Eight simple metrics that allow providers and practices to make data-driven decisions in the new year.

As we welcome the year 2020, providers, practice managers and consultants alike are inspired to make all things ophthalmology thrive and succeed. In the new year, we should all be inclined to double down on improving patient care and practice economics.

Unfortunately, headwinds abound. Reduced reimbursement (and more cuts slated for 2021), increased competition to attract new physicians and a low unemployment rate that makes hiring lay staff harder continue to create practice management challenges to all stakeholders.

So, to help kick off the year, here are eight key performance indicators (KPIs) that can help you keep a closer watch on practice performance and monitor the results of your efforts at improvement. These metrics allow you to make data-driven decisions rather than applying a gut hunch to the important issues that will surface this year.

1. PROFIT MARGIN

As revenue and profit margins shrink, practices are under more pressure to make faster, data-driven decisions and fewer errors. Profit margin is determined by taking the profits before any MD/DO salaries and draws and dividing by net collections. The largest profit drag in a practice is excess staffing and under-employed providers. Excess staffing results in higher overhead costs. Under-employed providers need (and want) to create opportunities to increase their patient volumes.

Profit margin norms in anterior segment practices are 30-45% and +/-50% for retina and plastics. The higher your profit margin, the more resilient you will be to future fee reductions.

2. PRACTICE REVENUE GROWTH RATE

The demand for eye care is growing 4-5% annually. So, for the typical practice, targeting a 4+% increase in revenue keeps you steady in terms of market share. Growing at a slower pace than market demand means your market share is shrinking.

In this current environment of slowly eroding fees, efficiency and productivity must materially exceed fee reductions to hit growth targets. Aggressive practices should aim for 10% growth rates. Mature doctors in mature practices have the option to keep up with market growth or to even intentionally lose market share as the end of their careers loom.

The math for this is simple. A practice that collected $1 million in 2018 and $1.1 million in 2019 enjoyed a 10% growth rate.

3. LABOR PRODUCTIVITY

Staffing is the largest component of your practice’s operating costs — improvements here can have the largest positive impact on profit margins.

To boost productivity, be wise. Move slowly. Experiment with staffing before taking dramatic steps. Excess staffing stifles profits, but, if your staffing is too lean, ancillary sales (eg, special testing), profits and patient satisfaction will decline.

It is helpful to review your spending from more than one perspective.

• Staffing levels for the overall company and by department. Calculate total lay staff hours per visit: total lay staff hours in an average month (excluding optical staff) divided by average total patient visits (including postops). Norms are about 2.5 staff hours per patient visit overall and about 2.8 staff hours per patient visit in retina practices.
• Labor costs as a percentage of net collections. Calculate your staffing cost ratio: total lay staff payroll, benefits and taxes divided by net practice collections. The target is 28-32% in the typical general practice. It can be sub-25% in a high-volume surgical practice and 35% or more in a primary care-oriented practice in adverse urban settings with high labor costs.
• Your own observations and preferences. Along with quantitative ways to review staffing levels, there is room for subjective impressions. Your tech team may be composed of mostly inexperienced staff. Your subspecialty or research work may call for higher staffing. If being comparatively “overstaffed” makes your clinic days go easier, and you are willing to pay for this, then do so.

4. POTENTIAL VISIT CAPACITY

As a practice leader, it is essential you know how much patient volume each provider is capable of and how that compares to norms. Tracking this data monthly, and individually coaching and motivating each individual provider can in some settings be the best revenue enhancement opportunity you have. This data can also help you determine the right time to add or dismiss a provider.

Here are reasonable production quotas (inclusive of postop visits):

• General ophthalmologists = 550 visits/month
• Retina/glaucoma = 450 visits/month
• Oculoplastics = 350 visits/month
• OD = 350+ visits/month

As an example, if a general ophthalmologist sees 500 visits per month, she may be working at roughly 91% of her potential capacity of 550 visits per month.

5. FACILITY COST RATIO

Your office facilities are generally the second highest cost in running your practice, so it’s important to understand how this cost impacts your profit margin. To calculate this value, divide your rent, utilities, taxes and basic repairs costs by net collections. The typical facility cost ratio is 4-6%. This can range to 10% or more when the practice is still growing into a new facility.

If your facility costs are higher, evaluate your options. Did you expect a higher patient volume and it hasn’t come to fruition? Can you increase practice building efforts? Is it time to sublet a portion of your suite or sell your building and lease it back? Be proactive and understand how relatively fixed costs may impact practice performance in an environment where you are likely to receive lower fees in the future.

6. NO-SHOW RATE

Ideally, your appointment schedule is booked 100% daily. There will always be no-show patients, and the norms are 5% or under as a target in a general practice. Rates hit 10-15% in pediatric offices and with optometric providers or in settings with a higher percentage of Medicaid patients.

A clinic with 100 filled appointments at the start of the day and 10 no-show patients that day would have a 10% no-show rate. Average this figure over time by location and provider. If necessary, increase appointment reminders.

7. ANNUAL STAFF TURNOVER RATE

Turnover (percent of lay staff who leave each year) impacts practice expenses as well as staff and provider morale and often goes unrecognized as an profit enhancement opportunity.

The typical figure is highly variable, depending on the market, provider behavior, employment practices, and management’s skills. The U.S. private industry rate is about 35%. This figure is only about 15% in government service. In a stable practice, a mid-point between these two is typically seen — about 25%. Best practices often run under 20%. Even lower turnover rates may indicate that your employee performance standards are set too low.

8. PROFIT PER MD/DO-HOUR

This is another individual rather than practice-wide KPI that helps providers measure their performance.

The calculation is simple: Divide a provider’s annual income (wages, taxes, benefits, dividends) by the number of hours worked (clinic, surgery, CE and administrative time, etc.).

The typical figure for this KPI can be wide ranging. For younger doctors with lower surgical volumes or in practices with low profit margins, it may be as little as $100. In some settings, it can exceed $600. The average is about $180 in a general practice.

This is one of many dimensions of efficiency where ratio analysis is often best applied as an internal standard, rather than trying to match external benchmarks. OM

Corinne Z. Wohl, MHSA, COE, is president of C. Wohl & Associates, Inc., a practice management consulting firm. She has over 30 years of hospital, physician practice management and management consulting experience. Her new book, “UP: Taking Ophthalmic Administrators and Their Management Teams to the Next Level of Skill, Performance and Career Satisfaction,” is available at www.asoa.org/resources . Contact her at czwohl@gmail.com or 609-410-2932.

John Pinto is president of J. Pinto & Associates, Inc., an ophthalmic practice management consulting firm. He is the leading author in America on the business of ophthalmology. His latest book, “Simple: The Inner Game of Ophthalmic Practice Success,” is now available at www.asoa.org . Contact him at pintoinc@aol.com or 619-223-2233.