5 Key Benchmarks That Make or Break Your Ophthalmology Practice

5 Key Benchmarks That Make or Break Your Ophthalmology Practice

Is your ophthalmology as profitable as it can be? Numbers alone can only offer so much insight, but comparing your practice against widely agreed-upon benchmarks can show your industry position and point out areas for improvement.

Here are five benchmarks that allow you to compare your numbers to your peers, courtesy of 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.

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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 how efficient your collections are. An overhead ratio that is more than 10% beyond what’s healthy 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.

You can reduce your medical practice overhead by evaluating performance, identifying areas for improvement, and getting buy-in from physicians and staff that change needs to occur. A well-tailored action plan can be used as a road map to increase productivity, reduce costs, and improve business operations. You may need to:

  • Review staffing needs and adjust staff size
  • Assess staff compensation
  • Review your retirement plan for potential savings
  • Identify ways to optimize patient encounters
  • Outsource billing and collections to a professional, revenue-focused vendor

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 collection 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 and $1.8 million per provider.
What to Know: If your provider productivity is below established benchmarks, there are two things you need to do: Identify the barriers to productivity, ensure alignment, and enact plan to raise productivity. Examples of barriers to productivity include issues with documentation, problems with lab turnaround times, and time wasted on EHRs. With the barriers to productivity established and buy-in from providers, you can then enact changes to your practice to improve provider productivity. Some possible solutions include:

  • See more patients
  • Improve your billing and coding
  • Consider tech upgrades, such as automated online bill payment
  • Regularly audit and assess services such as telephone and internet
  • Consider if it would be cheaper to eliminate overtime through the hiring of additional staff

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.

What to know: Many practices struggle to find the right staffing level, and a variety of factors, some of which may be out of your control, can come into play here. Keep in mind that higher physician productivity may justify higher staffing levels, and the existence of satellite locations may call for heavier staffing. Ways to move your ratio in your favor include:

  • Adjust your number of mid-level providers
  • Increase physician productivity
  • Improve organization, adhere to schedules, and complete paperwork on time
  • Lower your staff turnover rates

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. If the figure is at the low end of that range, any number of factors may be at play. In this case, consulting with a firm that can optimize your revenue cycle management will likely help raise this number.

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.
Adding staff can help boost your revenue, though it is important to keep in mind that as you add staff to boost revenue, your staffing costs will increase, and you may need additional office space. Efficiencies can be realized in part by removing unnecessary steps in a practice so providers can see more patients in less time.

What Next?

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

For more ideas to remove or lessen the operational burdens associated with running your practice and improving your revenue, contact the pros at Eye Care Leaders, who offer solutions for revenue cycle management, patient acquisition and retention, and MIPS assurance.

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