It sounds so simple and, at first blush, that simplicity makes it appear self-evidently true. However, enacting improvement is far more complex than that. If improvement derived solely from the act of measuring, losing weight would be no more difficult than standing on a scale. The plain truth is that measuring does not change anything. Does measuring how many patients you see each day cause you to see more? Does measuring how many days it customarily takes your lab to deliver a pair of glasses get them to you any faster? Certainly not.
What we measure doesn’t improve, but it’s an essential first step that empowers us to enact the improvements we seek. Measuring provides a point of focus: it directs your attention and supports the decision-making process.
What, then, should you be measuring? While any number of variables could conceivably be recorded, one should only measure those things that matter and are changeable. Consider the notion of “revenue generated per square foot of optical sales.” It’s an alluring number to banter about with optometric colleagues. But whether the figure is $1 or $1,000, are you prepared to change the size of your optical as a consequence? Yes, you could certainly make it a priority to increase the practice’s total optical sales, which would of course affect this ratio, but you’re hopefully concentrating on that anyway. Dollars per square foot is important to major retailers like Target—less so for most optometric practices.
Measure what matters to you, and only to you, based on your practice mission, values and goals. If your practice is very reliant on its dispensary, measure things related to sales. If the focus is more medical, perhaps measure how many OCTs you perform each month or how many active dry eye cases are currently in your patient base. If customer service is a challenge that you wish to improve, measure those things that enhance patient satisfaction and loyalty scores on surveys. What if you believe all of those examples apply to you? Consider tracking each, but keep in mind that the more you attempt to focus on, the less you will accomplish.
The goal of measuring is to make changes in those things that reveal a need for your attention as the practice owner/manager. How many things can you realistically change and work on at once, while still maintaining your practice? For that reason alone, once you have prioritized what matters most, avoid attempting to focus on more than three things to measure at any given time.
Be sure they are amenable to change. The measurement technique itself should be repeatable, simple and reliable. Repeatability is crucial—any changes you make will happen over time, and measurements will have to be repeated so that you can gauge the success or failure of your efforts to enact the desired change. If the methodology by which you measure something his highly variable (e.g., on-time performance of appointed patients) and you change its definition mid-measurement, it will be difficult to arrive at conclusions and an action plan for remediation. For example, if an acceptable on-time performance is “within 10 minutes of a patient’s appointed time,” document success and failure to meet that standard for about three months before you attempt to implement any improvement. Simple and reliable in this case means your staff is able to easily and consistently record the check-in time of each patient. That sounds effortless enough, until they tell you, “I wasn’t able to record the last three patients because I got stuck in the optical adjusting eyeglasses.”
Remember: simple, repeatable and reliable—or don’t bother.
Practice owners and managers willing to act on measurements will find the exercise provides a road map toward improvement. However, be cognizant of the unique and individualized nature of the process; the road map is yours and yours alone. Comparing your performance to other practices may satisfy a competitive urge but, for strategic planning, is fraught with problems. National data is often self-reported by individual practitioners and, as such, is unaudited and often unreliable. Other practices may use different definitions than yours, for instance, or might be influenced by misperceptions more so than rigorously recorded data. Ask an audience of optometrists for the percentage of their spectacle lens dispensing that includes AR coating and the reply may be in the range of 60% to 80%; this is not borne out by industry data from manufacturers, however. Also, when asked for their capture rate (typically defined as the number of eyeglass prescriptions filled at the practice), doctors often respond with what they think it ought to be––not what it actually is. If you try to measure your capture rate against a published national average, your definitions might not match. If patients uses their own pre-existing frames but replace the lenses, how should that be counted?
Additionally, national averages cannot account for local or regional differences like payroll and occupancy costs. You might consider a payroll expense at 31% of gross revenue to be inordinately high—but that level is quite reasonable for a high-end practice in midtown Manhattan, as would paying $98/square foot for rent.You should measure for the sake of self-improvement—your own practice’s, not someone else’s. So, document your own metrics over time and look for patterns to emerge. With the above perspective in mind, let’s dive deeper into the variables most worth your while, both to measure and act upon
The “Big Three”Let’s start with the big three practice performance statistics that should be measured by every practice; these lay the foundation for all other measurements
1. Gross receipts. For the practice owner, personal net income milestones tend to be the impetus for goal setting. To achieve those, first begin with gross income. While most practicing doctors have a good sense of trends here, make sure it is clearly defined month to month and year to year. Gross receipts is most meaningful when defined as how much revenue ultimately transfers to the cash line on the balance sheet. Consider the following example: If a patient’s charges are $417, the individual provides a $20 co-pay and the insurance company reimburses the practice $150 for the services rendered. The gross receipts would be $170, not $417. This measure is variously called production, collections, deposits or receipts. Whatever the nomenclature used, make sure that revenue deposited is the figure you actually measure.
