Financial and accounting challenges are common for both the seasoned optometric practice owner and the recent optometry school graduate. While both O.D.s have extensive clinical training, few optometrists have formal training in finance.
“The biggest challenge I see O.D.s facing regarding ‘accounting’ is really about business acumen — or lack of it,” says Michael A. (“Mick”) Kling, O.D., Business of Optometry trainer for Vision Source.
This is where membership in an alliance can help. In addition to a list of services that includes vendor discounts, staff training, marketing tools, networking opportunities and CE, among others, alliances offer access to financial resources and expert assistance. (Because the menu of services differs from organization to organization, contact the individual alliances directly for specific information. See “Alliances” on p.20.)
Here, authorities from several alliances discuss solutions to common accounting challenges.
Tracking the wealth of data needed to manage a healthy business is a challenge that can be managed with alliance solutions, says Tyler Judkins, business and financial advisor for Professional Eye Care Associates of America (PECAA).
“Practices should be tracking individual doctor performance, individual optician performance, multiple location performance, medical billing management and so much more,” says Mr. Judkins.
Mr. Judkins says that PECAA offers a program (Success TRACK) that is designed to help practices measure and track performance, identify growth opportunities, forecast future trends and anonymously compare practice results amongst peers.
UNDERSTANDING BIG-PICTURE FINANCIALS
Knowing how factors, such as cost of goods, pricing, cash flow, etc., all work to affect the practice’s overall profitability is another challenge optometrists face, say Imran Gulam, CFO, FYIDoctors and Laurie Sorrenson, O.D., F.A.A.O., Business of Optometry Trainer for Vision Source.
“A lot of times you might assume that when the top line grows, the bottom line does, too, but that’s not always true,” he says. Top line growth is measured in gross sales or revenues, whereas bottom line growth is measured in net income.
Mr. Gulman says FYIDoctors’ goal as an accounting team is to help build budgets with their members and then help them focus on areas they can control.
“Being a corporate entity, there will be certain areas they can’t control,” he explains. “But there are many they can, including how to manage staff wages and having a better understanding of how the decisions they make impact financials.”
Dr. Sorrenson adds: “It is imperative that doctors create proper financial templates to analyze profitability and cash flow. To do this, Vision Source leadership hosts local meetings specifically focused on the seven categories of practice profit and loss statements, showing Vision Source doctors how to categorize payments.” The categories: cost of goods sold, staff salaries and expenses, occupancy expenses, marketing, equipment, general office overhead/miscellaneous and doctors’ compensation.
“We highlight why this step is key to practice health,” says Dr. Sorrenson.
MANAGING CASH FLOW
Multiple optometric alliances discussed the ability to simplify management of cash flow for their member offices. This can be broken into two parts.
1. Accounts receivable, or payments expected. According to Troy Hall, Vision Trend’s chief operating officer, 42% of respondents on a member survey ranked “Insurance Accounts Receivables” as their No. 1 accounting challenge.
Recognizing this, Vision Trends launched its Insurance Solutions Program about 18 months ago.
“Our Insurance Solutions Program is open to all Vision Trends members and is designed to meet member practices where they are in their insurance journey,” says Mr. Hall. “We developed steps along this journey, including an online insurance carrier guide, practice-specific training for insurance staff, outsourced insurance billing services and even a full-service doctor credentialing service.”
The insurance carrier guide, for example, provides instructions on how to verify plan member eligibility, file a claim and check claim status. It identifies key contact information for nearly 50 vision insurance plans, Mr. Hall says.
2. Accounts payable, or bills due. With insurers utilizing a variety of payment schedules, revenue is not always predictable, says Stephanie Lucas, executive vice president and general manager, Healthy Eyes Advantage (HEA), Member Solutions. In addition, juggling an uncertain accounts receivable cycle with multiple payables further complicates the cash flow “dance,” she says.
“With our consolidated billing, the member receives just one bill from us and makes just one payment for all optical purchases,” explains Ms. Lucas of HEA’s one bill, one payment service.
