Ophthalmology

Marketing, as every thriving ophthalmologist now knows, is a key fuel for your practice vehicle. Depending on the setting and provider ambitions, some practices seem to need nitro-boosted dragster fuel. Others chug along just fine on charcoal.

Facility costs include base rent or mortgage costs, utilities, maintenance and upkeep, and taxes. If you own your own building, these costs are offset over time by any appreciation or depreciation in value.

A reasonable cost ratio for facilities in a general ophthalmology practice is 4% to 6% of practice collections. In pricier urban and suburban markets, facility costs will skew somewhat higher: Demand is higher, and land, vendor, tax and even utility costs can be much higher. What’s more, urban patients expect more lavish surroundings. It’s not unusual to pay 8% to 10% or more of revenue for retail-oriented facilities in the urban core.

For the average general ophthalmology practice, and before considering optical or ambulatory surgical facilities, it’s typical to generate $500 to $1,000 in annual collections per square foot of office space. Said another way, at the usual intensity of utilization, with each doctor seeing 40 to 60 patients per day, 3 to 4 days per week, most practices need a square foot of floor space for every five new or established patients seen each year.

In my last blog, I discussed a gross screening ratio you can employ to begin to understand if your staffing costs are too high. In part 2 of this same subject, let’s review another common, very simple ratio that will help you begin to understand if you have too many or too few staff.

This second way to evaluate staffing efficiency is to add up the number of support staff full-time equivalents, or FTEs (a technician working 40 hours per week is 1.0 FTE; a clerk working 30 hours per week is 0.75 FTE), and divide this figure into the practice’s annual collections. Normal limits for this ratio are $110,000 to $150,000 in annual collections per FTE in a typical general ophthalmology practice, with many variations depending on your circumstances.

Some of the most common questions asked today, as practice costs rise and reimbursements decline, are, “Are we overstaffed? Are our staffing costs too high?” The fundamental productivity of your practice’s non-physician support staff can be assessed with one common ratio.

A simple percentile ratio can be derived by adding up the fully burdened annual lay support staff wages, payroll taxes and benefits, and dividing the resulting total figure by your practice’s annual collections. In a general ophthalmology practice, the typical range falls between 28% and 32%, with that much of each dollar collected going back out for lay support staffing costs. It’s likely your largest single cost of doing business.

Nearly every cataract surgeon wants to do more surgery and spend less time in the clinic, even in the fast-emerging era in which (absent an owned ASC) profitability per hour of your time can be much higher in the clinic. 

Surgical volume is directly linked to your productivity in the clinic: See more patients and you’ll identify more patients to help with surgical care. There are a number of things you can do to increase your surgical yield, but the important starting point is to measure the baseline surgical density of your practice today.

Doctors often ask me, “How tough should I be with my staff?” Consider America’s marsupial, the humble opossum. Biologists know that “playing possum” is not some coy act. The animals actually pass out from sheer terror.

Do your staff members look similarly dazed when you approach them? Or, at the other end of the spectrum, are you ophthalmology’s Rodney Dangerfield, so meek that you get no respect?

Have you ever watched a children’s karate class? Do it, if you have a nearby studio, and especially if the kids are a couple of years and a few belts into their program. You’ll see little ninjas-in-training, all of about 10 years old, all going “Ayyyyaaahhh” at the top of their lungs under the watchful eyes of their sensei.

Based on current expectations, we could see a roughly 18% drop in Medicare fees within the next 5 years. Of course, private insurance companies index their payments to Medicare rates, so an across-the-board revenue drop should be plugged into one’s planning metrics as a practice owner or administrator.

Forensic accountants are paid tens of thousands of dollars to opine on the market value of even quite small ophthalmic practices. If the stakes are high, as in contentious legal cases or deep disputes between partners, this formal treatment is certainly indicated. But for the majority of routine buy-in and buy-out transactions between companionate parties, the following thumbnail describes a reasonably approximate market value for the typical practice today.