Fix this practice

The Benefits of Another Doctor

You can treat more patients and raise income by adding an O.M.D. or O.D.

Richard S. Kattouf, O.D., D.O.S.

Q: I am considering adding another doctor to my practice. My goal is to lower my cost of operations. How can I accomplish my goal?

Dr. E.R. Thomas
via e-mail

A: Adding an M.D. or O.D. can reduce your cost of ownership (COO) and raise your net income. However, if done incorrectly, it could lower your net. Follow these tips to get started on the right track:

Adding an M.D.

In bringing an ophthalmologist (O.M.D.) into the practice, you must stay within the guidelines of the Stark Law (http://starklaw.org/investment.htm). Simply stated, O.M.D.s can't share their income with the O.D. They can comanage cataracts and pay comanagement fees for refractive surgery.

The simple and most financially rewarding way to add an O.M.D. to your practice is the shared over expense (SOE) method, which can also be used when adding an O.D. Some of the key points of this method include:

► Utilizing your certified public accountant (CPA) to calculate the expenses charged to the O.M.D., such as square footage. For example, the optical department and optical lab would not be included. If your practice has four fully equipped exam rooms, the O.M.D. pays his share only for the lanes designated for him/her. Also, the CPA calculates the salaries of the employees utilized by the O.M.D.

► A practice appraiser evaluating the value of the equipment used by the O.M.D. For example, if the overhead is 55%, the O.M.D. would pay 27.5% of all monies paid for services rendered in the O.D.'s office. This does not include the O.M.D.'s surgical fees.

In this example, the O.D. (owner) reduces his/her cost of operation by 27.5%. No doubt the net income of the owner will increase.

► No investment on the part of the O.M.D. Therefore, the O.M.D. has no ownership and no management responsibilities.

► Using a contract that stipulates a length of time for this SOE. This protects the owner. Also, define a non-compete clause in your contract in states that honor a restrictive covenant. At the end of the assigned years, amend the original contract.

► The O.M.D. managing all his/her patient records, paper or electronic, which are his/her property.

In addition to raising net income, The O.D. owner should benefit from several additional spectacle prescriptions from the O.M.D.'s patients. In addition, having an O.M.D. in the optometric practice demonstrates you offer a full range of eyecare services.

Adding an O.D.

When adding an O.D. to the practice, consider the following guidelines:

► The associate must generate three times his total compensation in order to earn money for the owner. This is collected income. If the associate generates less than this amount, it will lower the net of the owner.

► To assure the above production, the associate must add two or more optometric specialties, expand medical services or start new profit centers.

Assess your COO. Make things happen by taking calculated risks that can offer solid returns. OM