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Making performance benchmarking work for your practice: Part 2
The second segment in a two-part series on the importance of establishing practice performance benchmarks.
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Benchmark [benCH märk]
A standard or point of reference against which things may be compared or assessed; to evaluate or check something by comparison with a standard.
– The Oxford English Dictionary
“Within Normal Limits” is a concept that frames a subset of a population that conforms to the central range of tendency along a distribution of a given parameter. WNL is often used to identify what is “typical.”
Editor’s Note: If you did not read Part 1 of this article in the Aug. 10 issue of Ocular Surgery News, please go to http://www.healio.com/ophthalmology/practice-management/news/print/ocular-surgery-news/%7B15054a70-1a8a-4705-b205-4d1f628df59c%7D/making-performance-benchmarking-work-for-your-practice-part-1.
Last month we made a case for the value of business benchmarking and reviewed a few simple examples, such as profit margin and the overall lay staffing cost ratio. These fundamental metrics are the ophthalmic business equivalents of a patient’s pulse and temperature.
This month we will discuss 15 additional benchmarks, including a few more advanced metrics that very few practices track but should.
Additional practice benchmarks
1. Facilities cost ratio. In most practices, the second largest cost after lay staffing is the cost of facilities. Simply add up the relevant annual costs — rent or principal/interest payments, utilities, taxes and basic repairs — and divide by the annual collections. In the typical setting, 4% to 6% is reasonable. The cost stretches to 10% or more if you practice in the high-priced urban core, or if you have recently developed a new facility into which your practice is still growing. Fortunate rural providers often get by on a 2% or lower facilities cost and bring the extra percentage points to the bottom line of their practice.
2. Marketing cost ratio. The overall cost to generate new patients is commonly the third highest practice expense. This includes inexpensive elements like recall and customer service tune-ups, outreach to referral sources and community eye screenings, but also, in the most aggressive settings, direct-to-consumer advertising. Add up all of your marketing, advertising and public relations costs and divide by practice collections. For the average, mid-career general ophthalmologist, 2% to 4% of cash flow spent on marketing communications is perfectly sufficient; spending less than this may cause your practice to atrophy. Costs rise to the 10% to 15% level in elective plastics or LASIK settings, especially in larger cities where competition is high and media costs can be astounding. An old-line, established practice with no further growth aspirations and referral-dependent retinal practices commonly get by on less than 2%.
3. Patient visits per exam room hour. Have you ever wondered how your practice compares to others in terms of the efficient use of office space? To figure it out, add up the total patient visits for the year, including postoperative visits, and divide by the number of exam room hours per year; this is calculated by taking the number of fully-equipped exam rooms multiplied by the 2,080 nominal potential hours available to see patients per year. The typical figure is plus or minus one patient visit per exam room per hour, a figure that generally holds up whether the practice is performing general or subspecialty care. If the figure you get in your practice is 0.7, that means you are only using about 70% of your available facilities. If the number comes out significantly higher than one (let’s say 1.2 or 1.4), you are probably overwhelming your current physical plant. Options include expanding hours, shedding lower-paying or less professionally interesting categories of patients, or adding more exam rooms and collateral space.
4. Information technology cost ratio. A couple of decades ago, the IT costs in your practice were scant in relation to annual collections. The typical practice management systems and their upkeep only cost about 2% or less of cash flow. Any middling office manager could readily handle the duties of key operator; you did not need much of a technical services team on call. Not so today. Electronic health records and related consulting and support services have plumped up the cost to $25,000 or more per doctor per year. Add up all of your annual practice management/EHR software, support, hardware, consulting, Web access and related costs, and divide by collections. You may be shocked to see a cost that was once under 2% now hitting as much as 5% of cash flow.
5. Technician efficiency ratio. To derive this figure, add up all tech payroll hours in an average month, including work-up techs, scribes and testing staff, and divide by the number of patient visits inclusive of postoperative visits. This figure was once as low as 0.6 or 0.7 tech hours per visit in a general ophthalmology practice but now stands at 0.9 to one with the advent of more available testing. Retinal practices benchmark at 1.3. Pure LASIK practices benchmark at about 1.1 tech hours per visit. The figure can be somewhat higher in practices that delegate more care to lay staff or that have a large number of trainees, or in hub-and-spoke practices with more time lost to travel.
