Optometric Management Tip # 310   -   Wednesday, January 09, 2008
Three Major Management Challenges for 2008

With the holiday season well behind us and the new year underway, let's look at the big picture of your practice and analyze three of the largest management issues facing eye care practitioners today. Which of these three problems is challenging your practice... or maybe all of them? Admittedly, these factors are complex and there is no easy fix, but I'll give you some thoughts on each one that might get you on track

Gross and Net Income

The age-old question often revolves around which is more important, gross or net, with many people concluding that the net is all that matters. I don't really think there is a good answer to that question because they're both very important. Sure the net is what really matters because that's what the owner gets to keep, but one simply can't have a big net without a big gross.

Many cases of poor net income or expense categories that are out of line can be remedied by increasing the gross. Remember that most expenses in your practice are considered fixed costs; only your lab bill (optical and contact lens) is considered a truly variable cost. With most expenses fixed, any increase in gross revenue (after lab costs) pretty much falls straight to your bottom line! And if an expense category seems too large as a percentage of gross, it will fall in line if the gross goes up.

Benchmarks for gross income in optometry could be viewed from the standpoint of annual income per full time practicing OD. In very successful practices, gross revenue can exceed $1 million per doctor, but most would consider $600,000 and over as excellent gross earnings for one OD. We often look at practice net income as a percentage of gross, with 30 to 35% considered as the standard.

The first thing to consider if you need to shore up revenue is your fees. Most eye care practitioners (ECPs) charge too little for their services and products. The current trend of looking to coding and billing of medical insurance plans as the path to higher fees causes many ECPs to miss the point. Billing insurance plans that pay decent fees is a nice service to offer patients, but many doctors take the approach that only exams for medical eye problems are worth those fees. In truth, all your exams are worth those higher fees, regardless of the diagnosis. Patients will happily pay those higher fees if you offer excellent services. Of course, if the patient has a vision plan that you accept then the fee may be capped, but that's a business decision you made and must live with as long as you choose to participate in the plan. It may be necessary to drop some vision plans if they hold the practice back from strong earnings.

I do not agree with the various methods in common use today of discounting exam fees for private pay patients, or differentiating between well vision exams and medical exams. I would make the fee the same no matter who is getting billed and no matter what the diagnosis.

Patient Volume

Lack of patient demand is the biggest problem facing ECPs today, in my opinion. This is closely tied to insufficient income, but I see it as a separate issue since there are some practices that have plenty of patient volume but insufficient income. We should judge volume by looking at the appointment schedule. It should be full every day with appointments at a fairly rapid pace of about 25 exams of various types. Ideally, the schedule is booked a week in advance or more.

Building patient volume is one of the most difficult achievements for most practices. It must be done over a period of time; there are no quick fixes. Since most practices are built on word of mouth referrals, I believe the key to patient volume is customer service and developing deep patient loyalty. Look within your office policies and your attitude to see if there are ways to improve your philosophy. Loyalty is built by satisfying patients' wants and needs, not the doctor's.

An additional factor in building volume is to invest in your office facility, instrumentation and frame inventory. You need competitive advantages to attract people and fortunately some of those advantages can be bought.

Staff Management

This topic always tops the list of practice management challenges for ECPs. Again, I can't offer an easy answer but I believe practice owners should embrace the human resource management and try to get better at it rather than trying to minimize the effort by keeping a small staff. A practice must have an excellent and large staff to be truly successful. As the practice grows, the owner should make more time for staff management duties in his or her schedule and also appoint an office manager. Without leadership in this area, practice growth will be stifled and will stagnate. If this administrative time decreases clinical availability too much, an associate doctor can be hired.

The key to a happy staff with good attitudes is in the office culture. The owner must care about the needs of employees and foster a workplace based on respect while having firm policies that are administered fairly. A positive culture is not developed overnight, but it starts with the practice owners and the example they set.

I find most optometric practices are understaffed and many good things happen when an additional employee is added.

Best wishes for continued success,

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