Is your ophthalmology as profitable as it can be? You’ll know the answer to this question if you measure five benchmarks and compare your numbers to your peers, says Derek Preece, a BSM practice management consultant who presented at AAO.
Benchmark #1: Overhead Ratio
How To Calculate: Divide total operating expenses by total practice revenue. Exclude from “operating expenses” the salary and personal expenses for any revenue-generating provider, including MDs, ODs, and physician extenders.
What’s Healthy: 50-70 percent. A healthy overhead ratio for a retina practice is likely to be 5-10 percent lower than for a comprehensive practice, Preece points out. This gap may close as retina specialists get hit with injection reimbursement decreases.
What to Know: If your overhead ratio seems out of whack, take a look at factors that might affect it, including payer mix, geographic location, operational efficiency, provider productivity, surgical intensity, and collections efficiency. An overhead ratio that’s really out of whack can alert you to something serious going on, like internal theft. For example, “If you are a retina practice, and you occasionally ‘lose’ some of your Lucentis inventory, that will drive up your overhead quickly,” says Preece.
Benchmark #2: Provider Productivity
How To Calculate: Divide total professional fee collections by total number of full-time equivalent (FTE) providers.
What’s Healthy: A comprehensive ophthalmology practice is healthy if the average collections per provider is between $800,000 and $1.3 million. This number is similar for glaucoma and plastics practices. The healthy range for cornea and pediatric ophthalmology practices is slightly lower. Retina practices should pull in between $1 million an $1.8 million per provider.
Benchmark #3: Non-Provider Staff Payroll Ratio
How to calculate: Divide total staff gross payroll (not including benefits expenses) by total collections.
What’s Healthy: 20-26 percent. Retina practices should be at the low end of this range. If you factor benefits into the equation by adding benefits expenses into your payroll expenses, the range should be 26-32 percent.
Benchmark #4: Collections Per FTE Staff Member
How to calculate: Divide total collections by number of FTE staff members.
What’s Healthy: $140,000-$200,000.
What to Know: If the number gets close to $200,000 or exceeds $200,000, you should wonder if your existing staff is overburdened and be concerned that essential tasks (like compliance) aren’t getting done, Preece warns.
Benchmark #5: Number of FTE Staff Per FTE Provider
What’s Healthy: 4-8 staffers per provider.
What to Know: Ophthalmologists who make more money for the practice than others are almost always in the higher level of this healthy range, Preece observes. Reason: Well-supported doctors are often the highest revenue earners.
It’s important not only to compare your metrics to other practices, but also to your own practice’s past performance, Preece stresses. Such comparisons can alert you to trends and tell you whether things are getting better or worse at your practice.
It’s also important not to jump to conclusions too quickly, Preece says. Benchmarks are like symptoms—mere indicators that something may be going wrong and that further investigation is required. In your practice, if a patient reports floaters, you don’t assume you know the exact problem without investigating further. So too with benchmarks and good practice management.
Once you have these basic benchmarks, you can drill down into other benchmarks available from AAO and other sources, including:
- clinical staff cost per encounter
- front office costs as percentage of collections
- clinical staff costs as percentage of collections
- billing staff costs as percentage of collections
- new patient ratio expenses per encounter
- collections per encounter
- encounters per FTE provider
- net collection ratio
- retail optical revenue per FTE optician