Are You Covered?
Are You Covered?
Regardless of the economic climate, use these 10 steps to protect — and grow — your practice.
JIM THOMAS, Editorial Director
IMAGERY BY ARTPARTNER
Whether it's called "the recession," "the crisis," "these challenging times," "the crunch" or one of several hundred other pseudonyms, the economy continues to dominate the media's news coverage. But are all the labels and gloomy news reports relevant to the practice of optometry?
In one sense, no, say some of your colleagues. "Phrases like ‘during uncertain times’ are pointless," says Gary Gerber, O.D., president of the Power Practice, Franklin Lakes, N.J. "When the economy is good, are things any certain or less challenging? Managed care fees have continually been ratcheted down, good economy or not," he says. "Staff always wants more money, and margins are always being squeezed. So from a conceptual standpoint, nothing is new."
Richard S. Kattouf, O.D., president of Kattouf Consulting services, says optometrists might "need a reality check."
"Of all the people who want to work, only 7% are out of work. Therefore, 93% are working," he says. "Don't get caught up in the negativity fed to you by the media."
Media reports aside, the optometrists interviewed for this article report varying results regarding the performance of their practices. In the Chicago area, Dianne Anderson, O.D., notes that yearly eye exams, spectacle purchases and sales of annual supplies of contact lenses are down.
"However, I have been very busy with the medical/sub-specialty aspect of my practice," she says. "There has been a steady influx of patients with visual concerns, such as cataracts, diabetes, hypertension and especially dry eye syndrome."
Is your glass full, empty or somewhere in between? And more important, what steps should you take if your practice isn't performing to expectations? The truth is, without a clear understanding of your practice's numbers, it's not easy to tell.
"I hear a lot of our colleagues say things like, ‘I hope things get better,’ and do little to find out what is the cause of the problem," says Ted A. McElroy, O.D., Tifton, Ga.
So, the first step in how to protect and grow your practice is:
1. Create a business plan
A solid business plan allows you to chart a direction for your practice. It includes a system of metrics that show you what's working and what areas require your attention. For example, in looking at his numbers, Dr. McElroy's revenue per patient is down by $1, receipts have fallen by an estimated 0.71%, and comprehensive examinations are down. Meanwhile, contact lens patients and sales; receipts from private-pay patients; per-day revenue; total frames sales and overall profits are all up.
"But all that is to say, when you look at my numbers, it's the lack of patients that is driving our downturn," he says.
To be effective, a business plan must evolve to meet changing needs. "The successful business person is constantly re-evaluating his actions and practices for the purpose of modifying his business plan," says Andrew S. Gurwood, Doylestown, Pa. "This maximizes productivity and profit."
Dr. Gurwood's system of checks and balances has seen his practice through "the unpredictability of the Nixon economy, the despair of the Carter economy, the prosperity of the Regan and Clinton years, the flatline of "H" and the volatility of ‘W,’ " he says.
With the business plan as its foundation, you can take steps that will create savings and generate revenues, regardless of the economic climate. Here are nine more steps offered by the optometrists interviewed for this article.
2. Cut costs
Cutting costs has an immediate impact on the bottom line, which explains its universal appeal across most industries. Consider reducing expenses for:
► Office supplies
► Maintenance and cleaning services
► Frames and contact lens inventories
Your practice can achieve cost reductions through "a wiser use of utilities, coupon shopping and bargain hunting for office ancillary items [such as trash bags, pens, tissues], consolidating office hours and cutting extra days that book less," says Dr. Gurwood.
"Send your office manager or yourself to Costco or Sam's Club with a list of what the office needs," says Michael P. Lange, O.D., Ocala, Fla., "You would be surprised at the savings you get."
Neil Gailmard, O.D., Munster, Ind., reviewed all his practice's monthly expenses. He identified only a few suppliers that could be reduced, "but every little bit helps," he says. He found a lower-priced phone plan that "was available for the asking." The practice also reduced the size of its Yellow Pages ad and cut its trash removal service back to twice a week, "which is adequate."
Dr. Lange notes that although your optical must include name-brand frames, you still have an opportunity for savings.
