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How does your practice compare?
Measuring your practice against these basic guidelines can help strengthen effective procedures and identify areas that may need improvement.
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The health and viability of an ophthalmic practice can be measured in many ways. Although each practice will have certain unique characteristics, some general parameters are available that can provide useful comparisons to peers. These comparisons can confirm areas of achievement and help identify areas that need improvement.
Because of the varied nature of ophthalmology practice, comparisons must be viewed in the context of practice circumstances. Case mix, patient demographics, local market competition, physician subspecialties and other factors will greatly influence comparisons. Negative variation from the average does not necessarily mean the practice must change.
Also, neither positive variation nor conformity within benchmark standards should be seen as a license for complacency. The main points of benchmark comparison are to identify and prioritize potential areas of practice improvement.
Revenue, collections and staffing
The following parameters are based on our firm’s experience with hundreds of ophthalmic practices across the country. Note that these parameters pertain to professional services only and exclude the effects of optical dispensaries or ambulatory surgery centers that may be affiliated with the practice.
Some of the typical questions we receive from ophthalmologists include:
How much revenue should I be producing? As one might imagine, revenue is highly dependent on practice circumstances. Nonetheless, certain parameters are available for comparison. Most practices will produce net professional collections (gross collections less refunds) of between $120 and $180 per patient encounter. For purposes of this benchmark, patient encounters are defined to include patient visits involving evaluation and management codes, eye exam codes and no-charge visits. Although imperfect, this approach provides a reasonable approximation of patient encounters. Examining revenue in a different way, most general ophthalmologists will collect between $600,000 and $900,000 each year for professional services rendered. Keep in mind that this benchmark will be greatly affected by practice subspecialties, local payer rates, patient mix, maturity of the practice and other factors.
How much should I be charging for services I provide? No benchmark is available for fee comparisons. Many practices use the Medicare fee schedule as a foundation to determine their non-Medicare fee schedules. In others, the practice’s traditional fee schedule is modified as it is deemed necessary. Regardless of the method used to establish fees, physicians operate under the same antitrust laws applicable to other businesses. As a result, practices must be careful to avoid price-fixing violations through sharing of fee information with competitors.
How can I judge the effectiveness of collections? Collections effectiveness can be compared in three different ways. The first measure involves comparing net collections to net revenue. In this context, net revenue is defined as gross charges less contractual adjustments. This is essentially the amount the practice expects to collect for each service rendered, representing allowable amounts under Medicare and other payer fee schedules. In most practices, net collections will be 95% to 100% of net revenue.
A second measure focuses on amounts held within the practice accounts receivable. Most practices will maintain a receivables balance equal to between 35 days and 50 days of average daily gross charges. For this measure, average daily gross charges are determined by dividing gross charges by the number of calendar days in the period, then dividing the result into the accounts receivable balance.
A third measure involves examination of the accounts receivable aging report. Aging refers to the amount of time elapsed between the point of service and corresponding payment. For most ophthalmic practices, balances less than 30 days old represent 40% to 60% of the total, balances between 31 and 60 days old are 15% to 25% of the total and amounts older than 120 days are 10% to 20% of the total.
What should my overall practice costs be? For purposes of this benchmark, overhead is defined to be operating expenses as a percentage of net collections. Operating expenses encompass all practice expenses but exclude compensation paid to ophthalmologists and optometrists. Most practices will find their expenses represent between 45% and 65% of net collections. The higher end of the range usually includes larger group practices and practices with an emphasis on primary eye care.
Within general ophthalmology, operating costs within better-performing practices will usually represent 55% to 57% of net collections. By comparison, operating costs within surgical retina practices usually represent 30% to 40% of net collections. Note that many practices will exclude various discretionary items from their operating expense totals, limiting the usefulness of anecdotal comparisons among physicians.
What should my staffing costs be? Staffing can be measured in terms of full-time equivalents (FTEs), the percentage of practice net collections devoted to staff compensation, or the amount of practice net collections per FTE. Full-time equivalents are measured by totaling staff hours worked during a given year and dividing that sum by 2,080, the number of annual hours corresponding to a 40-hour work week. For purposes of the benchmark, staff members exclude ophthalmologists and optometrists.
Most general ophthalmology practices will employ between five and seven FTEs per physician. Divided by functional area, front office staff will range between 1.5 and 2 FTEs, back office staff will range between 3.0 and 3.5 FTEs, business office staff falls between 1 and 1.5 FTEs, and administrative staff at 0.5 FTEs. Total compensation for these staff members usually ranges between 17% and 24% of net collections. Most practices will collect between $100,000 and $150,000 per FTE staff member.
Patients
How many patients should I see in an average workday? Most ophthalmologists will complete between 5,000 and 8,000 patient encounters per year. This equates to between 31 and 50 patients per day, based on 3.5 clinic days per week and 46 weeks per year. Specialties requiring greater amounts of time per encounter will naturally be found at the lower end of the range. In most practices, new patients will represent 20% to 30% of all encounters. No-show appointments should be no greater than 2% of the total for established patients and no greater than 3% for new patients. Patient cancellations should be no more than 2% of all appointments.
How quickly should my patient exams be completed? For a routine eye examination, an efficient practice should require no more than 15 minutes from patient check-in to commencement of the technician exam. The technician workup normally requires another 15 minutes, followed by no more than a 10-minute wait for the physician exam. The physician exam should require 5 to 8 minutes, followed by 2 minutes for patient checkout. Total time will be between 47 and 50 minutes from patient check-in to completion of checkout. Obviously, these time frames will vary depending on the nature of the patient visit, the type of examination rendered and physician practice style.
How quickly should I be able to schedule patients? Ideally, new patient exams should be scheduled within 10 days of the appointment call, with established patients scheduled within 14 days. Cataract and refractive surgeries should be scheduled within 3 days, with other surgical procedures scheduled within 5 days. Emergency services should be scheduled within 1.5 hours of the call.
Although comparative measures can often provide a useful basis for improving practice performance, it is important not to overreact to aberrations. Virtually all practices, even highly efficient ones, will exhibit some variance from performance benchmarks. Performance standards should be used as a tool for improvement, not as the ultimate goal itself. If improvement is needed, assistance is available from the practice accountant, from consultants specializing in practice efficiency, and through publications and seminars sponsored by various professional organizations.
For Your Information:
- Richard C. Koval, MPA, CMPE, is vice president of practice management services at The BSM Consulting Group, 916 Southwood Blvd., Suite 2C, Incline Village, NV 89451; (775) 832-0600 or (800) 832-0609; fax: (775) 832-0664; Web site: www.bsmconsulting.com.