A quick way to obtain a basic report card on your practice can be found by calculating the full-time equivalent (FTE) number of optometrists and staff members and then expressing those values in relation to financial production. I use the FTE numbers to get a rough idea if a practice is producing a high level of revenue (total sales) and also to determine if it has the correct number of employees. It’s really easy, so take a minute and do some rough calculations for your practice.
Full-time equivalence is simply a way to count the number of workers in an organization even when some are full-time and some are part-time. We use a 40 hour work week as the standard for full-time status, even though the legal definition may vary on that. Another way to look at full-time is five days of work per week at eight hours each day.
As an example, let’s determine how many FTE staff members you have working in your office by adding up the typical hours per week each person works. This includes all employees who are not doctors. Let’s suppose you have four full-time staff members and three part-time. The full-timers work 40 hour weeks, two part-timers work 15 hours per week and the third part-timer works 20 hours per week. The total hours for all seven employees is 170. Divide this weekly hour total by 40 hours and we get an FTE of 4.25. This means that this practice has 4.25 full-time employees.
A practice with five optometrists, with each one working 15 hours per week, has 1.87 full-time equivalent ODs. The total OD hours worked per week is 75, divided by 40, equals 1.87.
Production per OD FTE
We can look at national data to determine the median collected gross revenue for a practice with one full-time OD. The Management and Business Academy pegs that at about $686,000 per year and the AOA data is close to that as well. That is the middle range of gross revenue per OD FTE, but what is the high end? It is debatable, but I would use the round figure of $1 million. I know many practices that exceed that figure on a per-OD FTE basis, but it is a good yardstick for a highly productive practice.
Now that you have determined how many FTE optometrists you have in your practice, all you need is your collected gross revenue for last year and you can compare how you are doing. Divide your annual collected gross revenue by your optometrist FTE; if it is above $686,000, you are producing above the mid-earning practice. If it is close to the $1 million mark, you are in the very top echelon of production.
If your revenue per FTE OD is less than you would like, what can you do about it? Well, determine what the problem is. Do you need more patients because the schedule is not very full? Do you need to be more efficient in order to see some of your backlog of appointments? Do you have too many doctors and if one left the practice, the remaining docs could still see all the patients?
Production per staff FTE
You can do the same calculation for your employees. I like to see the collected gross revenue per FTE staff member at about $135,000. The normal value for this metric is sometimes cited as high as $150,000. This statistic is tricky because unlike the OD production, where the higher the revenue number the better, I don’t want to see the production number per staff person too high or too low. If the revenue per staff member FTE is lower than $135,000, there is a good chance you have too many staff and if the number is above $150,000 you may be understaffed. Both are bad. A very high production per staff person many not simply mean you are doing awesome; it could mean you have a stressed-out staff with poor customer service and a low amount of delegation. In that case, you may not be able to sustain that high production.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week
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