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Heads up: Ten things every owner should know about their practice
You do not need to know everything about your business, but some areas are imperative and require your attention.
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“To know that we know what we know, and to know that we do not know what we do not know, that is true knowledge.”
– Nicolaus Copernicus
“We are all born ignorant, but one must work hard to remain stupid.”
– Benjamin Franklin
All ophthalmologists, by common agreement, are highly intelligent. But most ophthalmologists are profoundly underinformed, at least when it comes to the business of eye care and the economic and structural affairs of their practice.
Let’s see if we can help that in the next 1,000 words.
You do not have to know everything about your business to be a successful practice owner, any more than you have to know everything about medicine to be a successful eye surgeon. But there are a number of basic imperatives. Here are 10 of them.
1. The practice’s key performance indicators (KPIs). KPIs are things such as:
- growth rate;
- profit margin;
- labor productivity;
- comparative facility costs;
- contact lens wholesale goods cost; and
- net collection ratio.
Business KPIs are like a patient’s lab values. The same principles apply. You need to narrow your focus to the most important numbers, or you will be paralyzed by overanalysis. The underlying data must be reliable and reproducible. Everyone has to agree on the units and the acceptable normal limits. And you have to look at the data at appropriate intervals (that is why we generally look at profit and loss statements monthly, not daily or yearly).
2. Your personal KPIs. Unless you work solo, your practice is a composite of professional careers. So, you want to not only know how your overall company is doing, but also how you are doing compared with your peers, both inside your practice and in your wider profession. Here are some important personal statistics over which you should have a memorized command:
- visits per month and per clinic session;
- surgical cases per month;
- surgical density (ie, how many visits it takes to generate a surgery);
- average collections per visit;
- YAG and phakic IOL rates; and
- personal income per hour worked.
3. Administrator and managing partner “fitness.” The hardest two jobs in ophthalmology (besides being an overworked receptionist) are held by administrators and managing partners. Each is one-half of the critical so-called “dyadic” leadership structure at the top of your organization. If one or both are unfit (a relative term because larger or troubled practices need stronger leaders), your organization is at risk. Here are some dimensions of leadership fitness:
- raw time, generally 50+ hours per week for administrators and 10+ hours for managing partners;
- non-defensiveness;
- a command of the facts and figures;
- excellent communication skills;
- a do-it-now demeanor; and
- persuasiveness.
You will notice that education is not on this list. Most great practice leaders get that way through hard experience and tough lessons, not scholastics.
4. The contents of your key legal agreements. Even if you have a great attorney looking out for you, as a practice owner you should be conversant with the general contents of your employment agreements, leases, operating agreements and the like. Review all such documents annually. Have conditions or sentiments changed? Is everyone living up to what they agreed to?
5. Your practice’s profit distribution model. There are hundreds of approaches to compensation modeling. “Eat what you kill” is common, even if it seems more suitable for orthopedic surgeons than genteel ophthalmologists. Some practices split profits equally. In most settings, we see a blend. But whatever you use, you should know your comp model inside and out because it drives not only your personal income but partner harmony. Even if everyone is satisfied at the outset, conditions change and the model should typically be adjusted every few years. And if you cannot describe in a few sentences your practice’s compensation model, it is probably too complex and needs slimming.
6. The practice’s compliance and regulatory status. We do not operate in a vacuum but rather a high-pressure chamber, and the pressure is growing. In the last generation, rules and consequences have proliferated. My foreign clients are horrified to learn that their American counterparts (and their management staff) can go to jail for stepping over the line. You need to know where that line is drawn and how to step as close as one dares to optimize patient care and practice success alike.
7. What your competitors are doing. Keeping abreast of the competition is rarely a matter of practice survival. The vast majority of practices — the weak and strong alike — are enduring. Rather, keeping tabs on your competitor is more like having a jogging buddy. They speed up a little bit, you speed up. They adopt a new surgical maneuver and you follow — somewhat faster than you would all by yourself without a pacer — which often enough accelerates the pace of innovation for everyone’s benefit.
8. Your practice’s plan for the future. Amazingly, less than 10% of practices have a written strategic plan. This can be as simple as a few pages and answer longer-term questions such as:
- What is our agreed service area?
- What services will we add or subtract in the years ahead?
- What is the best provider mix (the OD-to-MD/DO ratio)?
- How fast should we grow?
- How should we market our services?
- How should we interact with local health systems?
- What does our succession plan look like?
If you do not have a plan yet, write one. If you have an old plan, update it. If the long-term plan is written, great — memorize it. Use it to prioritize near-term tactics. Use it to engage with your partners and argue the plan’s limitations and merits at least annually.
9. The organization chart. This can be an old-fashioned pyramid-shaped diagram or something more contemporary. It shows names, positions and reporting lines. It induces order. “Aha. I see that as an associate MD I report to the medical director for care pathway questions, my office manager for vacation scheduling and my CEO for a raise. And, um, I see that I’m nobody’s boss.”
10. The comparative quality of your services. Last but far from least on this starter list of things every provider should know about their practice is its quality. In this case, “quality” is not just a matter of visual acuity outcomes or complication rates, although these are important. Quality from a patient’s perspective goes beyond how quiet their eye is on the first postop day. Quality is more often perceived as clean restrooms, short waiting times, thoughtful staff, fair charges and a doctor’s easygoing response to the seventh question. This kind of quality is hard to measure, but you and your partners should strive to be able to say, “I know our outcomes and patient experiences rank with the best available in our profession.”
That is a start. If you are the managing partner of your group practice, you already know the real list is several times this size. Make 2020 — what a convenient number! — the year when everyone comes up to speed on how their company works.
- 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, Simple: The Inner Game of Ophthalmic Practice Success and a new book, UP: Taking Ophthalmic Administrators and Management Teams to the Next Level of Skill, Performance and Career Satisfaction. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.