EyeNet Magazine

Practice Perfect: Coding & Reimbursement
Use the New Benchmarking Survey to Improve Practice Performance
By Chris Mcdonagh, Senior Editor

As the children of the Baby Boom grow increasingly gray, the demand for eye care seems poised to surge upward—but who will be there to provide that extra care? The news for tomorrow’s Medicare beneficiaries is mixed. On the one hand, ophthalmologists are keen to see more patients,1 and therapies are being developed for previously untreatable conditions; on the other, successive administrations have been reluctant to increase health care spending in line with rising demand. If this underfunding continues, it will become even more important for physicians and their staff to focus on practice efficiency.

Is your practice performing efficiently? Has a change to your billing procedures helped or hindered collections? Is there room for improvement with your optical shop? In order to answer such questions confidently, you need benchmarks. These are points of reference—such as the percentage of your accounts receivable that has been pending for more than 120 days—that can be used to gauge how well your practice is doing.

Benchmarking can be “internal” or “external.” Internal benchmarking involves seeing how benchmarks within your own practice change over time. This provides you with an early-warning system that enables you to spot, and then address, problems before they cause your practice too much damage. It also helps you judge whether changes in your practice have had an impact on performance.

External benchmarking involves comparing your practice against other, similar practices. This can help you pinpoint issues that need attention.


The Benchmarking Survey

Last year, the American Academy of Ophthalmic Executives (AAOE) started developing a practice management benchmark database that is specific to ophthalmology. A pilot program began in May, and more than 60 practices submitted complete sets of benchmarks. Based on their feedback, the AAOE board reviewed the list of benchmarks and clarified some of the definitions. In October, the Academy/AAOE Benchmarking Survey was launched.

WHY REGISTER? The Academy/AAOE Benchmarking Survey provides a convenient way to compare your practice against other, similar practices. This will help you identify opportunities to improve your practice’s performance. And because it taps into the Academy and AAOE membership, it is expected to include more practices than other databases do—it is only by including large numbers of practices that the data can be truly accurate and useful.


How You Can Take Part

Your practice can participate in the Academy/AAOE Benchmarking Survey if you are an Academy or AAOE member. Because each practice is allowed to submit just one set of data and gets just one user account, your practice should designate just one individual as the authorized data entry person. Once that has been done, go online at www.aao.org/benchmarking.

Step 1. Register your practice. A series of drop-down menus will allow you to select practice type (e.g., “solo private practice”), practice subspecialty (e.g., “glaucoma”), town size (e.g., “less than 50,000”) and number of office locations. You also will be asked to submit your practice’s Federal Tax Identification Number. (This ID number won’t be displayed on the Web site nor will it be shared with any other practice or person. It only is used as a unique identifier for your practice, to ensure that each practice only submits one set of data.) Next, you will be asked to create a user name and password that you will use to access the Benchmarking Survey.

Step 2. Collect your data. You will be asked to collect up to 36 data elements—30 apply to all practices, but six are just for practices that have an optical shop. These 36 data elements will be used to calculate the 41 benchmarks. In the pilot program, 75 percent of participants said that it takes less than four hours to collect this data, and many of them said that it takes less than two hours.

Step 3. Submit your data. Once you have collected the data, it won’t take long to enter it online—less than 30 minutes, according to 68 percent of the pilot program’s participants.

Step 4. Your data is reviewed for anomalies. The purpose of this review is to prevent incorrect data from skewing the database. To ensure that your practice’s data remain confidential throughout the review process, your survey submission is given a random identifying number and then stripped of any information that would allow the reviewer to identify your practice. If the value that you report for each benchmark falls within an acceptable range, your data will be added to the benchmark database and you will be given access to the report application. However, if any of your values seem anomalous, you will receive an e-mail with instructions to double-check that data. (Although a reviewer might e-mail your practice, he or she won’t see your e-mail address. Reviewers use a specially designed computer application that includes a “send e-mail” option that keeps the e-mail address hidden.)

Step 5. Run a report to see how your benchmarks fare against those of your peers. Use the filtering options to make sure that your report only includes practices that are similar to your own. You can, for instance, filter the results by subspecialty and geographic region.

When you run the report, it will display the following data for each benchmark: the value that you reported; the number of practices that met your filtering requirements; the mean value; the standard deviation; and the 10th, 25th, 50th, 75th and 90th percentiles. To ensure that you are looking at meaningful data, your report will only display results if a minimum of 15 practices meet your filtering requirements.

Keeping your data safe. The developers of the Benchmarking Survey made it a priority to ensure that your practice data remains confidential. The reports will only display aggregate data; no user will ever be able to view single data sets.

