November 26, 2013
1 min read

BLOG: Optical performance guidelines, indices and pearls

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Read more from John B. Pinto.

In the typical $1 million revenue general ophthalmology practice without dispensing, adding an optical will add $150,000 to $250,000 to the top-line revenue of the practice. With full-cost allocation for space, administration, staffing and marketing, it’s reasonable for an in-house optical in the typical setting to enjoy a 25% to 30% profit margin.

COGS stands for cost of goods sold, which is the largest single cost of running an optical dispensary. A reasonable COGS rate in the typical office is 30% to 40% of optical collections. A higher figure should trigger an investigation regarding possible overstocking, underpricing, overpaying or diversion via theft by patients or staff.

The second highest cost component is staffing. Some practices with larger, commercially efficient optical operations get by with 20% or lower optical staffing costs. The more typical figure is 25% of collections.

Your practice’s optical average ticket — found by dividing total optical collections by the number of jobs — is commonly as low as $150. If your practice is willing to be more sales-oriented, that figure can climb closer to $250 or more.

The typical optical conversion rate — the percentage of the glasses prescriptions written that result in jobs done in-house — is a figure that varies wildly. I see conversion rates as low as 35%, although the national average is closer to 60%, a figure that, according to ophthalmic optical guru Arthur De Gennaro, can approach 80%.

When optical utilization is low, the most common reason is doctor disengagement. “I see this as an indictment of dispensing ophthalmologists,” De Gennaro says. “Disengagement is an important factor, but equally important is a lack of any qualified or engaged in-house expertise. Neither the doctor, the administrator nor the optician understand optical retailing well enough to create the profit formula and working model for the business; hence, they flounder.”