The old adage, “An ounce of prevention is worth a pound of cure,” implies a small amount of planning and preparation can prevent much greater costs to fix a problem after the fact. But, given there are 16 ounces in a pound, and speaking from personal experience, I would argue it’s proportionally worth much more.

In the past year alone, more optometry practices than ever in my lifetime have been affected by:

• blazing wildfires;
• roiling hurricanes;
• violent tornadoes;
• soaking floods;
• vandalizing riots and
• jarring earthquakes.

That obviously doesn’t include the raging pandemic or a host of other things we could add to this list of potential threats to our lives, our homes and our practices but, pragmatically, what can we do to prevent financial ruin from such disasters?

I’ve experienced extended shutdowns and business interruptions from Hurricane Katrina (2005), Hurricane Gustav (2008) and Hurricane Isaac (2012), but the biggest natural disaster to impact me was an unnamed storm that dumped 31 inches of rain on an already water-logged ground and waterways in south Louisiana in 2016. This “thousand year” deluge, according to the National Weather Service, caused a nearby river to crest 5 feet higher than ever recorded in history, flooding one of the offices, as well as 150,000 personal residences (including my own and that of our patients and staff) in the greater Baton Rouge area. (See photo.)

Disaster recovery is a topic for another day, but even with my previous hurricane experience, my disaster prevention grade for this flood was only average, at best. Case in point: We had flood insurance for our office structure and maximum coverage on our office contents, but I did not have flood insurance on my home. This is because it wasn’t required, as it was outside the 100-year flood plain, and there had never been floodwaters anywhere near our neighborhood before. Some of you can, undoubtedly, empathize, as the following year the greater Houston area saw historic flooding from Hurricane Harvey, followed by large areas of Florida, Georgia, the Carolinas and Virginia from Hurricane Michael (2018), not to mention devastating localized floods throughout many other areas of the country during that same time.

Regardless of whether it’s flooding, hurricanes, or some other potential threat, such as a pandemic, proper preparation is crucial to practice survival, and there’s never a better time than the present to consider ounces of prevention.

ANALYZE ANNUALLY

Start by scheduling an annual meeting to review your disaster preparedness. This meeting could include just you or some of your management team (e.g. practice administrator/office manager, CPA, insurance agent, attorney, financial advisor, etc.). The annual review should identify threats and analyze what level of risk you’re willing to accept vs. attempt to mitigate. Consider also (1) having practice management and EHR backed up using a cloud-based platform; (2) being aware of the possible need to furlough or lay off staff; and (3) being cognizant of the potential need to adjust operating hours/schedules depending on the situation.

PRACTICE SOUND FINANCIAL JUDGEMENT

It goes without saying that we should operate our practices within an established budget, adjusted annually based on forecasted revenues and expenses, and that we should manage our debt in a fiscally responsible manner. For example: The higher our debt-to-income ratio, the more at risk we are, should disaster strike; and a cash reserve equivalent to 3 to 6 months of operating expenses puts a practice in a strong financial position to weather any future storm. I recommend you consult your financial advisor, tax attorney, and/or CPA for additional advice based on your personal income, corporate status and specific tax considerations.

INSURE PROPERTY AND CONTENT

Some level of property and/or content loss insurance is paramount in the event of a major natural disaster. If you already have a policy, I have found you need specific answers to two important, multi-part questions:

1. What’s my coverage and deductible in the event my office and its contents are a total loss from:
   • hurricanes?
   • tornadoes?
   • fire?
   • flood?
   • wind?
   • hail?
   • vandalism?
   • earthquake?
   Feel free to add anything else, but unless there’s absolutely no way you would encounter one of them (e.g. a hurricane in the Midwest), I would strongly consider leaving these on your checklist to gather as much information as possible to make an informed decision.
   Also be aware that insurers are notorious for fine print exclusions, such as the common “wind driven rain” exclusion, which can lead to claim denials for water damage and/or which allow the insurer to contend the loss is the result of poor maintenance on behalf of the building owner. Get as many of these answers from your agent in writing as you can, and either personally review your policy with a fine-tooth comb or consider having an insurance attorney do so on your behalf. This way, it’s crystal clear what’s covered and what exclusions exist, and then you can adjust accordingly.
   Further, note there are multiple parts to the question above. First, and most obviously, your coverage is how much the insurance company will pay you to cover your losses for a qualifying event, and your deductible is how much you have to pay out of pocket before the insurance company writes you a check. Second, if you own the building, be aware that many policies require separate riders, or even separate policies altogether, for damage to or loss of the structure (i.e. the roof, walls, foundation, etc.) vs. damage to or loss of the building contents (e.g. furniture, fixtures, equipment, frames, lenses, etc.).
2. Do I have enough coverage for my building and/or its contents?
   Make it a habit to update your contents policy to include any equipment you purchase, and consider updating photo or video documentation of what’s in your office every January. Then, store it in a cloud-based platform. This can make life a lot easier should a claim need to be filed down the road.

To assure you have adequate coverage with a new or existing insurance policy:

• Estimate the cost to reconstruct your office building if you own it and it were a total loss
• Calculate the value of your other hard assets (i.e. furniture, fixtures, equipment, frames, lenses, etc.), should they be a total loss

These two figures represent the basic coverage amounts to consider for your structure and content policies, respectively. If either premium is more than you can afford, or you don’t need full coverage for any reason, you can lower the premium by lowering your coverage amount.

However, keep in mind any minimum coverage amounts any lender(s) may require you to have for your mortgage or for any equipment leases, and consider that you will be responsible for any expenses incurred above the maximum coverage amount in the event a disaster occurs.

Also, realize that in the future it may cost you more to replace your hard asset contents than what their current value is at the time the policy is purchased. Some policies cover actual replacement cost instead of the value of the asset at the time of the disaster, albeit at a higher premium.

PROTECT AGAINST BUSINESS INTERRUPTION

Business interruption insurance policies supplement your income when it is interrupted by a qualifying event, but vary widely based on how long the interruption must exist before the policy kicks in, what percentage of your income it replaces and what exclusions apply. We’ve discovered the hard way that our original business interruption policy covers “acts of God, except flood,” and more recently that it also excludes pandemics. So again: know your policy!

ENDURE

At the end of the day, the practice has endured more than its share of natural disasters and business interruptions, yet still survived and thrived using the aforementioned basic steps and with help from our family, our friends, and our faith. Your practice can too. Be safe and prosper! OM

DR. WROTEN is a partner at the Bond-Wroten Eye Clinics, a three-location private practice in southeast Louisiana. He specializes in hard-to-fit contact lenses and has spoken for and been an advisory board member with Alcon this past year.