Laser Hair Removal 1
Quantitative Methods
Laser Hair Removal
Group Two
Stasie Broughton
Lindsey Gainer
Maryanne Tidwell
Wendell Weaver
MBAC 5453 Quantitative Methods
Dr. Juan R. Castro
October 18, 2001
Laser Hair Removal 2
Abstract
The impact of increased governmental regulations and the institution of managed care
products into the primary care environment are causing physician practices at Trinity Mother
Frances Health System (TMFHS) to look at additional viable revenue enhancements from a
variety of sources. In 2000, TMFHS incorporated a new slogan into its marketing strategy.
“Amazing Technology and Graceful care”. The health system has set a goal to provide
technology that is amazing, but yet customer friendly for all patients.
The LightSheer Laser is considered as one the most efficient, innovative, and advanced
lasers developed to treat unwanted hair. It is one of the leaders in hair removal technology
offered today. According to Dr. Vistnes, of the LightSheer Company, “the LightSheer laser is a
diode laser system, that is approved by the Food and Drug Administration (FDA) for permanent
removal of unwanted hair” (2001). Many other hair removal systems exist, but most do not
provide permanent hair removal. Our analysis will be for the implementation of permanent hair
removal technology into the Family Practice division of TMFHS.
The Family Practice division of TMFHS currently consists of nine board certified
primary care physicians. In July of 2000, the division added a female physician who had
previously worked in the Bronx of New York. One of her certifications included the use of the
Light Sheer laser for hair removal. The TMFHS division believes that her additional certification
in hair removal can be used to enhance revenue for the family practice division.
This paper will investigate the following hypothesis: the introduction and use of
advanced hair removal technology, and how it can and will provide an additional revenue stream
for the family practice division of TMFHS. This service can be managed at a break- even rate
monthly for the first year, and will be re-evaluated financially at the end of the first year.
Laser Hair Removal 3
The goal in implementing this hair removal system is also to provide a psychological
boost for the family practice physicians who enjoy the institution of new technology. Since the
institution of the new technology plan for TMFHS, the family practice division has had very
little input to the systems initiative. The approval of this hair removal system will allow the
family practice partners to contribute to providing new technology to our patients.
Laser Hair Removal 4
Introduction
This paper will be presented as a data analysis tool to the Family Practice division and the
Chief Financial Officer at Trinity Mother Frances Health System. It will be used for decisionmaking regarding the addition of a permanent hair removal procedure to the existing business
services offered by the Family Practice division to the East Texas Community. The division
concurs with the system that we must work together to provide the latest technology available for
the East Texas population, however, we must also be aware of the financial risk and operational
liabilities regarding the institution of this new advanced technological service.
The division’s current pay or patient mix consists of a forty percent Medicare population
over the age of sixty-five who have fixed incomes. Because of the high volume of Medicare
patient’s, the financial risk must be determined thru data analysis to ensure monthly break-even
for the first year and the continued success of the service.
The hair removal procedure will be offered to adults age 18 and over who are willing to
use discretionary income to pay for permanent hair removal. The current family practice patient
population was asked to complete a convenience survey to determine if the men and women who
use Trinity Clinic would want to have permanent hair removal at the Clinic. The survey also
includes a question to determine the amount of discretionary income that patients are willing to
pay for this procedure.
Our goal is to determine the viability of instituting this procedure as an expansion
to the existing practices. To prove our hypothesis we will use surveys to determine the expected
utilization by the patients. Chi-square will be used to perform a test of statistical significance to
determine the degree of confidence in accepting or rejecting the hypothesis.
Laser Hair Removal 5
The break-even point for operational expenses will be established thru the use of Costvolume-profit analysis (CVP analysis). Secondary sources consisting of literature reviews from
physician practices that have already implemented the hair removal procedure will be used to
determine potential operational risk involved with the use of this procedure.
Literature Review
Dr. Vistnes. (2001). Laser hair removal: laser assisted hair removal. LightSheer.
Available: http:www.vistnes.com/LaserHair.html. [2001, September 17].
This source was used to determine the use of the LightSheer laser treatment for all
age groups within a patient population. Patients are given information regarding the
hair removal procedure and the laser source used for hair removal. Patient interviews and
questionnaires were used to provide patients with factual true-life testimonies of
experiences gained from the use of the product, as well as, previously used products for
hair removal.
Primaria, A. (2001). Economic impact of the introduction of a minor surgery programme
into primary care. National Library of Medicine. Available:
../query.fcgi?cmd=Retrieve&db=PubMed&list_uids=11333554&dopt=Abstract.
