Optometric Management Tip # 187   -   Wednesday, August 17, 2005
Seeing the Big Picture for Higher Profits

Sometimes we become so engrossed in our daily work at the office that we need to take a step back and see the big picture. Letís examine the most basic goal of all businesses, including professional optometric practices, increased profits. The net profit is really our end goal, but gross revenue is a key factor in increasing net profit, so we must care about both. When you think about it, there are only four ways to make more net income if you own your practice. The last three methods are actually ways to increase the gross revenue, but increasing the gross is a very good way to increase the net. Letís look at each one and consider how you might be able to improve your performance. Ideally, try to improve in all four areas at once!

Reduce expenses

Iím a big advocate of comparing practice expense percentages to established norms such as the Hayes 7 Expense Categories (see tips 172 and 173 in the tip archives) and closely monitoring all overhead costs, but most practices are already watching expenses closely. Most ODs and office managers are frugal and shop around for the best deal. I become concerned if a practice decides to make cost-cutting the primary goal for increasing net income, because it can lead to cutting services. You canít cut your way to prosperity. If you cut on the quality of optical materials, or on staff payroll, or on housekeeping, or on new instrumentation, or on the little extras for patients and staffÖ you can create a cycle-down effect. So watch your costs when you can, but remember to think big and invest in your practice so you create a cycle-up effect.

Many of the expenses in your practice are fixed or semi-fixed. Only cost of goods sold is considered a true variable cost. Fixed costs (like rent) stay the same no matter how much you gross, so when you increase your gross, most of that increase falls directly to the bottom line as increased net.

See more patients per day

This is a no-brainer if you have any backlog of patients in your appointment schedule. If you can move some of those exams forward by opening up more appointment slots per day, your gross revenue will increase dramatically. The main ways to facilitate more appointments per day is through additional delegation to staff, more exam rooms and pre-test rooms, and ultimately, an associate doctor. Those efforts may seem big Ė but the increased revenue production is even bigger. If you donít have much of a backlog of patients, I still recommend that you compress your appointment schedule so the practice looks busier on days you see patients. Plan some non-clinical days into your schedule to work on marketing and staff training to build the patient demand.

Increase your average gross per patient

Simply put, this means sell more goods and services to each patient you see. Start by calculating your current gross per patient by dividing your monthly gross revenue by the number of full eye exams performed. This is a key stat that many ODs are now tracking. Just measuring this stat alone often makes it go up because you are paying attention to it! While the number may vary based on your practice philosophy and your local economy, it is very possible to achieve a gross per patient of well over $400. Consider some of these factors that will increase your average gross per patient. Raise fees

Raising your fees immediately increases your average gross per patient, except for the segment of your practice that is under fixed fee discount vision plans. For that segment, raising your fees has no effect at all. Of course, reducing managed care in a practice is actually another way of raising fees, because the average fee actually paid is increased.

There are many ways to increase fees in a practice, and itís necessary to keep up with all of them since your expenses increase over time. Consider these fee categories and note when you last raised them.
Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management