6. Reception staff efficiency ratio. This includes all check-in and check-out staff, anyone answering the phones or making appointments, and anyone trafficking medical records. Be sure to omit any time spent by these same staff members posting charges; for example, some well-run practices post charges at the front desk at check-out. Take the total number of staff payroll hours and divide by total patient visits, including postoperative visits. The typical figure is now 0.4 to 0.5 in ophthalmic practices of any composition.
7. Percent of total receivables out over 90 days. This datum is found on any practice management system’s aging report, typically appearing on the last page of the print-out. The figure we like to see is 12% or lower for the typical general/geriatric practice. Half of this is desired in a practice with a significant cash-and-carry trade (ie, elective plastics, LASIK, optical).
8. Patient accounts staff efficiency. Add up the billing department’s total payroll hours, including all staff doing posting, charging and collections, and divide by the additive product of the total patient visits (inclusive of postops) and the total surgical cases. The average figure seen is 0.3 staff hours per transaction. Astoundingly, in America today, it takes about 18 minutes of clerical time for you to get paid for each average patient service rendered. For comparison, my Canadian clients typically get the job done in 5 minutes or less.
9. Surgical counselor efficiency. With the advent of premium lens options, the role of the surgical counselor has expanded from mere clerking and patient hand-holding. The extra teaching and motivating time is better for the patient and certainly better for the practice. Add up surgical counseling staff hours per average month and divided by the number of surgical cases per average month. With 173 payroll hours in an average month, the typical full-time counselor can transit 50 to 150 cases per month; that amounts to between 1.2 and 3.5 payroll hours per case. The metric is wide-ranging based on staff experience, the premium IOL implant rate of the practice, your control over the surgical facilities used and the scope of counselor responsibility.
10. Patient visits per ophthalmic surgeon per month. For general ophthalmology, the figure optimally lies at 550 visits or more, including postoperative care. In a subspecialist’s practice, ±450 is a reasonable target.
11. Percent of allotted schedule template that is filled. Trick question: If a doctor’s half-day session allots 25 appointment slots, what percentage of these slots should actually be filled at the start of each day, before cancellations and no-shows? One hundred percent is obviously the correct answer, but do not be surprised if the answer in your practice is well under 100%. A few empty appointment slots may sound like no big deal, even a nice respite, but just three missing patients per clinic day can skim more than $100,000 from your bottom line.
12. No-show rates. This is the percentage of today’s scheduled patients, even after prior reminder calls have been placed, who did not show up for their appointment. A clinic with 100 filled appointments when the day started and four missing patients throughout the course of the day would have a 4% no-show rate. This figure should be averaged over longer time frames, as well as by location and provider. A 5% or lower figure is desirable in a general practice. Rates commonly hit 7% to 15% in pediatric offices, optometric clinics, settings with a higher percentage of Medicaid patients, and in urban (as compared to rural) practices.
13. Surgical density. This benchmark, which is most applicable to a cataract practice but also germane in retinal settings, measures the number of patient visits your practice transits per surgical case. The average seen today is 25 visits per case; for example, a practice with 600 visits per month would typically transit about 24 surgical cases. This figure can vary widely and is best used by each surgeon as a personal benchmark and reference standard, as well as a starting point for improvement. The figure is often well under 10 in an optometric comanagement setting. A newly graduated surgeon may benchmark at 40 or 50 visits per case, in part due to an appropriately conservative approach to case selection.
14. Annual lay staff separation rate. This benchmark is a useful proxy for the job you are doing with new hires and human resource management. It costs dearly to train and then lose a valued staff member, so within bounds, we want to have the lowest possible separation rate. Divide the number of lay staff departures you have experienced in the last 12 months, voluntary and involuntary, by the average number of lay staff members who have been employed by your practice during the same period. Then multiply that number by 100 to express the benchmark as a percentage. The U.S. private industry rate is about 37%. The figure is only around 15% in government service. In the typical, well-run ophthalmic practice, with good hiring and tenure-boosting policies, we typically see about 25%; that is to say, the average ophthalmic worker in America lasts, on average, about 4 years on the job before moving on.
15. Profit per surgeon hour. This is a critical metric — perhaps the most critical measure of the sum-total of your practice’s performance. Divide each physician’s annual wages/taxes/benefits by their number of professional hours, including administrative and meeting time. The figure can be wide ranging; it may be as little as $50 or well over $600. This is one of many dimensions of efficiency measurement where ratio analysis is best applied as an internal standard, rather than trying to match external benchmarks. Measure you current number and then, like a motivated runner, aim for a new “personal best.”