Twelve strategies to boost the bottom line

From seeing more patients to resolving partner conflicts quickly, these steps can help you cope with the new normal.

By John B. Pinto

About the Author
	John Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management-consulting firm in San Diego, Calif. He has authored numerous books on ophthalmology management topics, including his most recent, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams. His e-mail is pintoinc@aol.com and website www.pintoinc.com.

Back in the late Pleistocene, when my fellow biochem undergraduates and I were suffering through all five pounds of Lehninger's first edition, it was drilled into us that DNA makes RNA, and RNA makes protein. Simple as that. The naive simplicity of those times also decreed that 98% of DNA was probably junk; only 2% was really used for anything.

Not long after, it was discovered that there were actually three kinds of RNA. Oops, no, scratch that. There are more than nine types, now. And most of the DNA actually has a purpose. No junk. As it turns out, life is more complex than we thought.

This latter-day epiphany about the not-so-simple chemistry of life has a business cognate in the not-so-simple success factors that now go into making an ophthalmic practice thrive. A generation ago, in the days of 50%-plus profit margins and three-month appointment queues, anyone could hang a shingle and be a commercial success in private practice. Not so much today.

“In the end, all business operations can be reduced to three words: people, product and profits.”— Lee Iacocca

The new ‘normal’

“Normal” practice margins have shrunk from 50% to around 35%, and can be as low as 20% in managed-care hotbeds like Los Angeles.

Profit margins to a practice are like altitude to a pilot. Flying high, in either the economic or aeronautic sense, buys you time when something starts to go wrong. For a practice with high profit margins, losing a single contract, an important referral source or a key staffer is quite survivable. Not so for the low-profit practice. That's why in the last five years I'm witnessing more low-profit practices skirting disaster, even bankruptcy, than I have in my prior 30 years as a management consultant.

It takes books to describe how to comprehensively boost profitability in even the simplest practice. (Shameless plug: my next ASCRS/ASOA book is the second edition of Turnaround, available this spring.) What follows is a digest of just 12 pearls you can employ next week to boost profitability in the New Year.

1 ▸ BOOST PATIENT VOLUMES

Ophthalmologists who can learn to see many more patients with the same resources will own winning practices in the future. I've seen 80-patient clinics managed by one doctor, two techs, a couple of lanes and an espresso machine. It can be done. It will have to be done. You can satisfy patients at the same time. At least commit to seeing three more patients per clinic day. When you do this consistently, annual profits rise about $100,000, which will materially buffer future cuts.

2 ▸ PROVIDE MISSING CARE

An informed review of your practice's CPT report will almost always reveal missed opportunities. Here's one example: refraction fees. Some practices charge for a refraction for 10% of visits or less, collecting a fee below $30. These figures can be 25% and $45 — and more — respectively. In a solo practice with 6,000 patient visits per year, the difference between these two approaches comes to $50,000 or more in augmented annual profit — for NO additional work.

3 ▸ RIGHT-SIZE STAFFING LEVELS

Apply widely available industry benchmarks to assure you have the right number of staff. If you have too many employees, you are bleeding profits. If you do not have enough, collections, patient care and special testing will lag. Trim staff hours that are not efficiently used.

Here's one example: Imagine that the same practice with 6,000 annual visits has four full-time techs (who also scribe and perform special testing). That comes to 1.4 tech payroll hours per visit, when norms are 0.9 for a general practice. So this practice is employing about 0.4 techs too many. Right-sizing in this environment would bring about $20,000 per year to the bottom line.

4 ▸ CLOSE OPERATIONAL GAPS

Eye care, done well, is a massively complex enterprise. Something is always falling between the cracks. Now is the time to audit to make sure these operational gaps (especially in recall systems, appointment reminders, billing protocols and the like) are all closed.

5 ▸ LOOK FOR A MERGER OPPORTUNITY

You and your friend Dr. Joe practice within a mile of each other. You are friendly competitors. Joe has a bit more space than he needs and is slowing down. Your lease is up at the end of the year. Joe could potentially refer you some of his tougher cases. If you merged practices, you would save, at the very least, one rent payment and the costs of one office manager — at least $100,000 in boosted profits for you and Joe to share.

6 ▸ GIVE UP YOUR POST-OP AFTERNOON OFF

By adding another half-day clinic to your work week, and seeing the typical six patients per hour, plus or minus, you will see an extra 1,000 patients a year and boost profits by six figures.

7 ▸ IF YOU DON'T HAVE AN AMBULATORY SURGERY CENTER, BECOME AN ASC OWNER

Having your own ASC (or part of one) will augment your profit per surgical case by as much as $300 in a well-run center. In addition, both you and your patients will have a superior experience in the OR. And you'll make a profit in the future when you sell the center.

8 ▸ IF YOU DON'T ALREADY DISPENSE, ADD AN OPTICAL

Practices with optical shops have two business advantages. The first is patient tenure: If you have a one-stop practice, patients are not exposed to the offering of other providers and are more likely to stick around. The second is raw profitability. In the typical practice, adding an optical boosts profitability 10%. If you make $400,000 today, you'll make $440,000 with an optical.

9 ▸ HIRE AN OPTOMETRIST

Let's say you're a mid-career soloist and booked out five weeks in advance. A competent OD could readily follow 20% or more of your current patients. So you shift the patients over, opening up space to bring your backlog down to a more reasonable three weeks.

10 ▸ EXPAND YOUR USE OF PREMIUM IOLS

My typical client is now implanting more than 20% of cataract cases with custom IOLs, a bit higher than the current estimated 15% average in North America. Fifty percent rates are not unheard of. Although the transition from basic to custom will not move at the same pace as the shift from extracapsular surgery to phacoemulsification, if you're not implanting custom lenses at all today, you are officially behind the curve.

11 ▸ RESOLVE PARTNER CONFLICTS QUICKLY

Your practice will miss out on profits if your board members won't speak to each other. Projects and decisions will go unapproved. The world of private practice is getting stressful enough without simultaneously dealing with doctor-to-doctor conflicts. Get these behind you to clear the decks for the challenges ahead.

12 ▸ INNOVATE FRUGALLY

As I've shared in recent national talks, economic enhancement is no longer just a matter of seeing more patients and generating more top-line revenue. You must also puzzle through better approaches to reducing practice expenses. This is best examined on a cost-per-patient visit basis.

Add up your typical monthly costs, including everything except provider's wages/taxes/benefits, depreciation/amortization, drug costs and all optical/contact lens department costs. Divide the resulting average monthly expense by the average number of patient visits (including postoperative visits.)

The resulting figure in a general ophthalmology practice in a typical suburban setting is around $100. Use that as your baseline per-patient cost, and work diligently to get this figure as far below $100 as you can by reducing line-item costs and seeing more patients with the same or fewer resources. OM

Editor's note: John Pinto's white paper on frugal innovation is available at www.pintoinc.com.