"Right-Size" Your Staffing Level . . .to increase productivity and profits.
By John B. Pinto

Indians of the American Southwest deserts were a stoic group when it came to personal health care. The vast Native American medicine cabinet specified the following treatment for all manner of eye infections: Instill several whole, individual seeds of the white sage brush.

By all accounts, the disease was a lot more comfortable to endure than the cure.

The same could be said today of solving most practice-staffing issues. The painful, right medicine for overstaffing and understaffing in your office is often less comfortable than going along with the status quo.

But in a business environment with inexorably falling fees and continued -- albeit slower -- wage inflation, just about every practice will have to take what amounts to unpleasant medicine if it hopes to increase productivity and profitability. In this article, I'll provide some basic productivity benchmarks that will help you determine the staffing levels most appropriate for your practice.

	ILLUSTRATION: AARON MCCLELLAN

Start with the "big picture"

Staffing costs are the largest single line-item of expense in virtually every practice, and typically consume the first 20 to 35 cents of every dollar you collect. But don't just look at employee costs in the aggregate. You need to assess staffing levels grossly, by department, and by individual contributions and wages. Here's how to do it right, based on the objective facts:

First, you have to look at your overall practice-staffing costs. What percentage of your collections go back out for lay staffing, inclusive of wages, taxes and all benefits? For the average general ophthalmology practice, in the typical labor market, the target is about 25 percent. It's lower in successful LASIK or retinal practices, much higher in flagging urban clinics. But this is only one gross measure. Another, and perhaps equally valid metric, is to divide total annual practice collections by the number of lay staff.

Let's say you have a strong solo practice with $1 million in collections each year. You'll likely have a couple of front desk staff, an office manager or administrator, three or four techs, maybe an outreach or marketing coordinator, and one or one-and-a-half billing staff. That's nine full-time-equivalents (FTEs) in all (a full-time-equivalent is a full-time staff member working 40 hours per week). Do the long division, and that comes to about $111,000 in annual collections per FTE, which is within the normal limits of about $110,000 to $130,000 for the typical well-run practice. Increase staffing by just one FTE to 10, and your labor productivity is now $100,000 per FTE per year; well under normal limits.

And if you can find a way to get by with seven FTEs? Your labor productivity climbs to about $143,000 per FTE per year. But beware! Staffing that's too lean can leave you vulnerable to the loss of just one critical staff member. It's a little like driving your Porsche at the red line for mile after mile. The exhaust whine sounds beautiful, and the ride is thrilling, but when things go wrong, they go wrong catastrophically.

How much staff do you need?

Like the car enthusiast, you need to decide if your practice is going to have a lot of horsepower in reserve, or if you're going be running near the red line at all times.

Most practices err on the side of laxity and could easily do with one less staff member. Other practices are chronically understaffed, with the accompanying angst and tension. The key is to optimize staffing levels so that everyone is busy, happy and productive.

It's a broad generalization, but the most commonly overstaffed area is the techs, and the most often understaffed area is patient accounts management. As a result, the most common practice breakdown occurs in billing. Many solo practices are dependent on just one key person who's the only staff member who knows how to accurately code, post and submit a charge. If that person goes, the once-successful smaller practice can falter overnight. If you own a small, solo practice and have only one staff member handling billing work for you, put aside all of the great staffing efficiency ideas in this article until you have a second person on board who can make sure you get paid for the work you do every month.

Are you operating efficiently?

Let's next examine your practice's staffing efficiency by department, starting with the most expensive segment, technical staffing.

Every eye surgeon has his own preferences for how to use lay staff to support patient care. And most approaches work just fine in an environment with sufficiently high fees. I've worked for some surgeons who can transit 80 or more patients a day with two technicians, and for other surgeons who couldn't get through 35 patients without five techs in attendance. In the former case, that's just 0.2 tech payroll hours per patient visit. In the latter example, it's 1.1 tech payroll hour per visit. The normal metric, averaged over a year for a general ophthalmology practice, should be 0.6 to 0.8 tech payroll hours per patient visit.

For a high-volume surgical practice, with lots of short, postoperative visits, you should be able to hit the lower end of this range. For a testing-intensive retinal practice, the tech labor number will typically be much higher, but then, so too will the economic yield of each patient. What I hope shines through this discussion is that any national norms should be secondary to your own sense of the internal benchmarks in your unique practice. You should measure these norms, and then work hard to beat your own numbers, especially if your figures fall outside of national averages.

What doesn't work very well or efficiently is for your eye clinic to use highly paid technicians as glorified runners, or optometrists instead of technicians to work up patients. And it's not efficient to work patients up yourself and "double-pass" them, seeing patients twice during a single visit, both before and after they've been dilated.

Next, we turn to the patient accounts department. If yours is the typical general practice, and everyone is doing their part at the front desk and in the clinic to accurately enter each patient's relevant information, you should be able to get by with one patient account staffer for every $800,000 to $1.2 million in annual collections.

But different circumstances dictate different numbers. Let's say you practice in southern California or southern Florida, or in selected rust-belt cities. These are places where higher managed care penetration hits you with the triple whammy of increased pre-authorization requirements, lower payments and considerable additional time and bureaucratic friction in claims submission and processing. The best you may be able to do in such settings is $600,000 in annual collections per patient accounts staffer per year.

Your location matters

As you can deduce from the discussion so far, the most favored practices are in rural parts of the country. Labor costs, as well as facility and most other costs, are low. Managed care penetration is low. But revenue per patient visit can be high because there's little competition and more surgery to go around. As a result, practice profit margins in well-run rural organizations can easily be 50% better than in high-cost big city environments, and you can afford to be a little looser with staffing efficiency. If you're only spending 17% on staffing, who really cares if you have an extra runner on the clinic floor to do personal errands for the doctors?