"Frame companies will offer creative ways to get your business, even consignment sales, so take advantage," he says. "Smaller companies may offer payment terms of 30, 60, 90 days or better. Consider great-looking name brand closeouts."
Dr. Lange warns it's best not to disclose the costs of frames to staff. Otherwise, "they will think the frames aren't worth selling, and they [the frames] will sit on the board."
He says that cross training staff can create a more efficient practice. For example, teach the front desk staff how to do sales and tech work when possible.
"Drop the cleaning service and yard crew, and have the staff on a rotation where they clean bathrooms, pick up litter, dust, clean windows and vacuum," Dr. Lange says. "Hire someone to do the yard [work] and routine maintenance. There's no reason to pay a professional service hundreds of dollars if you can get someone who appreciates having a job for $7 an hour."
The O.D.s we interviewed stressed that cost cutting is not a one-shot deal.
"Cost management, control and containment have always been part of our essential business model," says Pamela Miller, O.D., Highland, Calif.
Additionally, cuts must never compromise service, says Sheldon Kreda, O.D., Lauderhill, Fla.
"Experts say you can never save your way to solvency," he says. "Cutting back just makes the practice smaller and less appealing to the public."
And finally, if the staff has to make sacrifices, then all staff should participate, including the optometrist, say the O.D.s interviewed for this article.
3. Embrace medical eye care
Medical eye care provides a steady flow of patients because like other healthcare professions — and unlike retail operations — it "is highly inelastic," says Dr. Gurwood.
"People will always make sure they see well and are pain free," he says. "Even in times of stressed finances; you can't afford to be without your vision."
For some practices, the focus on eye health (vs. retail frame sales) requires an investment in equipment (see Step 4), staff training and patient education. But the benefit of greater patient flow, increased revenues and better patient care make this a worthwhile investment, say the doctors interviewed for this article.
"Embrace medical eye care, and join medical insurance plans if you haven't already done so," says Dr. Gailmard. "The better vision plans are also providing patient flow and should be joined."
4. Invest in diagnostic equipment and information technology
While some practitioners have put a hold on new capital equipment services, "the downturn is actually making me invest in new technology to gain efficiency and increase revenue," says Dr. Gailmard. "We are installing new computer software and electronic medical records (EMR), and we will likely add other clinical instruments."
The benefit of practice management software and EMR is that both can "introduce efficiencies necessary to streamline staff, maximize reimbursements and reach patients in need of your services," says Dr. Kreda.
He adds, "if equipment will add profit in good times, an investment in new equipment may be vital to replace lost income in bad times."
Our experts recommend investing in EMR, practice management software and diagnostic equipment, such as retinal photography, optical coherence tomography technology, visual field screening, topography and preferential hyperacuity perimetry.
"When there is a specific need directed toward the patient, it is easy to justify the extra fees," says Dr. Anderson. "Even in this economic downturn, patients appreciate superior service and the convenience of having everything done in one visit."
"An optometrist that has a relatively busy practice and accepts Medicare and insurances cannot afford not to have this new equipment," says Dr. Lange. "The return on investment is higher utilizing this technology than anywhere else. You are offering the patient the highest standard of care possible. It is likely they will be your patients for life and perhaps refer 20 more patients to your practice."
Dr. Gurwood says you should base purchases on need (instrumentation that will help with daily practice decisions), feasibility of recovery (ability to bill and recoup investment dollars) and affordability (budget limitations).
"Regardless of the economy, you should add one new instrument in the clinic or optical annually," Dr. Kattouf says. "Exhibit to your patients that you will continue to invest in your practice for their visual welfare."
5. Upgrade and expand facilities
"Economic downturns offer an excellent opportunity to upgrade facilities," says R. Whitman Lord, O.D., Statesboro, Ga.
A substantially weakened commercial property market has made prices more attractive to buyers. In addition, building contractors who experience a slowdown in work are eager to negotiate prices, he says. And banks prefer not to accumulate a large inventory of repossessed property, so they will "allow developers to unload stressed property the best they can."
