Optometric Management Tip of the Week

Seeing the Big Picture for Higher Profits

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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. Let's 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. Let's 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

I'm 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 can't 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 staff... 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 - but the increased revenue production is even bigger. If you don't 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 threshold fields.
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 can't be eliminated, but many practices have old policies for routine visits that could be revamped.

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 it's 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
Editor, Optometric Management Tip of the Week

A Proud Supporter of

Send questions and comments to neil@gailmard.com.

Dr. Gailmard offers consulting services to eye care professionals through Prima Eye Group; information is available at www.primaeyegroup.com.

Please Note: The views expressed in Management Tip of the Week do not necessarily reflect those of the sponsor.

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