business advisor

An Asset or a Liability?

Don't let your appointment backlog hold your practice back.

Jerry Hayes, O.D.

If you are looking to increase your practice revenues in 2011 — and who isn't — the first thing I would advise is to evaluate your appointment backlog. Some instant growth potential may be there, even if you're booked just a few days in advance.

Take the case of Dr. Seewell, a fictitious O.D. who owns a solo practice that grossed $600,000 in 2010 and is booked two weeks in advance on a regular basis.

Her present patient load

We know that the average revenue per complete exam for a traditional dispensing O.D. practice is about $300 per patient, according to Hayes Consulting and the CibaVision/Essilor Management and Business Academy program.

This $300 figure, taken from more than 1,000 practices, is calculated by simply dividing total collected gross revenue by the number of complete exams. Of course, I realize you conduct many follow ups, progress and medical eye exams that aren't complete exams, but do generate revenue.

In Dr. Seewell's case, that's $600,000 ÷ $300 = 2,000 exams per year.

Assuming she works 48 weeks per year, Dr. Seewell would see 42 complete exams in an average week (2,000 exams ÷ 48 weeks = 41.6), or, eight or nine exams per day (42 exams ÷ 5 days = 8.4).

Therefore, if Dr. Seewell is booked 10 working days in advance, that means 84 patients (10 x 8.4 = 84) are waiting on appointments. That's a nice little reservoir to tap into for an O.D. looking to grow.

Increase revenues by increasing patient load

We know the demand is there, at least for a few weeks. So, what would happen to Dr. Seewell's gross and net if she increased her exam load by just 20%? That means going from an average of 8.4 exams per day to 10 per day or 50 exams per week.

The answer: Her total production would go from 2,000 to 2,400 patients per year (50 exams x 48 weeks = 2,400). Dr. Seewell's gross revenues would increase from $600,000 to $720,000 (2,400 exams x $300 = $720,000).

And, assuming the median net of 30% of gross, Dr Seewell's net income would increase from $180,000 to $216,000 (30% x $720,000).

My recommendation

Let's state the obvious. If Dr Seewell is presently seeing what she considers a full patient load every day, there are only three ways for her to increase practice revenue in 2011: (1) She can charge higher fees to the same patient load she is seeing now, (2) she can figure out a way to see more patients each day, and of course, (3) she can do both. This logic is sometimes lost on O.D.'s who are booked, but struggling to grow.

While every doctor enjoys being booked weeks advance, I view making patients wait more than a few days for an appointment as money left on the table. Plus, giving patients quick access to appointment times can be a distinct competitive advantage.

Finally, I realize you're going to work through your backlog if you increase your daily production. And if that happens, you might consider working four days instead of five until you develop another backlog.

Either way, the more patients you see and do a great job with each day, the more other patients will continue to call in for appointments. OM