[2001, September 18].
This source calculated the cost based on one year of procedures performed in a primary
care clinic. The average age and gender of the patient population was also established. This data
was used to compare the cost of minor surgeries at a private specialized level.
Laser Hair Removal 6
Gersten, J.K. (1998). Increasing revenue with an existing patient base. Coherent
Medical. Available: http:www.CoherentInc.com. [2001, September 19].
This source used surveys of the existing population base to determine if patients would
like laser hair removal treatments available by their physician. The marketing expenses were
reduced by the use of materials posted in the practice by the laser company. The procedure was
not marketed to people outside of the routine practice population. Start up cost consisted of the
laser lease and the operator. To answer patient questions, the practice created a brochure and
price list and used a taping announcing the procedure when patients called the office and were on
hold. Because this is a self-pay procedure, special attention must be given to patient needs to
ensure success.
Ames, B.L. (2000). Laser hair removal expanding a busy practice. Coherent Medical.
Available: http://www.CoherentInc.com. [2001, September 19].
Dr. Ames used mail outs to inform his patient population about the addition of this
procedure to his practice. When patients began using the service, they immediately informed
friends and family about the procedure. Within a few months of offering the procedure, Dr.
Ames determined that the use of the procedure was more lucrative than he anticipated.
The Objective of the Sampling Activity
The objective of the sampling activity is to determine probable utilization of permanent
hair removal offered to patients by the Family Practice division at Trinity Clinic. The survey
will also determine which body areas that patients would consider for permanent hair removal
treatments.
Laser Hair Removal 7
The Target Population
The target population will include the current family practice patient population of
10,000 patients. Patients will include both male and female patients age eighteen years and
older.
The Population Frame
Five-hundred family practice patients, ages 18 and older, were scheduled during the week
of October 5-9, 2001. All of these patients were asked to complete a hair removal survey.
The Method of Sampling
Subjective data was obtained using a convenience-sampling plan.
Operational Procedures for Collecting the Data
Scheduled patients were asked to complete the hair removal survey along with their
routine registration paper work. For patient convenience, all front office assistants added the hair
removal survey to the routine paper work clipboard. Patients were given the option to complete
the survey before their scheduled physician visit.
Ninety-four patients returned the completed survey to the front office receptionist. The
survey results were compiled and entered into an excel spreadsheet for statistical analysis.
Laser Hair Removal 8
Statistical Tools used to analyze the Data
Chi square distribution was used to “develop interval estimates and conduct
hypothesis tests about the population variance” (Anderson, Sweeney and Williams, 1999 p. 638).
The use of the chi square statistic determines the relationship as well as how strong the
relationship is between the fourth graphed independent variable in graph one and hair removal
body sites within the collected survey data.
Refer Graph 1 below:
Yes/No Hair Removal Questions.
80
70
60
50
40
30
20
10
0
73
49
47
34
41 40
31
35
41
yes
no
15
Have you
Have you
Have you
Would you
removed
removed
removed
be interested
unwanted unwanted ear unwanted
in a more
facial hair in
hair in the
body hair in permanent
the last 6
last 6
the past 6
hair removal
months?
months?
months?
If this service
were offered
at Trinity
Clinic, would
you be
interested in
having it
performed?
Graph 1
The data in this graph is used to determine the significance of the
relationship between the number requesting hair removal and the body
site of the hair removal.
Laser Hair Removal 9
Ho : There is no linear relationship between people who want hair
removal and the body site that they want the hair removed from.
H1 : There is a linear relationship between people who want hair
removal and which body site that the hair is to be removed
from.
The Chi square formula listed below will be used in Table 1 to test the
statistic.
Laser Hair Removal Chi Squared Calculation
Table 1
Underarms
Legs
Bikini
Totals
41
Yes
38
35
27
100
40
No
13
7
5
25
51
42
32
125
Underarms
Legs
Bikini
Yes
40.8
33.6
25.6
No
10.2
8.4
6.4
Step 5
Laser Hair Removal 10
Step 7
Row 1
0.19215686 0.05833333 0.0765625 0.327053
Row 2
0.76862745 0.23333333
0.013082
0.30625 1.308211
1.635263 Chi Squared
2 Degrees of Freedom
0.114377 Contingency Coefficient
There is no linear relationship between the variables.
Based on the data received, there is not a significant relationship between those patients
having the hair removal procedure done, and which body area they would want done.
Therefore, we accept the null hypothesis based on this data. There is not a significant
relationship between the variables.
