Article Date: 6/1/2009

Are You Running Your Practice, or is Your Practice Running You?
practice management

Are You Running Your Practice, or is Your Practice Running You?

With this system of metrics, you can develop the skills of a CEO.

JERRY LIEBLEIN, O.D. Healdsburg, Calif.

All industries have ratios or averages that allow them to quickly evaluate their businesses. Most optometrists do not. A typical optometrist will evaluate his/her business by using reports created by their accountants. Unfortunately, the reports are missing ratios or averages that will allow the optometrist the opportunity to determine what is really going on in his/her practice.

We call these missing ratios or averages "success drivers." These drivers are the same tools that most successful businesses use to answer their critical management questions. More than a concept, success drivers can answer such questions as, "Am I providing the highest level of care for dry eye patients?" Or: "Am I missing opportunities to increase revenue in my optical?"

With success drivers, you will be able to develop the business skills that any qualified CEO or president has developed in the delivery of their products, services and performance. These ratios provide the methods for a successful outcome.

While some may wish to avoid integrating "business systems" into their practice, it must be noted that without the tools to evaluate and make the necessary changes, you cannot expect to grow your practice. Along with the success drivers, you will need operational indicators to help track efficiencies in your practice, and financial indicators to help track the cost of doing business. These indicators are called "active success drivers."

The benefits of drivers

In a more simplistic way, think of success drivers as the goals that are used to challenge your practice. Think of active success drivers as the process where you compare your numbers with those of a known standard in order to understand how to successfully run you're practice. The benefits that you will derive from understanding how you can use active success drivers to evaluate your practice are:

► Improvements in quality of care

► Greater performance by you and your staff

► Increased productivity by you and your staff

► Improved staff motivation and loyalty

► Understanding and knowing how your business works.

How success drivers can build your practice

Let's look an example. Looking at your practice data, you conclude that your practice performs few dry eye evaluations. You feel there is room for improvement, but how many dry eye evaluations should your practice perform? According to national statistics, 20% of all patients have a dry eye condition. (In dry climates or areas where demographics lean toward older patients, the percentage would be larger. But for the sake of this example, we'll use 20%.) Your success driver would be to identify and manage 20% your patients, the average amount of patients in your practice who suffer from dry eye. These are the patients who may complain of tearing, red eyes, itchy eyes and/or eyes that "feel gritty."

You make the following assumptions: Two thousand patients visit your practice each year. If 20% have dry eye, then 400 patients (20% of 2,000) should have a dry eye evaluation per year, amounting to 33 dry eye evaluations per month.

You now know that by achieving your goal, your practice will increase its monthly revenues (33 × the fee for dry eye evaluation + additional treatment and follow up). If 45% of these patients (15 per month) require punctal occlusion, which is reimbursed by Medicare at a rate of $786, then your income increases additionally by $11,790 a month, or $141,480 a year.

From these assumptions, you have created the operational indicators (33 dry eye evaluations and 15 punctal occlusions each month) and financial indicators (the cost to deliver these services and the corresponding income). Using this approach, you build confidence as a leader who understands how to grow his/her practice. More importantly, you will grow your practice by knowing where and how your practice has performed.

Performance requirements

Now, let's talk about how to arrive at the performance requirements needed to meet our goals. The first step is to ask: What is it exactly that does not allow you to reach your goals? If we continue with the example, we would ask: Why isn't the practice managing more patients who have dry eye? What steps can the practice take to identify more patients who have dry eye? How will the practice define and measure these steps? You may decide to use a patient questionnaire or have you or your staff ask questions of the patient in order to identify those who possibly have dry eye. Once you select the steps to meet your active success drivers, you must regularly measure their effectiveness on a long-term basis.

Note that for active success drivers to be effective, they must be measurable, and they must be comparable to other trusted data that will be ideally suited for running an optometric practice.

After you define your goals, incorporate them into the database program of your choice so that you can define data and view progress. Again, using our example, a database that captures such information as "number of dry eye evaluations performed" allows us to quickly understand whether we are meeting our goals.

Why your staff benefits

The success driver ratios enable you to share data with your staff, so all can objectively evaluate the practice's condition. This means staff can better understand the strengths and weaknesses of the practice, and, thereby, develop a loyalty culture that encourages teamwork and helps retain employees.

When you share these management tools with your staff, they obtain a clear picture of what is important and what they need to do to make changes happen. You can then use this knowledge to manage staff performance. Tie these active success drivers into a "pay for performance" employee evaluation during each quarterly or annual review.

Post the active success drivers where your employees can view them daily (away from patients though), such as in a lunchroom or meeting rooms. On the posts, include targets and the progress made toward the target — think of this as a speedometer on a dashboard. By tracking and reporting key measurements at regular intervals, you will be able to see those key measurements that affect the practice's performance.

Employees can then see where the practice is and where it needs to go. The staff will be naturally motivated to work as a team to reach these goals.

Once your staff buys into the principles behind the success drivers, they can help define your practice's goals. They will be able to assist in building the active success drivers, while creating a sense of ownership or responsibility among employees.

Use quantifiable measurements

If the active success drivers are going to have any value, there must be a way to accurately define and measure them. To generate more patients may sound like a good goal, but as a driver, it lacks in quantifiable measurements. For example, you would need a method to distinguish between new and repeat patients.

Use the success driver to deliver outcomes. It will not suffice to merely use chair costs and the profit and loss statements generated by your accountant. You will need an effective and efficient way to indicate your true business performance based upon a proven and repeatable process.

How to fill more prescriptions

Let's look at an example of how a question can lead to metrics that define your practice and enable you to use indicators as a performance management tool.

During a weekly meeting, a question arises: "How many of our patients did not wish to fill their spectacle prescription at the office?" From there, the staff arrives at a goal of increasing the prescription amount filled at the practice. To accomplish this goal, the active success driver, or the metric, is derived from the number of frames sold divided by the number of refractions — in other words, the capture rate. From this benchmark number, you and your staff will be able to answer such questions as: "Is the rate trending up or down?" Or: "Was the capture rate always at the current level, or was there a point in time where it declined?" And finally: "What is our ideal capture rate?"

Your answers then lead to questions that address improvement, including: "What training will be required to increase these sales?" "Do you increase the training of your staff?" "Do the doctors need to provide more patients with recommendations?" With the right questions, you will find the active success drivers that will give you the answers on how to successfully run your practice.

Note that the active success driver measures only one area. For example, the capture rate does not indicate whether patients will return to the practice. This measurement gives you a specific tool for growing the business part of your practice. There are thousands of success drivers available for every type of practice. To enable you to run your practice as a business requires all the tools available and the knowledge to understand and implement them.

It's about patient loyalty

The most important element of the success driver strategy is that you deliver the level of care necessary to create loyal patients. That, of course, will have a strong effect on your revenue. By focusing on core and differentiating success drivers, implementing forward-thinking business models, delivering the necessary changes and sharing the data, knowledge and information, you will gain the advantage and the needed management skills to stay successful in an ever-changing business and market. OM

Dr. Lieblein is CEO of OD Excellence and is an internationally known practice management consultant working with doctors to accelerate their growth and profitability. You can reach him at (707) 433-5542.

Optometric Management, Issue: June 2009