2. Personal net. As stated above, more often than not, this is the driving force in strategic efforts, although of course the intangible rewards of optometric practice are many. The net represents the culmination of all your education, hard work, ingenuity, expertise and risk. In a purely monetary sense, a high net income is considered a vital sign indicating that the practice is operating successfully; the challenge is how to define it. The simplest approach is to consider personal net the remaining cash balance entitled to the practice owner(s) before applying personal income taxes.
3. Hours worked. Perhaps the simplest measurement a practice can take is also the one most often neglected when evaluating performance: how many hours the practice owner(s) spend working on practice-related activities. The culture of private-practice settings tends to assume that long hours are the norm and should be expected, rather than seeing your hours as a scarce resource no different than other practice assets. When measuring, be sure to include time focused on work tasks that happen outside your practice.
Each of the metrics above should be measured and recorded weekly, monthly, quarterly and yearly. With these protocols in place, you can next start to subdivide the top three and measure the elements that affect them and better learn how they interact with each other. For example, increasing capture rate will increase gross and net, but may also increase the hours worked. What happens when your last patient of the night takes 45 minutes to choose a frame and you have to make sure the seg height is dead on? You put in the additional time to complete the encounter.
In another example, seeing a higher percentage of contact lens patients may allow for less time in the office—with a great staff, that should be the case—but your capture rate might suffer as patients opt for contact lenses over spectacles. Carefully orchestrated, it should actually improve; contact lens patients are more loyal than eyeglass patients and eventually will purchase glasses, hopefully from your practice. With the top three global performance indices (gross, net and hours) defined and consistently measured, the subcategories below can be tackled next.
Practice-specific MetricsDespite the great diversity in modes of optometric practice found throughout the United States today, several key metrics should be illuminating for most offices. Wherever applicable, preferred values and/or ranges will be described, although these statistics are most useful when applied to an individual practice over time rather than a quest to meet industry norms.
1. Percentage of new patients vs. established patients. Someone who has had at least one comprehensive visit to your practice is a reasonable way to define “new patient” for these purposes. Compare this figure to the age of your practice. For those more than five years old, a good goal to strive for is 80% established and 20% new, with an acceptable variance of about 5% in either direction. This ratio would indicate you have a viable recall system that motivates patients to respond. Practices less than five years old will have very variable numbers, especially in transient markets like a college town, downtown practices in major cities or those near military bases.
2. Net Promoter Score (NPS) is a global patient satisfaction index. While much has been written about NPS, in essence it seeks to measure the response to the question, “How likely is it that you would refer a friend or family member to our practice?” Ask this of patients via a survey and grade responses from 0 (highly unlikely) to 10 (extremely likely); also include an open-ended question that asks patients to explain their rationale for the score.Next, subtract the percentage of scores in the 0-6 range from the number of 9s and 10s in the survey. Practices that are patient-centric/customer service focused should strive to have a score within the range of 70 to 80. Of course, the open-ended responses are qualitatively meaningful, as this feedback relates to all scores received—good or bad.Consider the NPS and the new/established patients breakdown and see if you can elicit a relationship. Unhappy patients won’t return, no matter which recall system you have in place. If so, your percentage of new patients will be inordinately high.
3. Recall percentage. Another valuable index to track is your recall rate. If you send out 100 notifications (e.g., postcards, texts, emails), what percentage of patients contacted come back for care? With concerted effort and focus, having 70% of patients return during the same month as their previous year’s visit is attainable—not easy, but attainable. This statistic assumes that you believe in the clinical efficacy of yearly eye care. If your recall protocol differs, determine your own metrics and goals. For instance, the practice’s recall percentage should be higher than 70% if you recall patients at greater than one-year intervals.