"If one is patient, great bargains can be found during the unstable times we are now experiencing," says Dr. Lord. "It is clearly the time to look at the glass as half full rather than half empty."
In addition, credit may not be as difficult for optometrists to obtain as it is for other professionals, he says.
"Loans to an owner occupant of commercial property, such as an optometric facility, are the kind of loans banks are eager to find," says Dr. Lord.
Such loans allow banks to limit their exposure to developers and speculators, which in turn allows them to obtain higher ratings from bank regulators.
"You might be surprised at how eager banks would be to talk with you at this time if you have a good game plan and a proven track record of responsible financial management," says Dr. Lord.
Now may be the time to shift from a lease to purchasing your facilities, says Dr. Gurwood.
"Owning the building or condo in which you practice has great strategic value," he says.
His practice will consider buying the building where the practice has resided for the last 25 years.
Optometrists may even consider acquiring existing practices.
"We purchased two offices that were struggling, and we were able to do cost-effective facelifts that made them into profitable offices fairly quickly," Dr. Lange says.
In such instances, optometrists may even want to consider owner financing, "so you don't have to involve the banks," he says.
|Where The Economy Has Hit The Hardest|
|Even in communities where the economy is faltering, optometric practices can succeed by working smarter. Here is an example told by Ms. Suter about a bedroom community in California where lenders have foreclosed on dozens of homes.|
"This practice started feeling the crunch more than 12 months ago. People weren't coming in. We told the staff that we wanted to ‘find’ $75,000 in revenue so everyone could keep their job. (This revenue was not an actual amount of salary. The average salary was $16 an hour.)
"We started blocking off one day every month as a ‘work day’ and performed the following tasks:
1. Detailed analysis of frames. We focused on how many vendors, how many frames sold in the last year, how many frames in that line were typically shown, etc. We found that staff were buying from their most personable vendors, and that even though they were staying within their ‘frame budget,’ the frames purchased were not at price points being sold. In general, the staff weren't tracking credits, and both frame vendors as well as lens suppliers weren't crediting returns promptly. We resubmitted lost credits. Shipping and handling was also costly — we found a few cases in which it cost more than the frame (the vendor was very nice about waiving the fee; but we had to point it out to them). We now maintain an accurate frame inventory in the computer and are paperless in the optical department.
2. Packaging product. The wholesale lenses lab offered a regional BOGO (buy one get one) on lenses. We used the ‘stale’ frames that the vendors wouldn't exchange dollar for dollar and concentrated on teaching the opticians to discuss visual wardrobes and additional eyewear (notice I didn't say second pair). The sale price was 50% off retail with multiple purchases.
3. Purchasing diagnostic instrumentation. In the clinic, we purchased three pieces of diagnostic instrumentation that positioned the doctor as more medical. We also insisted on pre-appointing anyone who had medical eye issues.
4. Added early morning/evening hours. To see those people fortunate enough to have jobs, we opened the office at 7:30 a.m. one day a week and closed at 7:30 p.m. one day, with the last patient seen at 7 p.m. We also opened the practice until 1 p.m. on three Saturdays each month.
"The result? Everyone was able to keep his job and seems happier. Also, the doctor now listens to his staff's ideas, and they have a sense of pride in the ‘good’ numbers. The doctor's net went up 5%. The books are filled two weeks ahead, and the frame boards look great."
6. Maximize your schedule
Consider offering early morning and evening hours to make it convenient for employed patients to schedule appointments. However, if your office isn't fully booked, then consider shortening workdays and consolidating schedules, says Dr. Anderson.
"Consolidating the schedule — by closing the office on one weekday or opening later and closing earlier — will maximize your profits," she says. It's also a perfect time to learn that new skill you haven't had the time to master, Dr. Anderson adds.
Dr. McElroy now "packs" appointments closer together. This makes the office appear busy to patients and provides "plenty of time to get caught up on what needs to be done, such as paper work, planning for our return to being busy, answering e-mail and other tasks that we postpone when we're busy," he says.
By moving appointments closer together, Dr. McElroy gave himself "an hour or so every few days to really get things accomplished.
