More and more ophthalmology practices are looking for non-insurance dependent revenue streams to gird against the roller coaster of payer reimbursement. Adding a retail optical is one option. And while some practices choose to outsource retail optical management, the steep fees can quickly cut into your profits. That’s why practices are increasingly running their opticals in-house. But managing a retail optical is no day at the beach …
Is your optical shop making less for your practice than you’d like?
A crucial conversation with your optical manger can help you work together to identify improvement opportunities and ways you can profit more than you are now.
Tip: If you don’t know whether your practice is making one or more of these 9 revenue-generating moves, ask your optical manager. Begin each point with “Tell me about our optical’s …” If your manager is effective, many of these things are already on his or her radar. If you show respect for what’s being done already, your manager will be more open to your suggestions and coaching.
1. Goals and KPIs.
Some optical managers report that their doctors don’t seem to have goals for the dispensary or even think about it much. “I worked for a doctor whose goal was for everyone to come in every day to work, and that was it,” quips Sharon Carter, an optical manager and consultant who spoke at Vision Expo West. (Carter’s advice to managers: Set the shop’s goals yourself and present them to physician owners.)
As a physician-owner, are you clear on what metrics your practice is using to measure success in your optical shop? Is your optical manager clear on what your goals are?
2. Methods for forecasting which frames will sell best in your practice and at each location (if you have multiple sites).
What tools does your optical manager use in addition to talking with reps about frames that move well in your region? Has he tried zip code analysis or asking your lab what styles move most in your area?
3. Number of vendors.
Too many vendors is an all-too-common revenue buster.
When Mark Johnson first began managing optical shops at Virginia Eye Institute’s seven locations, they had 45 vendors total. Now they have 12, and do much better financially, he told an audience of optical managers at last year’s Vision Expo West. A single location needs about eight vendors, Johnson estimates. Some experts recommend as few as three to five if you serve a market with lots of seniors who are likely to choose similar, conservative styles, says Robert Swanland, a POS software expert.
If you limit the number of vendors you work with, your optical manager has the bandwidth to negotiate good terms with each and to draw up written partnership agreements that protect your practice, just as you do insurance contracts, Johnson observes. You also set yourself up to negotiate volume discounts and you simplify your bill paying, says Sherrie Rogerson, a former optical manager who now works with REM Eyewear.
4. Criteria for vendor selection.
Some criteria are givens, such as quality, service, delivery, warranty, return policy, rep service, and ease of order, Rogerson says. You can negotiate criteria such as discounts, shipping costs, and marketing assistance to benefit your practice.
5. How many frames you carry and why.
Frames typically are 43 percent of a practice’s expense and 30 percent of revenue, Johnson notes, citing Vision Monday stats.
Limit the number of frames you carry. You should have a selection sufficient to move inventory at your location, but not so many that you’re tying up revenue unnecessarily. Larger locations can handle 1000 frames, experts say. Small locations should carry around 750. Some opticals in particular markets with lots of seniors can profit very well with as few as 600, says Swanland.
6. Turn ratio.
Frames that don’t have an inventory turnover ratio of three or four are costing you money and you need to swap them out for frames with potentially higher turns, says Mark Johnson. The exception is high-end, luxury frames, which will have lower turns in most places. It’s strategic for your optical shop to carry a few lower-turn frames if they move in your market and make you money. You should love frames with turn ratios of six, and your average is likely two, says Rogerson.
But watch out. “If your turn ratio is low, your inventory may be too low,” she cautions. Customers may perceive you don’t have anything for them and they may move on to other shops, which limits your optical’s potential.
7.Number of remakes.
Your optical shop staff should be experts at preventing and troubleshooting prescription complaints to limit remakes, says Joy Gibb, an optical manager and consultant. You don’t shell out for the cost of remakes immediately, but if you have a high remake rate, you will most certainly pay more when it comes time to set terms with your lab, she warns.
Tip: You can get remake stats from your lab. Ask them about how your optical’s data compares to other opticals your lab serves.
8. Staff incentives.
Skip spiffs, experts advise. Create an incentive system that encourages your optical staff to sell as a team and to suggest the products that truly benefit your clients.
9. Technology that can protect or enhance your profits.
We’re talking about much more than virtual try-on software here. Some of your dispensary profits are walking out the door with shoplifters or with staff looking to make some extra money, especially if you carry designer frames. A basic camera surveillance system costs about $1500 per location and will save you thousands, says Johnson.
Cameras can also protect your inventory from the employee who’s squirreling away 300 of your frames in her basement and selling them on eBay. (This is a true horror story I heard from an optical manager attending Vision Expo West.) If you report and prosecute thefts, criminals looking to supply the black market will learn to avoid your practice.
Another good technological investment that helps you grab opportunities: a paging system that allows the optometrist to page the optician as the exam concludes for a smoother hand off. Johnson saw a $7,000-a-day uptick when he implemented a paging system at his seven-location practice, according to a recent Vision Monday article.