How a Young Doctor Grew His Practice 144% in Just 3 Years
Sound advice and coaching give
doctors tools to thrive.
cases of optometrists' practice dilemmas and how these seasoned
consultants resolved them.
Like most optometrists graduating in 1993, Dustin Hatler looked forward to sitting for his boards and beginning to practice primary eye care. Also like many of his peers, he dreamed of someday owning his own practice. He put down roots three states away from his childhood home and worked two jobs to save money for a down payment on his future practice.
A retiring doctor sold his practice to Dr. Hatler for $75,000 and handed Superior Care Eye Clinic over to him in late 1995. During his last year in practice, the former owner grossed $150,000. In his first full year in practice, Dr. Hatler grossed $185,000. The second year his gross grew just over 5% to $195,000. On the flip side, his net of 23.9% didn't cover his living expenses and loan payments and his staff of 1.5 had already changed three times.
Unlike most of his peers, this young doctor sought professional help to coach him on the business side of primary eye care after 2 short but difficult years. Dr. Hatler told us that the pressure of being responsible for making so many management decisions was tremendous. He was living his dream but wasn't really happy. Between filing insurance claims and keeping his books, he was working long hours in his own practice. Plus he was driving 80 miles one way 2 days per week to work in an ophthalmic practice and living like a hermit to make ends meet.
His goals were simple:
- "I want to play an occasional round of golf without feeling guilty."
- "I want to make enough money to quit my part-time job."
- "I want to learn to manage my practice and staff efficiently and know that I'm making the best decisions possible."
- "I want to learn how to problem-solve situations as they come up and benefit from your expertise the rest of my career."
- "I don't want a million-dollar practice and don't want you to tell me to see more than 15 patients a day."
- "I want each patient to leave my office knowing that he's had a thorough eye health exam."
We felt confident that we could help because his track record was good. He showed determination and had worked hard to reach his goal of owning his own practice. His community's demographics confirmed that he'd purchased a practice with potential.
Getting down to business
Our first step was to evaluate the business side of Dr. Hatler's practice. Though it's difficult for a practice grossing less than $350,000 to fall perfectly within the norms of the seven key expenses (see sidebar), it's possible to use some of the seven as benchmarks to keep any size practice on track.
At 40.3% when we started our consultation, cost of goods as a percent of collected gross income was way above recommended levels. Our analysis of these expenses suggested that Dr. Hatler's lab fees were too high. Because the average number of patients he examined in a day was 3.4 and he displayed 400 frames, we weren't concerned about frame inventory turns. His cheapest full-service frame cost $75. The average retail price of a frame sold was $110.
A review of his professional fees and retail lens charges compared to his competitors' showed that his were the lowest. He was still charging exactly what the retired doctor had.
Our analysis of the percentage of frame merchandise by price point showed that the majority of frame inventory retailed for less than $120.
Even if he selectively raised his fees by 10%, which he immediately did, Dr. Hatler would still be the lowest-reimbursed practitioner in the area. We recommended another 5% increase in 6 to 8 months.
With 70% of collections coming from optical, we knew that the optician could sell high-end. So, while not increasing inventory, we recommended that as Dr. Hatler sold through lower-priced merchandise, he replace them with 117 frames retailing for more than $99.
The seven key expenses to keep in mind are:
- cost of goods sold
- staff salaries and benefits
- occupancy costs
- patient care costs
- equipment costs
- marketing and promotional costs
- general office overhead.
Next, we identified his two most pressing problems:
Low patient volume compounded with poor record keeping. Close to 90% of all
businesses in Dr. Hatler's community offered healthcare benefits that allowed participants direct access to medically necessary eye health exams. Many employers also carried primary eyecare options and vision services. Still others allowed employees to use set-aside pre-tax dollars for medical expenses (called cafeteria-plan benefits). Plenty of patients existed; Dr. Hatler needed only to bring them in.
Unfortunately, the retiring doctor's recall system consisted of a file box with cards listing name, address, last date of service and one phone number. A random review of old records revealed many wrong addresses, deceased people and home-only phone numbers. The systems in place were clumsy at best and time consuming.
Poor relations with staff, and lack of staff training. Though he tended to be shy and soft-spoken, Dr. Hatler could be critical of his staff and withholding of praise. He tended to eavesdrop on their telephone
conversations from his office and, frustrated, tell them what they should have said after they hung up. This in turn made them feel that he was policing them and looking for faults.
Also, the staffers weren't really sure how to behave toward patients because Dr. Hatler
hadn't trained them. The doctor himself didn't always seem to know how to talk to people. He didn't use personal names and didn't "catch the underlying message" (i.e., question the patient in such a way as to draw out his real concerns).
Solving the problems
Dr. Hatler had little extra money to spend, and no extra time, so costly external marketing programs weren't a first option for him. Instead, we decided to do some internal marketing.
We knew that each patient who entered the practice could become a "live advertisement" so we had to make sure that the doctor and his staffers got along and that they knew how to handle the patients. Here's what we told Dr. Hatler to do:
Fix the record keeping and recall system. To replace the half sheets of random notes the retiring doctor had used, we had Dr. Hatler select preprinted exam forms that included room to record eye health information for contact lens and spectacle patients. Now he could record his notes in a standardized way.
We revised the inherited recall system of index cards filed by last date of service. Each index card of a patient name with a valid address and phone number was entered into a database. Staffers mailed a postcard announcing end-of-year savings opportunities to these patients.
Because of the doctor's close attention to patient health, the staff now recognized the importance of annual exams and began to make up "talking points" on patients' records and followed up each appointment notification postcard with a phone call. Telephone recall now went like this: "Mrs. Smith, our records indicate that your eye health exam is past due. With your high blood pressure and family history of glaucoma, it's important you don't delay."