Who can participate? In order to take part in the Benchmarking Survey, you must be part of a medical practice. For the purpose of this database, a medical practice is defined as a single legal entity, or collection of legal entities, consisting of one or more physicians who deliver health care services. At the present time, the benchmarking database is not open to: freestanding ambulatory surgery centers, hospitals, independent practice associations, integrated delivery systems, management services organizations, medical school clinical science departments, medical school facility practice plans, physician practice management companies or any other type of organization that owns, manages or provides services to medical practices.


Several Annual Meeting sessions will address benchmarking, including Mr. Preece’s Using Benchmarks to Improve Your Practice (Instruction Course #420; Monday, Nov. 12 from 2 to 3 p.m.; $35). You can demo the Benchmarking Survey at the AAOE Practice Management Center, which is located in the Academy Resource Center (Hall G; Booth #2939).


How to Use Benchmarks

“Benchmarking should not be about trying to meet an average value. Most benchmarks should be looked at as a healthy range,” said Derek Preece, MBA, who is senior consultant with BSM Consulting Group in Orem, Utah.

The case of the wayward payroll ratio. Suppose, for example, your payroll ratio is higher than average—should that prompt you to start firing staff? Not necessarily, said Mr. Preece. You have discovered an issue that deserves further investigation, “and your investigation might prompt you to make changes, but only after the problem is clearly understood. There are many possible reasons why some practices have higher payroll ratios than others do. Some areas have very low unemployment, and, as a result, wages are relatively high. Practices that have a lot of long-term employees will naturally have a higher payroll ratio than practices that have mostly newer employees. The difference may be due to physician preferences—some doctors like to have extra staff available so there is always somebody available to do extra work; others prefer to keep staff numbers as lean as possible. And a practice may need extra staff because it is using inefficient procedures.”

Another, slightly counterintuitive, reason why a practice’s payroll ratio could be above average is that it is focusing too much on limiting staff wages. “The classic case is a practice that doesn’t want to hire another tech because they don’t want to increase their payroll,” said Mr. Preece. “But if they did hire that tech, the doctor could see five more patients per day, and that extra revenue would result in a lower payroll ratio.”

And if you are using internal benchmarking, you may have noticed your payroll ratio increase over time. “As average reimbursement trends downward, payroll ratios tend to go up,” said Mr. Preece. “It will be interesting to see how practices deal with this in the future—will we seek out ways of using technology to reduce the number of hours spent in scheduling, providing and billing for an exam? I think we will need to explore some of those possibilities.”

1 In a 2007 survey of Academy members, 56 percent of respondents said that they would like to increase their personal patient load.


Use These Benchmarks to Improve Practice Performance

After registering your practice for the Academy/AAOE Benchmarking Survey, you will be asked to report data that is then used to calculate up to 41 benchmarks (see below)—31 of these apply to all practices; 10 apply to practices that have optical shops.

Financial Receipts and Income
Professional clinical collections per FTE ophthalmologist (MD/DO)
Professional clinical collections per FTE optometrist (OD)
Clinical revenue per encounter for ophthalmologist (MD/DO)
Clinical revenue per encounter for optometrist (OD)
Practice net collections per FTE staff member
Practice net collections per FTE billing office staffer

Financial Costs and Expenses
Clinic operating expenses per encounter by entire practice
Non-MD/DO/OD clinical staff cost per encounter
Front office staff cost per encounter
Total staff wage and benefit cost as a percentage of net collections
Total front office wage and benefit cost as a percentage of net collections
Total billing staff wage and benefit cost as a percentage of net collections
Total non-MD/DO/OD clinical staff wage and benefit costs as a percentage of net collections

Staffing Levels
Number of FTE optometrists per FTE ophthalmologist
Number of FTE front office staff per FTE MD/DO/OD
Number of FTE non-MD/DO/OD clinical staff per FTE MD/DO/OD

Accounts Receivable (AR) Management
Total days clinical AR outstanding
Percentage clinical AR in “current”
Percentage clinical AR in “31–60 days”
Percentage clinical AR in “61–90 days”
Percentage clinical AR in “91–120 days”
Percentage clinical AR in “121+ days”

Throughput and Productivity
Total encounters per FTE ophthalmolo- gist (MD/DO)
Total encounters per FTE optometrist (OD)
New patient encounters as a percent- age of total encounters by entire practice
Encounters per FTE non-MD/DO/OD clinical staff
Encounters per FTE front office staff

Total clinic facility cost as a percentage of total net collections

Bottom Line
Net clinical compensation per FTE ophthalmologist (MD/DO)
Net clinical compensation per FTE optometrist (OD)
Net clinical compensation per FTE owner

Optical Benchmarks
Optical collections per FTE MD/DO/OD
Optical collections per FTE optician
Optical collections per practice encounter
Optical cost of goods sold as a percentage of net optical collections
Optical operating expenses as a percentage of net optical collections
Optical Rx capture rate
Average revenue per sale
Average cost per sale
Average net profit per sale
Total optical net profit or loss


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