When we talk about the best ways to improve profitability, we often point out that cost-cutting can only do so much to improve profits and cash flow. Most practices need encouragement to take risks and invest in growth rather than greater discipline in their spending.
If costs aren’t the issue, then revenue growth is the best way to improve profitability, especially if—like most practices—you’re able to grow revenues without adding staff, space, or equipment. More retail sales involve materials costs, but those costs only occur because you sold glasses or contacts.
The obvious objection to “just grow your revenue” is “If it was easy, I’d already be doing it!” True enough. It can be intimidating to figure out the right investment into new revenue streams or even simply how to grow. So, this week, let’s focus on three areas that are the building blocks of maintaining and growing revenue in your practice.
Fill the Schedule
Fill the schedule. Fill the schedule. Fill the schedule. If there’s one key performance indicator that will yield the most consistent results, it’s ensuring that patients show up for every exam your practice makes available.
This is simple to say and difficult for many practices to execute. Here are some marketing tips for filling a less-than-full schedule:
- Pre-appoint your patients.
- Review and improve your recall process.
- Nurture referral sources. An hour a week can yield remarkable results. Get creative; it’s not just PCPs, OMDs, and pediatricians who can send patients to your practice.
- Leverage digital marketing to increase your practice’s online visibility.
Get Your Pricing Right
Two truths have dominated our profession over the past four to eight years. First, managed vision care hasn’t increased reimbursements for primary care exams in…how many years has it been now? Second, both wholesale and labor costs (non-OD staff and associate OD wages) have experienced significant increases even before the COVID-19 pandemic.
Increasing costs against flat or declining revenues is never a great strategy for a profitable business. One easy thing to address in the face of these challenges is to get your pricing model correct. If you haven’t done so already, do a self-audit of your markups—particularly across frames, spectacle lenses, and contact lenses.
Any time your vendors increase prices, you should increase your retail pricing. This is critical for practices that take managed vision care plans because your profit margin on frames is contingent on your pricing relative to wholesale or retail allowances.
Even beyond the materials you dispense, evaluating your exam and service fees is essential. Wide-field imaging, routine exam fees, and usual and customary fees for various medical evaluations; make sure they’re priced at or above minimum reimbursements or where you’ll have an appropriate margin.
Keep Up with Receivables
Whenever I see a practice with all its expense areas above optometry benchmarks, I ask if there’s an issue in the revenue cycle—the process of submitting claims to third-party payers and receiving income for the services and products a practice provides to its patients.
Not getting paid for the products you dispense and the services you provide is a surefire way to create cash flow problems. After all, a busy practice with receivables issues is already staffed to support its patient volume and incurring the cost of the eyewear and contact lenses it dispenses. And then, to not get paid? It’s a recipe for disaster.
Quarterly, or at least semi-annually, review your aging reports and pull a sampling of EOBs to ensure that denied claims that should be re-submitted are re-submitted. Every practice likely leaves something on the table when it comes to receivables. Just be sure your gap is within the margin of diminishing marginal returns.
Accurate Financials Lead to Meaningful Insights
If you feel like your practice is working hard in the noble pursuit of helping people see but not seeing the financial fruits of your labors, consider whether accurate financial reporting could alleviate your concerns or illuminate areas of opportunity.
For accurate and meaningful month-to-month reports that will enhance your understanding of your practice and free up time to focus on attracting and seeing new patients in your practice, contact our team to learn how we streamline and enhance your financial reporting.
