practice made perfect
Overworked and Underpaid, Part II
Marilee Blackwell, M.B.A., C.P.A., A.I.B.A., and Donna Suter

Dr. Beverly Arnette (not her real name) called us because she was working 60- to 80-hour weeks between two practices and didn't have the cash flow to pay her bills (see the September 2002 issue, page 73). Breaking out her profit and loss between the two locations and our analysis of her balance sheet and P&L statements gave her data she needed to make sound decisions about her future. She decided to keep both practices and find an associate.

Putting her strategy into play

We cautioned Dr Arnette that the real work had just begun. During the on-site consultation and ensuing 12 months of business and practice management coaching, we concentrated our efforts in three general areas: practice growth, personnel training and hiring an associate.

Addressing the problems

Our financial analysis of the Cordora Eye and the River City Eye Clinics indicated that the expense most out of line was staff salaries and benefits. The River City location, the one Dr. Arnette had started cold, also had a high occupancy cost for the revenue this location was generating. Fixed expenses (staff costs and occupancy costs) are expenses that don't change with the number of patient visits. Between the two locations, she employed 4.5 full-time equivalent staff.

There are two ways to resolve both these issues. The first is to cut staff and relocate. The second -- and often the harder to execute -- is to increase gross revenues without increasing staff.

Because the areas where each practice was located showed potential, it appeared counter-productive to Dr. Arnette's goals to terminate employees or move. Our experience with other offices indicates that practices that spend more on marketing are not more successful than practices that spend within the 2- to 4% range (typically, poor execution and improper allocation of the marketing budget are the cause). Therefore, we developed the marketing budget and assisted in its execution.

Cordora

Even though cash flow was tight, Dr. Arnette allowed us to develop and implement an aggressive marketing plan that used 6% of this location's gross, or $9,000.

When growing a practice, it's important to make sure that the practice is offering goods and services that the community wants and needs. We provided Dr. Arnette with current-year demographic updates and five-year forecasts, along with 2000 Census data for each target market. We were particularly interested in knowing age, income, and where people worked in each market in addition to where they lived. We also looked at a socioeconomic profile report to determine "hot buttons." This type of market research helped to give direction to marketing activities.

We discovered that the Cordora community was a young and upscale population but the Cordora Eye Clinic's patient base was older and less affluent. We were careful not to alienate existing patients while marketing to a different clientele.

Cordora's historic sales showed that 5% of the its gross was generated by contact lenses sales. Dr. Arnette didn't promote contact lenses, nor were the number of new fits tracked -- in fact, unless a patient asked to be put in contacts, the option was not mentioned. We set a monthly goal for new fits and offered all patients currently wearing contacts the option of purchasing a year's supply at a discounted price. We also changed the patient history form and scripted pretesters in how to inquire about an interest in contacts (For a list of those questions, please contact Donna Suter).

Two contact lenses representatives offered to help with a contact lenses open house. However, because market research showed that 64% of all households in the area were dual income, we doubted that busy consumers would attend one.

Instead, we declared the week of April 15 as Relief From Taxes Week. We went through patient records targeting those that fell within the following categories:

• Those turning 45 (emerging presbyopes in denial)
• Refractive surgery candidates
• Sports/Outdoor enthusiasts
• Patients who work in specialized environments
• Those with dry eye symptoms
• Current contact lens patients who are heavy depositors
• Those who lose or tear lenses frequently
• Those living in high-income neighborhoods.

We reserved all appointment slots that week for patients fitting these criteria and recalled them with a special letter inviting them to book their eye health examination and receive a free 15-minute neck/shoulder massage. Co-op monies off-set most of the cost of this event.

Within months, Cordora Eye Clinic increased its contact lenses sales and was attracting patients willing to pay for the latest in spectacle lens technology and designer frames.

River City called for a different strategy

Our demographic analysis of the River City Eye Clinic's target market showed an older population. Interestingly, the percentage of diabetics (8.7%) in River City was higher than the national average of 6.2%. Because of this and other data, we positioned the practice as the one that knew more about systemic disease and the eye than any other practice in town. Internally, we ensured that appropriate additional testing was recommended and findings properly documented.

Training personnel

Once Dr. Arnette had decided how to position her services in the respective communities, the areas in which staff needed training become clear. They were

• The eye and systemic disease,
• Identifying the patient who was a candidate for contact lenses,
• Discovering lifestyle issues that could be solved by prescribing new spectacle lenses technology; and,
• Converting the caller into a booked appointment and WOW customer service.

Because both the busy professionals in Cordora and the elderly in River City demand TLC, each training included a module on staff professionalism and making that all-important good first impression. We also sent staff to seminars held by the American Diabetic Association and "lunch-and-learns" put on by pharmaceutical representatives for the staff of a local endocrinologist.

Hiring an associate

Because Dr. Arnette didn't want a partner, we sought an optometrist who only wanted to supplement his or her income. With assistance from her state association, Dr. Arnette learned of a practice 90 miles away that had just been purchased and called its senior doctor. The doctor that was buying into his practice didn't live in that town but 50 miles from River City.

With the senior doctor's permission, we contacted the young doctor buying that practice and arranged for him to work in the River City location. Finding this interim associate gave us time to grow our patient base to a two-doctor practice.

Conclusion

Dr. Arnette spent a grueling 12 months improving her practice and finding just the right associate. By focusing on the issues that would increase productivity instead of allowing crisis management to fill her days, she saw an average increase of 18.5%.

But most importantly, Dr. Arnette now works fewer hours and doesn't feel stressed. And she proves that it's possible to manage and grow a two-location practice.

	Marilee Blackwell, M.B.A., C.P.A., A.I.B.A., senior consultant for Hayes Consulting (904-273-1115), and Donna Suter, president, Suter Consulting Group (423-236-5465), team up to offer financial guidance and on-site consulting services designed to increase your gross revenue while significantly improving your net income percentage.