Low-cost marketing. It can take $500 or more in media advertising to generate a single new patient. By comparison, internal promotion is cheap, effective, advances public health and defends against malpractice claims.
Because of Dr. Hatler's convictions about a quality exam and emphasizing eye health, our anchor tactic was to make sure he asked all patients for referrals at every visit. His final leave-taking from the exam room ended with a simple script, "Please tell your friends about the importance of regular eye care," and he handed out a brochure about disease occurrence statistics and how a new patient would receive a discount on an optical purchase.
We also installed signs in the waiting room to encourage referrals. When patients obliged with a referral, we continued to foster a sense of family with a call from the doctor to say thanks for referring a new patient. The practice then mailed a card good for a courtesy discount in optical.
Take charge. Because neither of his staffers had work experience in a professional setting, Dr. Hatler needed to become a role model of an "efficient, take-charge, healthcare professional."
Though he hated the idea of conducting staff meetings, he started formally meeting with staff every 2 weeks. Each meeting included at least 15 minutes of training toward performance goals, such as scripts to help bring in all patients who book appointments, and 1-minute messages about an interesting case history or piece of equipment to help make the staffers feel professional and informed. He eliminated casual speech from his vocabulary and memorized all front desk scripts. He modeled the most efficient way to make appointments and book additional family members.
Dr. Hatler learned to smile and uncover the patients' underlying messages by asking questions such as, "How has your vision changed since your last eye exam?" and then asking about specific situations, for example, "What about driving at night?" He notes that patients listen to his recommendations more carefully if he begins the talk by using their names.
He and the staff also had weekly telephone coaching sessions with Donna Suter. She reinforced his goals and made sure the staff was working smarter, not harder.
Praise his staffers. Donna Suter encouraged Dr. Hatler to notice when staffers gave patients personal attention or accomplished a task well. Instead of only pointing out sloppily done tasks or errors, he learned to praise staffers for making eye contact, smiling and using every patient's name often.
Meet personal goals. As his own pre-tester, he began each exam by exploring under what conditions the patient had first noticed a change in vision. This allowed him to shorten the exam by linking his recommendation to the visual change he noticed. Dr. Hatler reviewed the medical history portion with the patient just prior to dilation.
To make patients feel they had received a thorough exam, Dr. Hatler discussed with them the possible side effects of prescription and over-the-counter medications they were taking. He also explained to the patients the link between medical history and what he saw inside the eye (hypertension with high cholesterol and the risk of stroke, dry eye with estrogen fluctuations, etc.).
Because the retiring doctor hadn't been licensed to dilate and had performed a very limited eye health exam, established patients were impressed with Dr. Hatler's grasp of medical issues. When he explained the practice's new referral program, they complied by referring colleagues and friends.
Turn phone shoppers into patients. Before our visit, the staff's job wasn't clearly defined. Unless a caller asked to make an appointment, for instance, none was offered. If the caller asked for an appointment, a staffer said, "When do you want to come in?"
With the use of training videos, mystery shoppers and telephone coaching, his staff has learned to aim at turning every phone conversation into an appointment and to offer to make that appointment soon.
As revenue permitted and opportunities presented, we began to externally market the practice. Beginning late in October, we ran a small ad in the town newspaper twice a week on the 2 high-volume days, for 6 weeks
announcing that unused cafeteria-plan monies were welcome at Superior Care Eye Clinic and could be used to stock up on contact lenses or buy designer eyewear.
Even before Dr. Hatler could afford to computerize, he outsourced building a database of names and addresses and began to mail topic-appropriate or time-sensitive postcards such as:
- 20%-off birthday card good toward complete eyewear. (Only valid 30 days from date of birth.)
- Medical alert about the cumulative effects of ultraviolet radiation on the day the rainy season ends.
- Medically oriented recall card to those older than age 40.
The month after our first visit, the practice saw a tremendous leap and it's still growing. Even during the current economic slow down, it maintains a
healthy two-figure growth because of its emphasis on personal service.
As Dr. Hatler became better at identifying performance deficiencies and offering positive suggestions to staff, we reduced our weekly staff phone calls to monthly and then quarterly. Now we call Dr. Hatler once a month to discuss personnel issues and role-play a doctor/employee encounter. As he becomes a better manager, we've had fewer interactions with the staff.
He still tends to worry about the numbers but enjoys more free time. The office is open all day Monday through Friday. He has Wednesdays off, works half days Monday and Thursday, all day Tuesday and Friday and every other Saturday during the Summer. He hasn't worked outside the practice since 1998.
He now sees 10 patients per day. The lowest-priced frame on his boards retails at $118. He has had to replace only one employee (the optician) since we began working with him and employs one full-time and three part-time staff members. This year we incorporated a profit-sharing plan into their compensation package.
Even though he still hates staff meetings, Dr. Hatler holds them every 2 weeks.
Dr. Hatler teases that he's our youngest client and feels that being "different" paid off. He balances attention to the numbers with staff praise and enjoys his reputation as a good listener. In fact, he claims that our teaching him to listen for the underlying message and use people's names appropriately was what convinced a blind date named Heather to give the shy young man a second chance. They're now engaged to marry.
You too can have a successful practice if you get professional guidance and take time to work through the unique circumstances of your practice.
Marilee Blackwell, M.B.A., C.P.A., A.I.B.A., senior consultant for Hayes Consulting (904-273-1115), and Donna Suter, president, Suter Consulting Group (423-236-5465), team up to offer financial guidance and on-site consulting services designed to increase your gross revenue while significantly improving your net income percentage.
Optometric Management, Issue: January 2002