By Derek A. Preece, MBA
This article is from July/August 2008 and may contain outdated material.
How is your practice doing compared with similar practices? To help you answer that question, the Academy and the AAOE launched the Benchmarking Survey in October 2007 and invited ophthalmology practices to submit their 2006 data. Almost 200 practices representing 658 ophthalmologists responded. Each practice reviewed its data for 2006 and submitted up to 36 data elements, which were then used to calculate 41 benchmarks. By providing points of reference, these benchmarks can help you identify aspects of your practice where there may be room for improvement.
Once you have submitted data and it has been approved, you can use an online reporting module to explore the Benchmarking Survey data and compare your benchmarks against those of other practices. Furthermore, you can filter a report so that, for instance, it only includes practices that have a certain subspecialty focus and are in a particular region. (If you want to participate, there is still time to submit data for 2007. See “How to Take Part.”)
When we reviewed the data for 2006, we found some very interesting information about ophthalmology practices. Here are some highlights.
Comparing Overhead
The most commonly cited benchmark for ophthalmology expenses is the operating expenses ratio, otherwise known as the overhead ratio. This benchmark quantifies your practice’s operating expenses as a percentage of your total collections.
By subspecialty. In the benchmarking project, we found comprehensive ophthalmology practices have a median operating expense ratio of about 60 percent, with the 25th and 75th percentiles ranging from the upper 60 percents down to about 50 percent. Those same figures held true when we looked at all participating practices as a whole, but when we focused on retina practices we found that the median overhead ratio was about 10 percentage points less and that the 25th and 75th percentiles only varied a few percentage points from that median.
By number of offices. It often has been assumed that practices with more offices typically have higher operating expense ratios than single-office practices. However, at least for practices with multiple subspecialists and with more than 50 percent of revenues coming from comprehensive ophthalmology, those with three to five offices had slightly lower overhead ratios than those with one or two offices. This can be explained, in part, by the fact that the former type of practice reported higher revenues per full-time equivalent (FTE) physician.
Don’t jump to conclusions. As with all benchmarks, use discretion in how you apply the overhead ratio. For instance, at first glance, a low overhead ratio would seem indisputably desirable. But one practice’s overhead ratio might be so low that it can strangle growth, while a second practice with a higher overhead ratio may be producing more growth, more production and greater profitability.
Comparing Staffing Levels
Probably the second most commonly cited benchmark quantifies the wages and benefits of your practice’s non-provider staff as a percentage of your collections.
By subspecialty. It is noteworthy that only half of the difference in overhead ratio between comprehensive practices and retina-only practices (see above) is explained by the difference in the staff payroll ratio. We also found that anterior segment/comprehensive practices have a median staff wages-and-benefits ratio of just over 27 percent, while the 25th and 75th percentiles are within a few percentage points of that.
By location. In general, the geographic location of the practice didn’t seem to impact the payroll ratio. One exception was for practices in nonmetropolitan areas with a population less than 50,000. The ratio for these practices was one or two percentage points less across all percentiles.
Focus on clinical staff. The ratio of FTE clinical staff members—which includes techs, ophthalmic assistants and scribes—per FTE ophthalmologist approached three per physician for comprehensive practices and was slightly more than three per physician for retina practices.
Focus on billing staff. For practices that didn’t use a billing service, the amount of practice revenue spent on billing staff ranged from 3 percent for the 25th percentile to about 5 percent for the 75th percentile.
Comparing Patient Flow
There are a number of ways to increase patient flow, but the first step is to identify that your practice might have a problem.
MD and OD productivity. Among practices that submitted data for 2006, the median number of patient encounters per FTE ophthalmologist was more than 5,000 for the year.
Optometrists who were employed by those practices had about 40 percent fewer patient encounters. (Of the 180 practices in the survey, 82 employed optometrists.)
Staff productivity. Physicians often wonder how long it should take for their technicians or assistants to work up a patient.
When considering the results of the Benchmarking Survey, you should keep in mind that the clinical staff category wasn’t limited to techs and assistants. It also included scribes, surgery counselors and anybody else who helps the physician see patients.
Among the practices that returned data for 2006, the median number of patient encounters per FTE clinical staff member was slightly more than 2,400.
For each FTE front office staff member, the median number of patient encounters was 25 percent higher and the 90th percentile was double.
Clearly, the rate at which your staff members can process patients largely will depend on the types of task that processing a patient involves in your particular office.
Comparing Optical Sales
Of the practices that returned data for 2006, 60 percent of them said they had provided optical products to their patients.
The average amount of collections per FTE optician was a little more than $180,000 for anterior segment practices; the average was slightly higher than that when the data for all practices were included.
The typical optical sale was reported to be slightly less than $250, and the total cost of providing that sale—including costs of goods and optical operating expenses—approached $200.
Help Build a Robust Data Set
The purpose of the Benchmarking Survey’s reporting module is to allow you to compare yourself against colleagues who are running similar practices. If, for instance, you are a solo glaucoma physician, you would want to compare your practice against other one-physician glaucoma practices. But to ensure that your report isn’t skewed by one unusual practice, there is a requirement that any subset of practices used in a comparison must have at least 15 members. The data for 2006 includes many subsets with more than 15 practices, and—with the help of you and your colleagues—the data for 2007 promises to be even more robust.
You have until Sept. 15 to submit your 2007 data. For more details, see www.aao.org/benchmarking.
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Mr. Preece is a senior consultant with BSM Consulting Group. Contact him via the AAOE Consultant Directory at www.aao.org/practice-management/consultant-directory.