How Can You Lower Costs?
fix this practice
How Can You Lower Costs?
Follow these six steps to keep money from flowing out of your practice.
Richard S. Kattouf, O.D., D.O.S.
Q My practice consists of 80% managed care patients. This lowers my usual and customary fees significantly. Can you offer suggestions as to how to lower my cost of operation to offset some of my loss in collected revenue?
Dr. J. Marsella via e-mail
A: Prior to lowering your cost of operation, concentrate on building a large “private-pay” patient base. You can accomplish this by developing a private vision care program with businesses and professionals within your radius of draw. Address this along with the following methods for lowering your cost of operation:
► Cut office supply cost. You should have a designated credit card that gives you returns on your purchases. Shop for the lowest prices at places like Costco, Office Depot and Staples. Stay with the vendor that offers the best prices.
► Control temperature. Install an automated system that turns settings to the most cost-effective temperature when you're not in operation. During evenings and weekends, maintaining the temperature used during hours of operation is not necessary.
► Reduce cost-of-frames inventory. For many practices, this is a minimum of $40,000 to $90,000 investment. This is a drag on your income. However, some frame companies put their product on consignment, so you don't pay for the frame until you sell it. A consignment arrangement can offer tremendous savings to you.
► Consider an in-house optical lab. Look at a lab invoice to determine what labs charge you for lens enhancements: U.V. inhibitor, tints, A/R coatings and A/S coatings. You'll find that adding U.V. inhibitor, A/S coatings and a tint would add about $30 per pair of spectacles to your lab invoice. Performed in house, your cost is $3.00 — a savings of $27. Additionally, in-house casting and A/R multifocal lenses can save you $10 or more per pair.
► Adjust the percent of salaries to gross income. This is the amount of money paid to non-O.D.s. Many doctors give automatic yearly wage increases. The math simply does not work. Many doctors overpay employees while their net income plunges. To avoid this, establish a commission system that must be earned. In other words, your team must reach or exceed monthly collections set by you, the owner.
Not all staff gets the same profit share just like they do not all get the same hourly wage When an employee merits a raise, give it on the commission side of their income. It must be earned. It is not a fixed cost. Note: Giving a $1 raise per hour is a fixed cost of $2,200 per year — there is no fixed cost when you increase a commission. This is a mentality that needs to be taught and implemented. Optometry does not afford you the ability to raise hourly income yearly. You will price yourself out of business.
► Subscribe smartly. Order magazines and all your reception room reading material though one source. Write one check annually for all your magazines. The cost is very low compared with individual subscriptions. (Visit www.ebscomags.com.)
These are examples of some major costs savings. You must evaluate your profit and loss statements quarterly to keep a pulse on these important issues. OM
DR. KATTOUF IS PRESIDENT AND FOUNDER OF TWO MANAGEMENT AND CONSULTING COMPANIES. FOR INFORMATION, CALL (800) 745-EYES, OR E-MAIL HIM AT ADVANCEDEYECARE@HOTMAIL.COM. THE INFORMATION IN THIS COLUMN IS BASED ON ACTUAL CONSULTING FILES.
Optometric Management, Issue: August 2011