4. Capture rate. As defined and discussed above, this is a valuable indicator of practice performance. What percentage of the corrective lens prescriptions written stay in the practice? That is its capture rate. You have worked diligently to pinpoint the corrective lens prescription that gives your patient the best visual performance possible, so it’s understandably deflating—both to your ego and bottom line—when they have it filled elsewhere. An ideal range to strive for on this measure is difficult to categorically define, as it is highly dependent upon geographic region, practice setting (i.e., urban vs. rural) and practice model. For example, a practice with a substantial focus on medical care, for which the dispensary is little more than an afterthought, will likely not top 50%.
Preferably, you should be making up any lost eyeglass revenue with a higher volume of medical billing. In a high-end, “destination” optical boutique practice, the capture rate can approach 100% with the proper effort and focus, pricing model, location and staff. Generally, however, consider any result below 40% to be problematic.
5. Patients per day. This measure also depends heavily, if not entirely, on the specifics of your practice model. Nevertheless, patient volume is a key contributor to personal net income and thus should be measured and tracked. A pediatric or geriatric practice with a small staff probably can’t do a thorough job clinically seeing more than one or two patients per hour. By contrast, an optometric practice with a young, healthy, active population of busy working professionals, especially in which the practice staff is delegated much responsibility, can easily see four examinations per doctor per hour and do a great job. Further, multi-doctor practices naturally will do even better in patient volume.While there is no profession-wide benchmark to aim for in patients seen per day, measure this over large time spans (multiple quarters or years) to ensure it does not fall below what you personally deem to be an acceptable level.
6. Patients per doctor. This is an important metric for practice-owning doctors who employ associate ODs. While every doctor within a practice will work at different speeds and may offer different patients highly customized treatment protocols, there should still be some degree of parity among all clinicians at the practice. For example, Dr. A. and Dr. B. might disagree on the first-line glaucoma drug for a particular patient. However, if one doctor completes the glaucoma follow-up visit and medication prescription in 10 minutes while the other takes 50 minutes, something is amiss.Practice owners often lament that their associate optometrists take longer in the exam room and fail to match their own productivity. This may indeed be true, for a multitude of reasons (e.g., varying expertise/clinical experience between junior and senior staff being one possible contributor).
Measuring exactly how much longer and how much less is produced is the first step towards changing behavior and improving performance. Despite its value to the planning process, the “patients per doctor” measurement is frequently overlooked, because owners view it as potentially overstepping clinical care guidelines, which can be a valid concern if handled indiscriminately. However, this deference needs to be balanced against the common fallacy of those who contend that more time necessarily equals better care, explaining it thusly: “My patients say I gave them the best eye exam they ever had because I spent a lot of time with them.” What patients are really saying is that the doctor spent the right amount of time with them. And that amount of time needs to be measured. Performing such an analysis in conjunction with particular disease states is also helpful in enabling the development of procedures that will allow for more efficient scheduling.
For example, if you know that historically a dry eye work-up will take 45 minutes and a spherical contact lens follow-up just five minutes, block the appropriate amounts of time in your scheduling templates accordingly for those patient encounters.
7. Accounts receivable (AR). The single biggest impediment to a healthy cash flow is letting your accounts receivable lapse. It’s widely known that the longer your AR ages, the less likely the practice is to collect the full amount due. Make it a priority and goal to keep the bulk of AR (i.e., 90%) less than 30 days old. That means that about 8% of total yearly collections (one-twelfth or one month) should be your preferred limit. There can be considerable variance, however, in AR collection patterns depending on each practice’s mix of third-party payers and their varying policies.Additionally, remember that buying inventory such as frames and lenses with 30-day billing, which is customary, may create a potential cash flow conundrum, depending on the date of purchase.
So, be mindful of when you buy larger inventory purchases and try to do so right at the beginning of a vendor’s statement date. For example, if the vendor closes out its monthly statements on the 30th of the month and you buy inventory on the 1st, you have an additional 30 days to pay. If you make the purchase on the 29th, however, you’ll only have a few days’ grace. In the first case (buying on the 1st), you have 30 days to sell (and collect) what you bought, making it less likely that the upcoming bill will hamper the practice’s cash position. You have improved your cash flow simply by changing the date of inventory purchase.
