Writing a two-page, 2-hour strategic business plan

Take time at the start of the new year to focus on long-term strategic planning.

Issue: January 10, 2018

ByJohn B. Pinto

“Planning is bringing the future into the present so that you can do something about it now.”
– Alan Lakein

“Let our advance worrying become advance thinking and planning.”
– Winston Churchill

Not even one ophthalmic practice out of 50 has a written, updated business development plan. There are understandable reasons for this.

Ophthalmologists are smart, exacting and professional, but they think and live in the “now.” This is not surprising. Most surgical and clinical work units are highly repetitive and last just 10 minutes. So their time frame for long-term strategic planning involves clocks more than calendars.

On top of that, most ophthalmologists have experienced 30 years of parents, teachers and professors telling them exactly what they are to do next. So it is an unnatural act, with a third of your life already done, to start thinking for yourself about the future.

Throw in time poverty, a lack of business training and the uncertainty of forecasts in an uncertain world, and the lack of strategic business planning is understandable. But it is still inexcusable.

So this month, at the launch of a new year, I am going to make it relatively painless for you to write your practice’s long-term plan. Simply read along and change the facts to fit your practice.

I have drafted this plan imagining the busy solo practice of “Dr. Jones,” a 55-year-old general ophthalmologist. But you can change the facts to match your setting. Whether yours is a part-time solo practice or a $50 million regional supergroup, the same chief strategic dimensions still apply.

1. Our practice was started in 1997 by Dr. Frank Jones, the current sole owner. Dr. Jones plans to work as a surgeon for another 10 years and then start tapering his practice, transitioning to medical care only and fully retiring at age 70.

2. The practice collected $1.5 million in 2017, and Dr. Jones enjoyed pre-tax profits of $450,000. The practice has always been slightly overstaffed and spends 35% of cash flow on wages, taxes and benefits for lay staff, a figure that is commonly closer to 30% or a bit less. We realize that in the present environment, especially with unemployment down and labor costs rising, we will have to right-size staffing more carefully than we have in the past.

3. Average collections per patient visit now stand at $179. This is lower than many of our colleagues. Part of the problem is our low refraction collections, which in turn has three drivers. Doctors only charge for a refraction at about 10% of encounters when the typical figure would be 20%. Our refraction fee is $35, much less than the current $45+ average around the country. And the front desk is weak at collecting at the time of service.

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4. Dr. Jones has worked with his accountant and determined that he will need to earn an extra $100,000 per year — from $450,000 to $550,000 — in order to be safely over his retirement finish line at age 65. A priority in our practice plan will be to generate these incremental earnings without undue risk, time commitment or fatigue for Dr. Jones, who at 55 is enjoying taking his Friday afternoons off.

5. The practice is located in a 3,800-square-foot rented office suite, and we have 8 years left on our lease. We have just four exam lanes and a small optical dispensary, which is really more of a patient convenience than a profit center. With 700 patient visits monthly, our exam rooms are approaching full capacity, and on busy days, techs have to wait for a room to open up before they can call back the next patient.

6. Historically, the practice has been growing 3% annually, which is a little under the organic pace of demand growth for eye care services. So we are slowly losing market share. We would like to boost our growth rate to 6% to slowly increase our position in the community, to boost earnings to aid Dr. Jones’ retirement funding and to help cover rising labor costs.

7. The practice employs one part-time optometrist, working 2 days per week, who will be retiring in a year. We believe replacing this doctor with a full-time optometrist will free up Dr. Jones to accept more new patients, which will in turn increase surgical and special testing volumes and the average revenue per patient visit.

8. If we grow at 6%, by 2023 we will be seeing a bit more than 900 patients per month. This means that we will need more than one MD and one OD. We will decide at that time whether we are ready to hire a second OD or recruit an ophthalmologist.

9. A zip code study shows that the majority of patients come from a 10-mile radius of our office, a service area with about 125,000 people. The senior population is in line with national stats, but our community is served by only three ophthalmologists, instead of the five or six that a community our size would normally support. So if we are successful in ramping up growth, we should be in a position in 5 years or so to start recruiting the next MD, which will provide a successor for Dr. Jones when he slows down at 65.

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10. Ours is a one-hospital town. Based on conversations with the hospital CEO, it has no plans to buy up specialty practices except for cardiology and orthopedics. We believe that private independent practice and patient access will remain feasible for the rest of Dr. Jones’ career.

11. New patients are currently sourced to 60% word of mouth, 10% MD referral and 5% OD referral. In order to achieve our growth goals, we will boost our marketing activities with a new website, optometrist outreach and senior vision screenings in the community. We currently see 90 new patients per month. By the end of 2018, we would like to see that number grow to 120+. While bringing in more new patients, we also want to do a better job of holding onto established patients. Our established patients are only growing by 3% per year, when 5% or higher would be normal. We will review recall and appointment reminder protocols to try to correct this.

12. The office is getting a bit dated. We are currently working on plans for modest interior design improvements — nothing lavish, just catching up on neglected routine upgrades.

In consideration of the above, our priority tactics in 2018 will be:

Condense our two separate doctors’ private offices into a single “bullpen” office, freeing up one room to become our fifth exam room. This will increase our capacity to 850+ exams per month without going to evening or Saturday hours.
Renegotiate our facility lease so that rather than 8 remaining years we can renew for at least 15 more years.
Conduct a labor productivity study and find a way to limit labor costs to not more than 30% of cash flow, which will bring about $75,000 to the bottom line.
Raise average collections per visit from $179 to $190 through a combination of slightly more assertive testing and treatment, and elevating refraction fees to $47 and charging this out about 20% of the time, rather than the current 10%. This will boost practice profits by about $90,000 annually.
Make a decision about our optical, either expanding and freshening it up to be more profitable, or closing it down to refocus on developing optometrist referral support.
Toward the end of 2018, we will recruit a full-time optometrist to replace our part-time optometrist. If we decide to close down our optical, our new optometrist will have time available to do outreach work with ODs in the community.
Complete the interior facility upgrades; hold a patient open house in the summer.
Improve recall and establish tighter care pathways; audit to assure that all patients leave with either a firm appointment, a recall or a formal discharge. If we are able to increase our established patient growth rate from 3% to 5%, we should grow profits by about $30,000.
Launch the new marketing plan, with an early emphasis on OD outreach. If we are able to increase new patient visits by just 10% in the coming year, that would add $25,000 or more to practice profitability.

For more information:
John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist, The Women of Ophthalmology, Legal Issues in Ophthalmology, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams and a new book, Simple: The Inner Game of Ophthalmic Practice Success. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.