business advisor

Doctor/Staff Ratios in a Solo Practice

Balance revenue and patient care when determining staffing.

JERRY HAYES, O.D.

A reader wrote to ask my advice on his doctor/staff ratio:

My advice: Strike a balance between providing an appropriate level of customer service and how much revenue you can generate on a per-employee basis.

If you do two exams per hour for 27 hours per week, you'll see 54 patients per week. So, 54 patients per week x 48 weeks = 2,592 patients per year. Let's round that down to 2,500.

According to the Ciba Vision/Essilor Management & Business Academy (MBA) survey of more than 1,000 practices, the typical dispensing practice averages about $300 of revenue per exam. Let's be conservative and say you average $250. At that rate, your annual gross revenues would be $625,000 ($250 per patient x 2,500 patients).

Again, using the aforementioned MBA survey as our benchmark the median dispensing practice produces $133,000 of gross revenue per full-time employee per year.

Using this methodology, an appropriate staffing level for your practice would be 4.7 full-time non-lab employees ($625,000 ÷ $133,000).

The fact that you only have three FTE's tells me your staff is highly productive ($625,000 � 3 FTE's = $208,333 per employee, per year) as compared with the MBA median.

It also suggests, however, that you may need to hire another staff member.

Of course, many variables come into play with the decision to hire another staff member, such as: How many of those 54 patients each week purchase glasses? And, how much contact lens and medical work do you do?

Productivity and salaries

Here's where the balancing act comes in. The median overhead number for all staff-related expenses is roughly 20% of collected gross revenues in a dispensing practice. That 20% would represent $125,000 per year for staff salaries and benefits ($625,000 x 20%).

This $125,000 allows you to pay three staff members an average of $16 per hour, plus $4 per hour in benefits (2,080 hours per year x 3 employees = 6240 hours, $125,000 ÷ 6,240 hours = a total of $20 per hour).

Four employees vs. three

But what if a colleague with similar practice revenues had four FTE's? Using the same math, the average pay for four employees would be $12 per hour plus $3 per hour in benefits. ($125,000 ÷ 8,320 hours).

Take it one step further. To pay those four employees the same $20 per hour as you, that practice owner would have to spend $166,400 ($20 x 8,320), or 26% of their annual gross.

Yes, it's very important to have enough employees on staff to serve your patients. But, don't forget that the more your practice produces on a per-employee basis, the more you can afford to pay each employee. This is a simple concept, but one that often gets lost when staff productivity bogs down and salaries skyrocket as a percent of gross. OM