Ophthalmology-Optometry Practices Present Challenges, Opportunities
The right compensation model and incentives enhance employee productivity, patient care, and the bottom line.
BY AMIR ARBISSER, M.D.

Physician owners of joint ophthalmology-optometry (O-O) practices often voice concerns about the perceived disappointing productivity of their optometrist employees. Questions such as why the optometrists within the practice aren't referring more patients to the dispensary or to the practice's glaucoma specialist tend to come up. Similarly, ophthalmologist owners may ask themselves why their practice's surgeons are getting more referrals from outside optometrists, or why the practice loses money in contact lens sales year after year?

While it is paramount for ophthalmologists to ask tough financial questions about these types of practices, improved profitability can become a reality if the practice aligns incentives between physician owners and employed optometrists through a compensation model that gets everyone involved.

As one of eight physician owners in a practice that employs several optometrists, I have experienced success in my practice. Our owners benefit directly and indirectly from the contributions of employed optometrists; however, owners must have an understanding of the "big picture" to recognize how the relationship works to their advantage.

In this article, I will provide insights into this issue from my practice.

Optometrists' Roles

Initially, it is important to envision the optometrists' roles, and why they should be employed in an ophthalmology-optometry practice. They are integral to an O-O practice's vertically and horizontally integrated business model. They help provide the security of protected market share by capturing patient population.

In capturing a patient population, a joint group's optometrists refer new pathology to the most appropriate specialist. For any pathology -- such as an opacified capsule in a pseudophake -- the practice is most likely to retain the patient for a possible YAG capsulotomy when the primary care remains in-house.

Generating appropriate refractive surgery referrals in this setting should be self-evident. For example, if a group optometrist's myopic patient decides he or she wants to inquire about LASIK, a consultation with the group ophthalmologist is an appropriate fit.

Another benefit of this type of situation is when a group optometrist sees a patient and refers that person to the group ophthalmologist on the same day. Office visit fees are generated for the ophthalmologist and the optometrist. This provides the ability to bill for both visits in the same day.

Employed optometrists in physician-owned practices enable patients to receive timely, geographically accessible service where pathology gets appropriately directed to the M.D. specialists.

Because we're organized to take maximum advantage of our O-O setup, our practice never aggressively adopted surgical comanagement as a strategy. We limit cataract comanagement, for example, to situations in which it's geographically justified for the patient.

Economic Model

At our practice, we start new optometrists off with a base salary for the first 2 years of their employment. This way, they can create a good working relationship with patients. After the optometrists have established a good working relationship with patients, economic benefits can be realized. Overall, our optometrists enjoy job security and significantly higher income than most of their colleagues due to improved patient access.

In our compensation model, we have reduced practice fixed costs by employing optometrists on a pay-for-performance basis. Obviously, this reduces owners' economic responsibilities, but it also lowers fixed costs, and entices employees to perform. Our optometrists become eligible for this after 2 years with the practice.

In our practice, we charge to the optometrists expenses related to their practices. Identifying specific expense categories (e.g., licenses, insurance, or contact lenses) with related supplies and proportioning group overhead items facilitates the practice's creation of a risk (and benefit) category limited to optometry. We've found that by charging the optometrists for those expenses, our practice owners need to spend less time monitoring the employed optometrists' productivity. They are motivated to watch both the bottom line and the net income they generate because it affects their salaries.

In our practice, for example, contact lenses evolved from a financial loss to profit once the optometrists who prescribed and dispensed lenses benefited from inventory control and appropriate pricing. Additionally, we have allocated identifiable and direct costs to the optometrists for their assistants. Our optometrists identified inadequately employed FTEs and made changes to their staff, creating a benefit for both the optometrists and ophthalmologists.

Compensation methodology always deserves careful scrutiny in assessing the group. Some practices compensate optometrists with a standard salary. This gives the optometrist little incentive to be more productive. Bonus incentives increase production as does paying the optometrist a percentage of charges booked.

Occasionally unsavory consequences such as heavy-handed charging result from compensating based only on charges. Cherry-picking patients may manifest as a focus on new patient visits with a reduction in efforts to serve established patients. An unusually high proportion of new/established patients might mean the practice discourages patients returning easily.

It's administratively less expensive to care for chronic patients than to generate new patients; however, a healthy growing practice depends upon both new and established clientele. Everyone in the practice needs to realize the cost of introducing a new patient to the group practice -- and also the hidden cost of patients feeling unwelcome. How many patients bypass your practice with its perceived hurdles to seek primary care and spend their cash buying glasses at the mall?

Group Dynamics

Overall, for joint group relationships to prosper, all parties -- owner ophthalmologists, employed optometrists, and patients -- must easily recognize the benefits. A seemingly simple yet significant benefit of a joint practice is the group dynamics formed from an educationally stimulating environment of collegial specialists. In our group, most optometrists also develop their own specialty care area with the associated respect from their M.D. colleagues. Examples include low vision, computer vision, and advanced contact lens specialties. Because our optometrists follow their own patients, they share the group optometric call schedule, which results in enhanced lifestyle for work schedules and vacation.

In-house, we team our nonsurgical doctors (optometrists and some ophthalmologists) with the busiest anterior segment surgeons. To qualify for the team, the nonsurgeons pursue an in-house didactic course before regularly scheduling post-op patients.