8. Percentage of multiple pairs sold. In most practices, there is real opportunity for improvement on this metric. Industry sources estimate that only about 5% to 7% of patients own a second (or third) pair of glasses with the correct prescription. Given the negligible level, one can assume these are patient-driven sales, occurring passively, rather than a consequence of the practice’s approach to presenting eyewear. With careful attention and focus, some practices have successfully elevated this number to 30% of patients ordering a second pair of glasses at the same time as the first—with no discount offered. It’s not easy, but it’s attainable.
9. Percentage of contact lens patients in the practice. There is broad consensus that contact lens patients are more profitable and refer more new patients than eyeglass patients over their lifetime of experience with a practice. With the wide variety of newer lenses available, more patients are able to wear lenses than ever before, and can continue to do so even after the advent of presbyopia. Contact lens wearers also typically desire spectacles for occasional use, increasing their purchasing potential at the practice.With that knowledge, it is advisable to measure your current percentage of contact lens wearers and target an attainable goal of 50% of all active patients being contact lens wearers, at least part time. Of course, as with all these metrics, this might be less likely for some practices with atypical demographics. But for most general optometric practices in conventional settings, it’s certainly achievable.
10. Inventory size. Rarely do high inventory levels correlate with high sales. The goal is to stock the smallest amount of product for the shortest time. Most practices carry an inordinately high amount of eyeglass frames relative to demand, and those extra frames represent idle inventory that ties up thousands of dollars. The downside to maintaining a high inventory level is twofold: the opportunity cost of foregoing other possible uses of practice capital, and the risk of eventual loss on unsold products. Maintaining inventory is also time consuming and constrains usable space in the practice.As the ideal amount of optical inventory to stock varies greatly among practices, it’s impossible to give a target figure. As a general goal, strive to raise the capture rate as high as possible while stocking the fewest number of frames.
Theoretically, a capture rate of 100% with one frame line would be ideal. Success in doing so stems less from product diversity and more from presentation and merchandising skills. It sounds counterintuitive, but has been observed time after time: practices with well-designed, well-merchandised, well-inventoried opticals and talented staff can outsell others while stocking just 25% of the inventory of otherwise-comparable practices. An optical with 300 frames can indeed readily outsell one with 1,200 frames. The other benefits above (decrease shrinkage, faster sales, less buyer’s remorse) are all added benefits to the smaller inventory.
11. Effects of merchandise price increases. Pricing can be thought of as either “kinetic” or “static.” Volume discounts, special offers and other incentives represent kinetic pricing; static pricing avoids deviation from the list.If you have a pricing formula in place, ask yourself if the rationale for it is sound, and challenge yourself to experiment with fine-tuning it. What would happen if you increased the prices in your optical, or those for contact lenses dispensed at the practice? Conventional wisdom arguing that increasing prices will lead to declining sales is often wrong. In some scenarios a fee increase adds to the perceived value of a product, and that alone increases sales. So, increase price on one or more product lines and measure the effect on sales. If they increase, keep raising the prices until sales stop increasing. If the first price increase leads to a decrease in sales, try decreasing the price and repeat the same process as above.
12. Patient wait times for services. There are two sides to the notion of patient wait times. On the one hand, it’s in keeping with a customer-first philosophy to ensure that wait times are kept to a minimum. But, shorter waits aren’t always ideal. If, for example, you walked into a restaurant and were immediately seated, you might perceive it to be less in demand and less worthy of referring a friend than if you had a brief, five-minute wait.
A small and reasonable wait also allows the patient to peruse the dispensary’s offerings or read patient education brochures that might expedite the doctor/patient discussion of clinical findings.The patient encounter at your practice is comprised of many smaller, discrete events that should be timed. Measure how long patients have to wait to make an appointment, how long they wait once they enter the office, the wait time to see the doctor once they’re in the exam room, the wait time to choose glasses or learn to use their contact lenses, how long they wait to check out, the wait time for eyeglass delivery, etc. As these are measured and excessive delays addressed, compare this against your net promoter score; longer waiting times are often a major deterrent to higher NPS.
Constantly measuring the right variables at the right time with the right goals in mind can help to reveal opportunities for increased practice efficiency and profitability. Measuring solely for the sake of measuring is counterproductive and often leads to a defeatist attitude if the practice comes up short on industry “norms.” With that in mind, choose those items listed here that are most important to you, and start charting a path towards a better quality of practice life.
Dr. Gerber is the founder of the Power Practice, a practice building and consulting company whose mission is to help doctors power their professional and personal dreams.