Cost-Volume-Profit (CVP) analysis is a tool that provides information regarding the
interrelationship between costs, quantity sold and price. The use of CVP analysis was to
determine the extent and magnitude of the economic trouble a division may be facing, and to
help pinpoint the necessary solutions (Hansen and Mowen, 2000, p. 638). For the purpose of this
data analysis, CVP analysis was used to establish the number of procedures that must be done to
determine the monthly break-even point. Hansen and Mowen, 2000, states “the break-even point
is the point where total revenue equals total cost, the point of zero profit” (p. 638). Also, we
determined the fixed and variable components of operating the Hair Removal equipment.
Laser Hair Removal 11
Due to the fact that the surveyed patients listed below in Graph 1 are willing to pay one
hundred dollars or less for the procedure the fee schedule is set at ninety nine dollars per each
hair removal procedure. Refer to Graph 2 Discretionary Income Data Survey.
60
50
40
$3000-$1000
30
$1000-$500
48
37
$500-$100
20
10
1
3
3
0
How much would you How much would you
be willing to pay for
be willing to pay for
FACIAL hair removal? BODILY hair removal?
Graph 2
The Coherent LightSheer Laser can be leased daily, monthly or annually. For the
purpose of this analysis, we will base our data on the monthly lease of the Laser. The operating
lease for the Coherent LightSheer Laser is fixed at $1400 per day, or $28,000 for twenty monthly
working days. The physician salary cost is fixed at $10,000 monthly. The nursing salary cost is
a fixed monthly cost for the first year of $2500 monthly including benefits. The system has
currently guaranteed the use of one procedure room for this project. The procedure room cost is
fixed at $1000 monthly. The laser enhancement cream is estimated at a variable cost of $15.00
per twelve ounces. Maximum usage per body surface area is three ounces. Personal protective
equipment is estimated at a variable cost of $5.00 per procedure.
Laser Hair Removal 12
The TMFHS estimation of variable bad debt write-off for minor cash procedures is set at
four percent. Each procedure averages ten minutes per treatment for each body area. Five
minutes must be allowed between each procedure for room and patient set-up. To determine
how many procedures must be done daily to break-even or to earn a zero profit, we can set
operating income to zero, and then solve the operating-income income equation for the number
of procedures daily.
Operating income=(Price X Number of units)-(Variable cost per unit X Number of units)Total fixed cost.
A monthly projected income statement is prepared to determine break-even operating income.
Results
Operating Monthly Income Statement
Sales (640 procedures @ $99)
$ 63,360
Less: Variable expenses
$
6,854
Contribution Margin
$ 56,506
Less: Fixed expenses
$ 41,500
Operating Income
$ 15,006
0 = ($99 x units) – ($10.71 x units) - $41,500
$88.29 x units = $41,500
= 470 procedures monthly to break even
Therefore, the Family Practice division must perform 470 hair removal procedures per month to
break even.
Sales (470 procedures @ $99)
Contribution margin
Less: Variable expenses
Less Fixed expenses
Operating income
470 procedures yield a zero profit.
$
$
$
$
$
Conclusion
46,530
48,354
6,854
41,500
0
Laser Hair Removal 13
To conclude: The CVP analysis proves that the procedure can be introduced and maintained
at a break-even rate financially for the first year, however the addition of the procedure is not
recommended until we can provide statistical data that supports the validity of a patient
population that can support four hundred and seventy procedures performed monthly. Our
existing data analysis does not prove that the current family practice patient population would
support this business service addition. Further analysis must be done before the project can be
given additional consideration. Due to the fact that the pay or mix for Family practice includes a
forty six percent Medicare population additional data must be collected to determine if there is a
correlation between patient age and patient utilization.
Laser Hair Removal 14
REFERENCES
Anderson, D., Sweeney, D. and Williams, T. (1999). Statistics for business and economics (7th
ed.) Cincinnati, Ohio: Southwestern College.
Ames, B.L. (2000). Laser hair removal expanding a busy practice. Coherent Medical.
Available: http://www.CoherentInc.com. [2001, September 19].
Connor-Linton, J. (2001). Chi square tutorial.. Georgetown Linguistics. Available:
http://.ruf.rice.edu/lane/hypersat/B141013.html. [2001, October 17].
Gersten, J.K. (1998). Increasing revenue with an existing patient base. Coherent
Medical. Available: http:www.CoherentInc.com. [2001, September 19].
Hansen, D. and Mowen, M. (2000). Management accounting (5th ed.). Cincinnati, Ohio:
Southwestern College.