At the opposite extreme, urban managed care havens may be exciting markets to live in, but they're horrendous markets in which to contain staffing costs. The most enticing markets to live in are populated with eye surgeons making 25% profit margins in their best years. The happiest eye surgeons I've ever met in Manhattan were doctors there on vacation from places like Oklahoma and Arkansas.

Evaluate each department

It's hard to meter reception and checkout staff productivity without a close study of their functions in your practice. But for the typical job description, including checking patients in and out, screening phone calls for the entire office, short-stopping prescription refills and pre-op instruction confusions, scheduling and rescheduling appointments, and taking the heat from all sides, you can expect one receptionist or checkout clerk for about every 400 patients per month, give or take 100 patients. Nowhere are small differences in productivity more apparent. I've seen 1,000+ patient-per-month practices handled by solo front desk superstars, and I've seen fragile, undertrained clerks flummoxed by a quarter of this volume. Experience, maturity and solid workplace skills make all the difference in the world. When you finally get the right person in place, give her money and prizes to make her stay. These frontline warriors are the overlooked key to practice success, and comprise the beating heart of the most outstanding practices in America.

What about optical productivity? Look for something in the range of $150,000 to $225,000 in annual optical sales per full-time equivalent, or recast in other terms, allocate about 25 to 33% of optical sales on staffing for this department. If you sell a strong line of premium goods, or push the edge on markups, the percentile staffing costs should be lower. If you run your optical purely as a patient convenience (and you shouldn't), with lower markups, expect staffing costs to be higher as a percent of total sales.

If your practice is large enough to have a formal marketing department, you may be finding it difficult to accurately assess the productivity of your marketing staff. But this need not be the case. Depending on what kind of marketing you engage in, your marketing staff could potentially be the most accountable part of your team, especially if you focus first efforts (as you should) on the interior of the practice: recall, patient satisfaction, alumni referral development and real service to your referring doctors. Each of these areas is exquisitely subject to results measurement. Not so, of course, general consumer advertising, where the return-on-investment gets fuzzy, fast.

Bottom line? It's reasonable in the average practice for marketing (inclusive of relevant staffing costs) to cost 3 to 8% of each dollar collected. The most common mistakes I see are clients sinking substantial sums into external marketing before they've fully drilled into the untapped internal pools of patients through recall and alumni referral development.

How about that department of one -- the office manager or practice administrator? With rare exceptions, this person is the most competent member of the staff, yet often doesn't enjoy the full confidence of doctor-owners. As a result, too much of her time is taken up in validating her worth to the boss, and too little time is spent doing what the best managers do best: increasing the productivity and morale of every other worker -- lay and doctor -- in the practice.

Assess each individual's contribution

Regarding all staff members: Each individual's productivity should be evaluated by his or her department manager. Semi-annual staff evaluations should include a rating for raw production, even if this has to be subjective and judgmental, as may be the case for front desk staff. Most other areas of the practice can be finitely measured. As an example, assign a different highlighter pen to every tech, and have them mark the patient schedule posted at the nurses' station. You can easily count each tech's daily workups and reach useful conclusions about individual productivity.

Compensation for each position in the practice should be reviewed annually against local standards. If you want a small, crack staff of "commandos," it may make sense to pay your team in the upper range of local standards. This may be appropriate for higher-demand/higher-profit surgical referral center practices. If, by contrast, your practice has a high percentage of low-profit-margin, routine eyecare patients, it may be more appropriate to employ a larger team with less skill and lower pay, just to mush the needed raw numbers through the organization.

Here's the final examination to your practice. If you have a general practice, and don't work in a managed care hotbed, or have unusually stiff competition, or eccentric doctors with extreme support demands, you should fit within the following norms:

• annual revenue per lay FTE per year: $110,000 to $130,000
• a range of 20 to 33% of collections spent on lay staff wages, taxes and benefits
• approximately 0.6 to 0.8 tech payroll hours per patient visit, averaged over the year
• an office manager earning $35,000 to $45,000 for practices with $1 million in annual collections, or an administrator earning another $10,000 or so above this for about every extra $500,000 in annual collections per year up to a peak salary of roughly $200,000 per year in the largest practices. Alternately, you may be able to do without an administrator if you have a highly engaged managing partner and a strong team of middle managers
• optical sales of at least $150,000 per dispensing optician
• an executive assistant, shared by the administrator and doctors, once annual collections reach $2 million or more
• in-house marketing support to the extent that total marketing costs, inclusive of payroll, don't exceed 8% for a mature general practice or 15% for a mature and established refractive surgery practice Practices growing and consciously increasing investments in marketing can reasonably spend at twice these levels and still be rational
• a full-charge, in-house bookkeeper, part- or full-time, once annual collections reach $3 million or more
• a full-time human resources director once your headcount exceeds about 100 FTEs.

Take appropriate action

If your practice is off in one or more areas, consider staffing up or down to fall within norms. At the very least, visit a colleague's practice where the metrics fall within normal limits to see how they do it, or furlough one or more staff to see if a busy day can be comfortably handled without the extra assistance. For strong practices, "right-sizing" will make a visible difference in profitability even with continued fee cuts. For already-weak practices, getting to the right number of support staff will be necessary for survival over the balance of this challenging decade.

John Pinto is president of J. Pinto & Associates, Inc., an ophthalmic practice management consulting firm established in 1979, with offices at 1576 Willow St., San Diego, CA 92016. Mr. Pinto is the country's most-published author on ophthalmology business and career management topics. Recent books include the second edition of John Pinto's Little Green Book of Ophthalmology. You can contact him at (800) 886-1235, pintoinc@aol.com  or via www.pintoinc.com.