As a “money guy” by profession, I completely understand that talking about finances, profits, or growing your personal income can sometimes feel a little icky or even selfish.
After all, much of your day-to-day involves:
- Asking patients to pay for your services,
- Expecting staff to be satisfied with their wages,
- Negotiating with vendors for better pricing, and
- Accepting lower and lower reimbursements from third-party payers.
You may even think, “If I wanted to spend my time focused on money, I would’ve become an accountant or a banker!”
Most optometrists went to optometry school because they wanted to help patients see the world clearly and live their best lives—not because they wanted to crunch numbers.
But as “the business numbers guy,” I’d like to affirm that patients are, in fact, the most important metric in your practice for three reasons:
- Your financial results flow downstream from caring for patients.
- Good strategic decisions flow upstream to support that care.
- The biggest predictor of success is how many patients are in your “river.”
Financials are downstream of caring for patients
Sometimes we get so caught up in metrics and spreadsheets that we lose sight of the simple truth behind every financial number. Revenue is the output for how many patients your practice cares for and how much care they consume. The formula for this is usually expressed as:
Collected Gross Revenue = # of Comprehensive Exams x Revenue per Comprehensive Exam
The number of comprehensive exams is a critical subset of your total patient volume. Meanwhile, revenue per comprehensive exam is an output of your standard of care, with two contingent variables:
- How effectively you price and bill for your products and services
- How effectively you collect payment from your patients and third-party payers
There is no scenario where you can manage costs well enough to make up for not seeing enough patients. Conversely, I have yet to see a practice where high expenses can’t be overcome by increasing patient volume, even if that means taking on additional costs to provide care to more people.
Decisions are upstream of patients
I think we’ve all heard the iconic line from the movie Field of Dreams, “If you build it, they will come.” And while that’s a nice thought, when it comes to building a practice, the truth is closer to: if you don’t build anything, they won’t come.
Before you invest heavily in space, equipment, inventory, staff, and all the other essentials of starting a practice, it’s important to have a clear picture of:
- Who your patients are,
- How many of them will want to come to your practice, and
- What they want and need to see their best.
A practice built to care for 12,000 Medicaid kids per year looks a lot different than a practice that can generate $1.2MM annually on 32 comprehensive exams per week at $800 per exam.
Almost always, the right decision about when to hire the next staff member, recruit the next associate OD, add new equipment, or move to a bigger space starts with calculating how many additional patients you’re trying to accommodate. It also depends on what products and services they might buy from you.
Patient volume is the safest path to success
Many ODs dream of filling their schedule with high-income, cash-only patients who will buy everything they’re offering. But here’s the thing: there are only so many of those high-income patients. Most live in select areas of the U.S., and almost all of them have work benefits that include a vision plan.
And yes, I think all but the most niche, specialty practices should offer full-scope eye care and prescribe a full suite of eyewear, contacts, and services to their patients. That said, a full schedule is way more important than striving for a super-high revenue per exam.
Patient volume trumps high revenue per exam
I once worked with an owner who was frustrated that his associate averaged around $300 per comprehensive exam, compared to the owner’s average of $450. That $300 figure is about 25% lower than the national median.
Yet, that associate still produced around $1.2MM per year, a very healthy result. (I generally like to see OD production above $1MM for a full-time provider).
How was this possible?
It’s simple: he maintained a full schedule of 16 complete exams a day, 5 days a week, 50 weeks a year.
16 comprehensive exams per day x $300 per exam x 5 days per week x 50 weeks per year = $1.2MM
Now, at $800 per exam (the top 1% of practices), you’d only need to see 6–7 comprehensive exams per day (250 working days per year) to reach the same $1.2MM.
The overarching point: if you fill your schedule with patients every exam slot, every day, you’ll do just fine. Combine that full schedule with great care and a high revenue per exam, and you’ll thrive in ways most owners only dream of.
Tight financials help tell your practice’s story
It’s almost a parlor trick of mine to tell a practice owner the operational story of their practice and the decisions they’re facing just by reviewing their financials. It’s one of the great benefits of working with our Books & Benchmarks clients: our team produces optometry financial reports that are accurate, meaningful, and ready whenever an owner needs them.
But for all that financials tell us, the right next step depends on the following:
- How many more patients does your practice want to see?
- Who are those patients?
- And what kind of care does your practice want to provide?
Before leaping into the future, it’s important to have a clear picture of your present. If you feel like you don’t have a handle on your practice’s financials, consider joining the 180 practices already using Books & Benchmarks for accounting and financial reporting.
Contact us today to see how we can help you understand your numbers and make smarter, patient-focused decisions for your practice.
