What you don’t know will hurt you

Benchmarking your data is just smart business.

By Robert Calandra

You became an ophthalmologist to practice medicine, not to angst over columns of numbers on a spreadsheet.

But these days physicians must wear several hats ­— and green eyeshades — to ensure practice profitability. In the past 30 years margins have flip-flopped from 60 percent profit to as much as 70 percent expenditure, says John Pinto.

“It has become obligatory that practices get better at tracking these figures,” says Pinto, president of J. Pinto and Associates, a management consulting firm in San Diego, Calif., that works with ophthalmic practices.

“Benchmarking is an integral part of our financial reporting because it allows you to compare yourself internally and externally,” says Corinne Wohl, administrator for the 12-physician Delaware Ophthalmology Consultants practice in Wilmington. “If you are not using benchmarks you are looking at certain financial results, but you don’t really know exactly how you got there and what were the drivers behind those financial results.”

Getting on track

Benchmarking your practice is one way to track those figures. Simply defined, benchmarking is knowing your business and its myriad aspects inside and out. How much money are you bringing in? What is your overhead? How do this year’s numbers compare to last year’s, and where does your practice rank against other practices?

“Benchmarking is about growth and expenses,” says Mark E. Kropiewnicki, JD, principal attorney and president of Health Care Law Associates and president of The Health Care Group, Inc. in Plymouth Meeting, Pa., “but you need to understand both.”

Benchmarking is more than a three-sum equation: If X is revenue and Y is overhead, then Z is profit. Simple, yes, but the typical practice could have 50 benchmark data points to follow.

The rub

Medical outcomes could be the untapped mother lode of benchmarking. A practice that consistently delivers great medical outcomes has a jam-packed waiting room and a fully booked surgical schedule.

But there’s a rub: While the profession can define a great patient outcome, it doesn’t have the statistical and analytical information necessary to standardize a methodology to achieve it, says LASIK surgeon Brian R. Will, MD. Consequently, little medical benchmarking exists.

“The information we have today doesn’t necessarily define how you select people or how you treat for individual eyes in order to attain that on a consistent basis,” says Dr. Will, owner of Will Vision & Laser Centers in Vancouver, Wash.

Dr. Will wants to resolve the data dilemma by building his own information management system. He plans to share it with the industry.

“Data is the new oil,” he says. “If you know what makes people get really good outcomes that is extraordinarily valuable. That will eventually drive the industry. The question is, how do you produce those results?”

Work towards the middle

Ophthalmologists working to grow and thrive their practices shouldn’t think like businesspeople, Pinto says. They should think like a doctor and benchmark the practice’s “lab” report.

Just as a healthy patient’s labs show their systems in balance, so too should the benchmarks of a fiscally sound practice. An excessively high profit margin could mean it’s too lean with no resources to grow. A lower margin might indicate expenses are out of line and stifling growth.

“In the middle is the sustainable and controllable healthy practice; it’s where you want to be,” says Pinto.

A practice’s size dictates how many of the 50 benchmarks it should check regularly. For example, a one or two doctor practice needn’t hit as many data points as a larger group. But big or small, if a practice is performing poorly financially, benchmark the trouble spots monthly.

Most practices, Kropiewnicki says, operate with overhead of about 60% to 70%, depending on size and style. So a practice with the latter can function as well as one with 60% expenditures.

Staffing, office rent, supplies, technology, malpractice insurance, things Kropiewnicki calls the “nut,” are reoccurring monthly expenses. They might not vary but don’t forget to keep an eye on each one.

“Staffing might be 22% of gross income and the rent might be 6 or 8%. You need to understand and analyze that,” Kropiewnicki says.

Unpack with care

Unpack those numbers to grasp and analyze them. Take staffing, for example. Pinto says that for a general ophthalmology practice, technician payroll hours per patient, per visit should be about 0.9. A practice coming in significantly higher probably has too many techs. One coming in under that, say at 0.6 tech hours per patient visit, is likely understaffed.

“Monthly I’m looking at efficiencies like our labor productivity, or staff efficiencies per patient visit, and patient visits per doctor,” says Wohl.

Wohl says a practice’s finances move up and down and sometimes the cause can be physicians taking vacations. But without benchmarking there is no way to know if vacations are the sole reason.

Pinto agrees. “You can really look at all the heretofore dark corners of the practice and say, not only are we over/understaffed, but do we have enough exam rooms for the patients we serve.”

The next step is a year-to-year comparison. There probably will be some variance. For example, salaries will likely increase from one year to another, and maybe there is an extra month’s rent. But overall, how do things stack up? Are expenses in line with last year? Or is something out of kilter?

If there have been no significant changes — you didn’t hire or fire any staff, expand to a new office, or buy new equipment — you shouldn’t see much variation. But if something is out of line ….

“If all of a sudden you have 70% overhead instead of 60%, you have to start looking into the detail of all those little components and see what was off and is it explainable,” Kropiewnicki says.

Now expand your view. How does your practice measure up against other ophthalmologic practices in the region and across the country? Information may be tough to nail down but the American Academy of Ophthalmology should be able to help. Make sure to compare your practice to others of the same size.

Dr. Will’s benchmarks

Like most ophthalmologists, Dr. Will’s practice relies on referrals from other doctors. So he benchmarks those numbers every year.

Benchmarks of a staff salary survey presented at the 2014 annual meeting of the American Academy of Ophthalmology.

“I need to look at how many patients did Dr. Jones refer to me this year compared to last year,” he says. “If that is going down then possibly something is wrong. Looking at that part of the business is important.”

But Dr. Will is focused on developing a method for benchmarking data to ensure consistent surgical outcomes.

If “data is the new oil,” as he says, there should be a gusher of benchmarking information for LASIK. On its business side, a practice can drill down on 50 data points; on its surgical, 150 metrics. But very few of those metrics, such as visual acuity before and after surgery, are currently benchmarked.

The reason, Dr. Will says, is there currently isn’t a way to automatically capture the data, analyze it and shape it into a system that can be searched and manipulated.

“Measuring the other 148 metrics is simply not possible on a large scale because we are extremely limited in automatically acquiring that information,” Dr. Will says. “It really comes down to building a system that allows us to do all these things in a systemic and accurate way.”

Dr. Will is building that system. He believes a methodology to benchmark surgical metrics will be more valuable to surgeons “than all the laser manufacturers and other elements that go into the whole industry.”

“If you took 150 metrics pre-operatively and started to look at [them] across the country with statistical analysis or even big data or predictive analytics it will tell you if this person has a high K value and if they are likely to do poorly as opposed to someone with a different value,” he says. “That is the direction we are trying to go.”

When the information system is fully up and running, existing touch screens used for EMRs will be used to educate patients, showing them all 150 metrics and explaining how they will be used to evaluate their outcome pre-operatively.

As the data bank builds, Dr. Will hopes to show consumers five years of data from “50 people [who] match your profile and here is how they did.”

That alone, he says, will go a long way toward building consumer confidence in LASIK surgery. Right now, Dr. Will says, most consumers are confused by the price wars among LASIK surgeons and have a “buyer beware” attitude about the industry.

“There is no relationship as to how a given technology or a given surgeon or a different center might approach [surgery] versus a different location or surgeon,” he says.

In time he hopes a national database will be established to help surgeons benchmark their outcomes and allow consumers to see who is getting the best, most consistent results. But it will require ophthalmologists to see the industry through a different lens.

“My thought is that it can be done and we can generate these large databases that will demonstrate that they do have value in terms of outcomes,” he says. “I think it’s a message the consumer would appreciate.” OM