Primaria, A. (2001). Economic impact of the introduction of a minor surgery programme
into primary care. National Library of Medicine. Available:
../query.fcgi?cmd=Retrieve&db=PubMed&list_uids=11333554&dopt=Abstract.
[2001, September 18].
Trinity Clinic, (2000). Annual bad debt report. Tyler, TX: Trinity Clinic.
Vistnes. (2001). Laser hair removal: laser assisted hair removal. LightSheer.
Available: http:www.vistnes.com/LaserHair.html. [2001, September 17].
Laser Hair Removal 15
APPENDIX
1. Survey Questionnaire
2. Survey Results
Laser Hair Removal 16
Appendix 1
TRINITY CLINIC FAMILY PRACTICE
HAIR REMOVAL SURVEY
The Family Practice division of Trinity Clinic is evaluating new services for our patients. Our
primary goal is to keep you healthy, but we also know that appearance can have a positive effect
on one’s sense of well-being.
Unwanted hair (facial, ears, and body) is bothersome to some people. We want to determine
how our patients feel about this and, therefore, have developed this survey. It is completely
anonymous and will take under 5 minutes to complete
Please drop the survey off at the office where you checked in.
Gender: M_____ F_____
Year of birth: 19_____
1. Have you removed unwanted facial hair in the last six months?
Yes _____ No_____.
2. When you remove unwanted facial hair, do you do it at home or have it done professionally
in a salon?
home _________________
salon _________________
both _________________
Laser Hair Removal 17
3. How often do you find that you need to remove unwanted facial hair?
daily __________ several times per week ___________ once per week ____________
several times per month _______ once per month ______ every few months ________
4. Have you removed unwanted ear hair in the last six months? Yes _____
No ______
5. When you remove unwanted hair in your ears, do you do it at home or have it done
professionally in a salon?
home _________________
salon _________________
both _________________
6. Have you removed unwanted body hair in the past six months? Yes _____ No ______
7. When you remove unwanted body hair, do you do it at home or have it done professionally in
a salon?
home _________________
salon _________________
both _________________
8. On what body sites do you currently perform hair removal?
arms
bikini line
other
underarms
back
legs
abdomen
9. If a more permanent method of hair removal were available to you, would you be interested?
Yes _____ No _____
10. If the service were offered in the Trinity Clinic, would you be more likely to have it
performed? Yes _____ No _____
11. How much would you be willing to pay for “permanent” hair removal on your face?
(i.e.; upper lip, chin, nose hair, eyebrow area, ears.)
$3,000 _____ $5,000 ______ $1,000 - $2,999 _____ $500 - $999 _____ $100 - $99 _____
less than $100 _____
12. How much would you be willing to pay for “permanent” hair removal on a body area? (Place
letter for particular body area on the lines below.)
Laser Hair Removal 18
A. arms
B. legs
C. abdomen
D. bikini line
E. back
$3,000 _____ $5,000 ______ $1,000 - $2,999 _____ $500 - $999 _____ $100 - $99 _____
less than $100 _____
Thank you for your participation. Please leave your completed questionnaire at the window
where you checked in.
Appendix 2
TRINITY CLINIC SURVEY
94 participants
Have you removed unwanted facial hair in
1 the last 6 months?
2 Where do you remove unwanted facial hair?
How often do you need to remove
3 unwanted facial hair?
Have you removed unwanted ear hair in the
4 last 6 months?
5 Where do you remove unwanted ear hair?
Have you removed unwanted body hair in
6 the past 6 months?
7 Where do you remove unwanted body hair?
What body sites do you remove unwanted
8 hair from?
Would you be interested in a more
9 permanent hair removal
method?
yes
no
49
34
home
salon
both
72
6
daily
5
2-3x
week
weekly
2-3x month
16
28
11
3
10
yes
no
15
73
home
salon
18
1
yes
no
47
31
home
salon
both
52
arms
2
underar
ms
legs
bikini
back
4
51
42
32
2
yes
no
41
40
monthly few month
both
abdomen
Laser Hair Removal 19
If the service where offered at Trinity Clinic,
10 would you be
interested in having it performed?
How much would you be willing to pay for
11 permanent hair
removal on your face?
How much would you be willing to pay for
12 permanent hair
removal on your body?
yes
no
35
41
$5,000
$3,000
$5,000
$3,000
$500$100 less $100
$3000-$1000
$1000-$500
1
3
$3000-$1000
$1000-$500
48
$500$100 Less $100
3
37