BLOG: Plan a practice ‘makeover,’ part 3

ByJohn B. Pinto

We looked at cash flow first. Dave’s office manager was overwhelmed and sweeping a lot of potential collections under the carpet, not maliciously, but out of naïve desperation. Even though staffing costs were already high, we immediately brought on a full-time, experienced billing clerk. Within several months, after refiling claims for what old money could be collected, and collecting a higher percentage of allowed claims, annualized collections with the same patient base were on track for $1.05 million, an 8% gain in revenue. The secondary gains were that there were now two people in the office who knew how to bill, the practice was no longer vulnerable to loss of a single key staff member, and the office manager had enough free time to plan for the future.

Next, Dave and I examined charts together and networked with a couple of thoughtful surgeons (in noncompeting markets) who made gentle suggestions about surgical case selection and providing more testing and treatment for glaucoma. The result? Surgical density improved so that within half a year Dave was performing a cataract surgery for every 20 patient visits, which is about typical in contemporary, non-co-managing practices.

Staffing costs were tougher to rein in, but the same methodical approach applied. We reviewed local wages and benefits, froze wages for all but one staff member, and announced that there would be a 3% rollback in wages per year until all staff were in the 70th percentile of local average wages — still high, but a rate that would gently bring staffing costs into alignment with national figures for an ophthalmology practice of this size and location, about 28%.

An announcement was made that in 12 months the majority of health care insurance premiums would be paid by the practice, but that family coverage costs would fall on staff, as in the vast majority of practices. There was a temporary drop in morale, but the staff worth keeping sprang back just fine. A couple of grumbling staff were eventually replaced.

With no prior marketing to speak of, Dave was suspicious about the cost-benefit of advertising. A very modest, even “folksy” testimonial print campaign was launched with the help of a local freelance consultant, which cost just $18,000 per year but seemed to immediately boost new patient volumes a few percent. It was definitely better than a break-even investment — how much better will take a couple of years to tell, as the campaign builds momentum.

It was clear that optical dispensing could provide a small boost to revenue and profits, add to patient convenience and help increase patient tenure. However, Dave was opposed to managing his own optical shop and settled for a 4-year agreement with a local optometrist to rent space in his office and place a dispensing optician several days a week when patients are being seen. Dave has the option after 48 months to take the space back over, hire the optician, and buy the displays and frame stock at cost. This was not the most profitable approach, but certainly carried no risk and presented no distraction to the core practice.

Moving on to the excess space problem, with diligent sleuthing, Dave was able to negotiate an intermediate-term lease of half of his facility to a compatible ENT. This allows Dave to expand once again in the future if he has a desire. Looking ahead, it may even be possible in the future, if growth warrants, for Dave and this ENT tenant to co-develop a modest ambulatory surgery center.

We added a full-time tech, which brought staffing levels into normal limits and allowed Dave to go home each day a little less fatigued, even though he was seeing more patients. This also allowed special testing to be completed during the same office visit, a huge convenience for distant, rural patients.

A simple revision of the ongoing recall protocol, and calls placed to lost patients, threatened to swamp the clinic with excess patients. Hours actually had to be cut from the temp employee who was placing the calls to old patients lost to follow-up. Instead of going alphabetically through the physical charts, we simply used the computer to mine those patients from the practice who were most in need of follow-up care. Better medicine, better business.

Note that sometimes you have to take a risk, be experimental and even counterintuitive — spending money in an already low-profit practice — to ultimately build the bottom line. As in this composite example, abstracted from numerous interesting cases, sometimes all it takes is doing a little more and a little less. Revision of your practice doesn’t always take heroic efforts. All it takes is a relatively simple makeover.