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!
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.
- Reduce spectacle Rx walkout. An Rx filled elsewhere really brings your number down fast.
- Sell two or more pairs of glasses to the same patient, including Rx sunglasses, computer glasses, or other
special need glasses.
- Prescribe new glasses along with contact lens replacement orders.
- Prescribe high-end specialty contact lenses, like bifocals.
- Sell high-end non-Rx sunglasses.
- Perform special medical diagnostic testing, from pachymetry to nerve fiber analysis to retinal photos to
- Eliminate unnecessary interim office visits that produce very low fees and result in no sale of optical
materials. These are replaced with exam appointments that have a higher revenue production. Obviously, some
office visits are medically or visually necessary and canít be eliminated, but many practices have old policies
for routine visits that could be revamped.
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.
- Primary eye exam fees
- Fee for emergency work-in exams
- Special diagnostic procedure fees
- Contact lens evaluation fee
- Contact lens fitting fees (at multiple levels of difficulty)
- Contact lens materials
- Ophthalmic lenses and options
- Frame mark-up formula
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management