Article Date: 5/1/2002

Business Advisor
How Big Practices Get That Way

Examining the differences between high and low gross practices.
Jerry Hayes, O.D.

If you've ever wondered how large practices differ from smaller practices, check out the survey we published last November. It provides some concrete data, and surprising insight, into the fundamental differences between high gross and low gross practices in the areas of doctor productivity, staff utilization and fees.

Practice profiles

For this survey, I defined high gross practices as those with total collected revenue of more than $700,000 and low gross as those with less than $300,000. Note: $700,000 is about double the reported American Optometric Association average for a solo O.D. A practice netting more than 31% of gross was considered high net. Anything under 31% was referred to as low net. Here are some data that you should find interesting.

Examining doctor productivity

Regarding exams per hour, the survey revealed that O.D.s in high gross/high net practices reported completing 1.7 exams per hour versus 0.8 for O.D.s in low gross/low net practices. Converted to a daily basis, that's 14 exams to 7 -- twice as many per day.

Consistent with seeing more patients, O.D.s in high gross/high net practices produced $394 per hour versus $207 per hour for O.D.s in low gross/low net practices. This statistic is dramatic and by itself accounts for huge differences in practice gross.

I consider the amount of hours an O.D. spends on management to be a predictor of his success. O.D.s in high gross/high net practices reported spending an average of 5 hours per week on management duties versus 3 hours for O.D.s in low gross/low net practices. Two hours per week difference may not sound like much, but it amounts to an extra 100 hours in planning over the course of the year. You have to "plan your work and work your plan" if you want to have a high gross practice.

Surprising staff productivity

While the production of doctors in high gross practices was nearly double their low gross colleagues, the case was the opposite for staff. Revenue per staff hour in high gross/high net practices was only $68 per hour versus $98 per hour for staff in low gross/low net practices. That's because O.D.s in low gross practices perform many duties that they should have their assistants doing. The usual culprits are paperwork, pre exams, frame selections and dispensings.

A closer look at exam fees

O.D.s in high gross/high net practices not only saw more patients, but they also reported charging more per complete exam -- an average of $72 versus $58 for O.D.s in low gross/low net practices. There was no evidence in our survey that higher fees retarded practice growth in any way. In fact, the larger the practice, the higher the reported fees.

Learn from the big guys

There's no one right way to build a large, high net optometric practice, but O.D.s in most high gross practices do the following four things that low gross O.D.s. don't:

1. see more patients

2. delegate more duties to staff

3. charge more for their services

4. spend more time on management and planning.

This doesn't give you all the answers for building a large practice, but at least you know the direction you should be moving in.



Optometric Management, Issue: May 2002