We credit our team doctors with an appropriate proportion of the collected surgical fee and subtract a similar amount from the surgeons' production numbers. As in many practices, our busiest surgeons remove a cataract in the time required for two or three post-op visits. The total practice production and the ophthalmology bottom line both benefit substantially from this team approach.

Patient Care

In an increasingly competitive medical marketplace, patients expect rapid and convenient access to care. Indeed, multiple insurance contracts in recent years specifically establish benchmark performance in those areas.

In our opinion, patient care starts with the phone call to our practice. We have well-educated call center personnel who properly triage care within the clinic's provider template menus. Patients benefit when they are directed to the correct provider efficiently. In ophthalmology-optometry groups, most primary care should arrive in the optometry offices, while more likely pathology should appear in the ophthalmologists' or even subspecialists' chairs on the patient's first visit to the office.

That means the group's optometrists will have less pathology to refer than their independent colleagues outside the group who examine all comers initially typically without prescreening. Effective triaging in ophthalmology-optometry groups enhances the facilities' optimal use and everyone's daily schedule. Ophthalmologists maximize their productivity.

Along with scheduling efficiency, patients benefit from continuity of care with the potential for enhanced outcomes, ultimately lower costs, and improved access and convenience of care. The patients experience enhanced access to both immediate care and to intrapractice referral to the most appropriate specialist should the problem exceed their optometrist's knowledge or skill. Implementing quality standards and protocols expedites the patients' care at all levels and frequently reduces the redundancy inherent in visiting multiple independent practitioners.

Financial Benefits

The aggregate economic activity of the combination of ophthalmology with optometry means a substantially increased cash flow. Economies of scale benefit the owners in practice development expenses such as marketing; reduce proportionate overhead expenses like rent; and generate volume discounts.

The larger business model enhances access to financial capital resources. When I began as a solo practitioner I used to go knocking on bankers' doors. Today, they regularly come knocking on mine to offer preferential rates.

Not only are bankers motivated to do business with O-O practices, but O-O practices become attractive contracting partners for insurers because of the administrative simplicity for both patients and intermediaries. To that end, we've actively sought insurance panel privileges for our in-house optometrists to enable them to triage emergency situations and provide routine chronic care visits for diagnoses like glaucoma and diabetes. This creates an opportunity for our optometrists to bill for such activities and further protect our ophthalmologists' schedules.

The Tax Man

Presumably your group's owners directly retain a portion of employed optometrists' production for distribution to owners. Be sensitive to IRS rumblings that abusive profits with a professional corporation (PC) business structure may someday result in taxation to both the PC itself and ­ again ­ to owners on their PC's "dividends."

In other words, funds produced from employed optometrists may first get taxed at corporate rates then again as dividends to the owners. To avoid such pitfalls, owners should periodically review both business structure (e.g., PC vs. S corporations) and state laws regarding employed licensed professionals.

Other Direct and Indirect Costs and Benefits

In our group, indirect costs such as rent or employees who are unassigned to specific revenue centers -- we've got three revenue centers: ophthalmology, optometry, and optical -- are proportionately allocated based on a revenue center's collections.

Our unassigned employee category includes administrators, receptionists, telephone schedulers, medical records, IT and insurance personnel. Sharing practice expenses, such as the employee category, has proven to energize employed doctors to more actively consider the group's FTE requirements.

While only equity owners are entitled to access individuals' salaries, optometrists can be made aware of overall percentages that make up this cost as well as other indirect costs.

Assigning overhead also results in optometrists contributing to diagnostic and office equipment purchases and building expenses and depreciation. There are other opportunities for owners to indirectly benefit. In some locales employed optometrists may not be required to carry a separate malpractice insurance premium. Optometrist employees are covered, but owners can reduce costs having the optometrists under the corporation's insurance.

Other direct and indirect benefits of an O-O practice are seen in the optical dispensary. Federal law prohibits optical dispensary incentives based on referral even within a single tax entity. Once the optical covers its fair proportionate share of unassigned expenses and something for owner management, we divide optical net equally among all practice doctors regardless of ownership.

In our group, the typical optometrist's monthly optical sales are a multiple of any individual ophthalmologist's. In this case, the ophthalmologists now benefit from the increased interest the optometrists show in our optical center or in areas like remaking prescriptions. The employed optometrists readily volunteer information about the dispensary's benefits and direct patients to the service about which they used to be ambivalent.

The Big Picture

When we inaugurated pay-for-performance for our employed colleagues, we noted a large increase in employed optometrists' salaries despite relatively flat revenues at first. As optometrists became more economically efficient, we all benefited from that behavior.

We owners acquired additional insulation from their economic risk. The surprise happy ending for the owners included increased optometric productivity, which appeared on the ophthalmology bottom line.

To my thinking, optometric colleagues in an O-O group prove to be quite economically productive. As with any nonequity employed doctor, differential compensation should directly benefit the practice owners. Owners benefit in indirect ways, such as shared expenses and transferred risk. And the greatest economic benefits emanate from the increased scheduling and practice efficiencies.

Dr. Arbisser is a partner at Eye Surgeons Associates, which has five offices in Iowa and Illinois. Dan Craig, executive director of Eye Surgeons Associates, contributed to this article.