Additionally, HEA members have the flexibility to manage a single payment due date or break their monthly HEA payment into smaller chunks to reflect their variable income cycles:
“Our members highly value the time-saving convenience of our consolidated billing, which also provides the most efficient means of monitoring cost of goods because all purchases appear together on a single statement,” Ms. Lucas explains.
Melanie Miller, of Primary Eyecare Network (PEN), a division of ABB Optical Group, also named reconciling bills among a top challenge faced by the alliance’s members.
“PEN helps to make the process more efficient by offering consolidated billing and quick access to monthly statements through our online billing portal,” Ms. Miller points out. “Accessible through a secure and private login, PEN’s consolidated monthly billing statements organize a practice’s purchases by category for convenient online viewing. PEN’s website, PrimaryEye.net , also accepts online payments.”
Pricing strategy also is among the challenges alliances aid their members with. Nathan Hayes, resident financial consultant for IDOC, says, in his experience, most eye care practices don’t have much “fat to cut off the bone.” That generally means one of the best ways to increase profitability is to increase revenues — and the fastest way to get there is to raise fees. Even so, Mr. Hayes says many practices fail to regularly follow through on this.
“While there’s not a dollar-for-dollar increase in your insurance reimbursements, just by increasing your prices, you will pick up overages and make up ground with private-pay patients,” he explains. “In cases where cost of goods is high, I would also look to pricing strategies as a first solution. IDOC can assist practices in developing these strategies by reviewing professional fees and product pricing on eyewear and contact lenses.”
Kim Bratcher, operations manager, The Alliance Buying Group, agrees that the pricing of frames, contact lenses and lab products is often a challenge for members. To help guide members in this arena, this alliance has developed several tools to aid members in decreasing cost of goods and increasing profits, says Ms. Bratcher.
“Our most popular tool helps our members determine pricing and profitability for contact lenses,” she explains. “The increase in daily lens options combined with price changes can make it difficult to know what a practice should be charging and, more importantly, what is the most profitable lens. In our analysis for contact lenses, we incorporate current price per box and usage, along with the industry standard price for private practice and retail chains. Utilizing these components helps to uncover current profitability and compares [the doctor’s] cost to other practices and products on the market.”
Relatedly, Jason Lake, O.D., Professional Eyecare Resource Co-Operative (PERC) senior medical director, says that simply having the “omni channel purchasing solution” of a buying group is beneficial to practices that are facing shrinking margins and rising costs. He adds: “The alliance’s ability to negotiate costs provides leverage that an independent doctor simply would not have on his or her own.”
Another accounting challenge reported by alliances is the sheer complexity of the process. Namely, multiple accounting variables can go into a single patient encounter, including patient out-of-pocket costs and estimated insurance reimbursement receivable, which carries with it patient eligibility considerations and provider credentialing components, explains Jim Edwards, president and CEO of Opti-Port. And this process culminates in entering all this information into the proper systems at multiple different locations — such as EHR, insurance company software and, when necessary, clearinghouse systems. Even another layer is added in practices that offer both optometry and ophthalmology services.
Mr. Edwards continues: “These complexities that are related to what seems to be a ‘simple patient encounter’ can make not only the accounting aspects challenging, but also the management choices a business makes related to the technology systems they use challenging.”
In order to help members navigate these challenges and learn about best practices, Opti-Port hosts six peer-to-peer information-sharing conferences each year. While topics vary, members say that these meetings facilitate the perfect opportunity to meet with their peers in the industry and discuss challenges, such as management techniques, regarding revenue recognition in a large, multi-office practice.”
BACK IN FOCUS
Membership in an alliance can help doctors put their focus back on what they do best, says Mr. Judkins. Some doctors wind up spending time doing the books or handling other financial responsibilities, while they would much prefer to be spending their time with patients. By partnering with an alliance that offers accounting expertise, it seems optometrists may be able to take that time back. OM