"There have been very few opportunities in my 15-year career where I have had the time to work on my practice like I am now," he says. "This is truly a gift, not a curse, if you will use your time wisely and efficiently."
Other suggestions for what to do with the extra time: Spend more time with your family, or visit a colleagues' office and get ideas from his or her practice. Or send your staff to watch — and learn from — a colleague's staff, Dr. McElroy says.
"You would be amazed at some of the ideas you can pick up from offices, even those you might consider inferior to yours," he says.
7. Expand services and offerings
Another way to close gaps in a schedule and offer greater value to patients is to offer a subspecialty, such as computer vision, sports vision, low vision, corneal reshaping or fitting contact lens patients who have keratoconus, says Dr. Kreda.
"Offer new services and innovative product to bolster profits," he says.
You can even increase fees for specialty services.
"Never loose perspective of the value of your services and the willingness of the customer to pay for the benefits they provide," he says.
In addition to subspecialties, many optometrists have found success in offering vitamins and nutritional supplements, which offer patient benefits and recurring sales for the practice.
"Who better than the primary eyecare physician to recommend a whole body formula that targets the eyes as well?" asks Dr. Lange.
8. Optimize billing and coding
"Half my clients are up, and half are down," says Donna A. Suter, president, Suter Consulting, chattanooga, Tenn. "The clients who are up say they are more diligent with billing insurance [questioning denials, explaining reasons for tests, etc.] and collecting small balances from patients, which means explaining insurance to the patient."
9. Continue charging fair fees
Speaking of rates and fees, should you consider lowering them? "Absolutely not," says Dr. Miller. "We charge fair fees and work hard, without needing to justify our services and materials."
Dr. Kattouf warns that such a move sends the message "that you were charging in excess."
"Once you do something like that, it signifies panic," says Dr. Gurwood. Plus, patients will interpret a return to previous fee levels as "a price hike," he says.
Dr. McElroy's practice increased fees.
"The increases have kept us from having a truly dismal year," he says. "Offering our patients the best and charging for it will keep us in business when others around are failing."
A hard line on fees doesn't necessarily mean that you shouldn't offer discounts on materials or bargains where appropriate, says Dr. Miller. "We have always offered an economy line," she says.
In each of his practice's locations, Dr. Lange has a frame board that offers $39.95 frames, allowing the practice to compete against the discounters and warehouse clubs. Also, his practice matches coupons. His message to patients:
"As long as the economy is in a recession, our practice is going to help out as much as we can," Dr. Lange says.
His message to optometrists: "In a bad economy, you cannot afford to let any patient walk."
10. Consider hiring a consultant
If your business acumen isn't as sharp as your clinical skills, consider getting help, says Alan Glazier, O.D., Rockville, Md. He hired a consultant who works with optometric practices and focuses on "bottom line issues."
The consultant set up an electronic monitoring system through QuickBooks so Dr. Glazier could closely "Watch expenses and benchmark more precisely," he says. The consultant developed an automated inventory management system that allows the practice to evaluate purchases more effectively, says Dr. Glazier.
The consultant looks over the "big financial picture, acting as part-time CFO," he says. "He frees up a lot of time and allows me to focus on exam lane and gross production factors. It's great security."
If you follow the adage, "buy low, sell high," then now is the time to invest in your practice. Here are some additional ideas to consider:
► Create or upgrade your Web site. Use the Internet to reach patients and make your practice more accessible, recommends Dr. Kreda, especially at a time when "Web sites are dirt cheap compared with other media."
► Create an O.D. referral network. For example, Dr. Anderson says that referring patients between a practice that treats glaucoma and one that has expertise in fitting patients with keratoconus, "will help both subspecialties grow."
► Learn from the experience. Dr. Miller notes that the United States experiences a recession every seven to eight years. Pulling through the recession will provide valuable lessons that will strengthen your practice.
Dr. McElroy adds, "This is the time when truly great leaders in our industry will emerge and become the leaders for the next generation of empowered doctors of optometry. OM
Optometric Management, Issue: February 2009