Managing Clinic Profit Centers for Growth

This section of our series will explore clinic revenue, how it’s generated, what it means, how you can track it, and suggestions to improve it. To begin this discussion, we’re going to take an in-depth look at your clinic profit centers. 

A profit center is a division of your business activities that is expected to directly add to your bottom line. Each profit center can be treated as a separate, standalone business, responsible for generating revenues and earnings.

A recent conversation with a practice owner uncovered a strong argument for breaking clinic revenue down into specific profit centers. This provider was confused about why her clinic revenue had recently experienced a downward turn, after a significant growth period during the prior year. The answer lay in her clinic services breakout. In 2023, she launched an OSD offering of IPL treatments, with the accompanying equipment purchase. At the outset of this new initiative, she had a waiting list of patients eager to invest in this treatment program, and the appointment slots were fully booked for months in advance. What she found confusing was the subsequent drop-off of clinic revenue in the following year. 

By breaking out her clinic profit centers, she was able to isolate a significant decline in those specialty IPL treatments, and begin formulating a solution. She implemented a referral program, re-evaluated her marketing efforts, and worked out new scripting for pre-testing, exam rooms and phone contacts. By monitoring her profit centers, this doctor was able to successfully identify and reverse a declining revenue trend in her new OSD therapy program, preventing further losses.

You can probably think of many profit centers in your practice. We’ve discussed two groups – the optical and the clinic – in our discussion of revenue streams. In this article, you will learn how to examine the various profit centers inside the clinic revenue, which will help you manage them more profitably.

Classifying Clinic Revenue

For purposes of tracking and analyzing your metrics, “clinic revenue” is all revenue generated by:

• Patient-paid fees for exams and medical services,
• Patient-paid proceeds from the sale of contact lenses, and
• Third party (insurance) payments
  

You’ll notice that’s not exactly the same way others, including your accountant, would define clinic revenue. Since you’re not using this information to file your taxes or apply for business loans, that’s okay. Managing with metrics is about organizing your practice revenue into logical groups so you can see and understand trends, make effective decisions, and take control of your business activities. What we’re striving for is to develop a clear understanding of how your practice is generating revenue, rather than accounting for tax or bookkeeping purposes. 

As we begin breaking down the details, remember that you have control over how you apply your metrics. You can choose how to think about your profit centers, which ones to group together, and which ones to track separately. We’ll make recommendations on what we find to be the most efficient, but ultimately, you decide how to think about your practice activities. 

The most important requirement is that you maintain consistency, always tracking your metrics in the same way. Inconsistent measurements will skew your results, and make them far less meaningful. So, whether you decide to follow our recommendations or class your clinic services differently, be sure to keep your routines consistent.

Services

Services are all exams of all types, specialty testing services, medical services, etc – all of which are billed with CPT codes. This large set of fees obviously includes more than one specific profit center. To track these individual profit centers effectively, you need to find a way to group them that makes sense inside your unique practice. Here’s a standard method for organizing your CPT codes on the most basic level:

Take a look at the CPT codes billed from your office. You should be able to assign each of them to one of these 3 line-items. All together, these make up your exam services + medical services.

If your practice model is medically oriented or you have a specialty service focus, you may want to create an additional group of CPT codes that are specific to this profit center. Some examples would be Vision Therapy, Sports Vision, Myopia Management, Retina, Specialty Contact Lenses or Dry Eye Therapy. Building these specialties often entails additional expenses and overhead, including specialized equipment and/or marketing. It is important to filter out the revenue that applies to that service profit center, so you can evaluate the success of your efforts and make decisions about how to proceed with your initiatives. We’ll cover more about tracking and optimizing specialty service profit centers later in this chapter. For now, it’s enough to separate and track their revenue.

EXAMS BY TYPE

If you feel like this is getting complicated, just remember that you’re building a skillset. Follow the steps with a routine that you can repeat monthly or weekly, and stick to it. Leveraging an analytics program like EDGEPro can help to streamline this process and significantly cut down on the time it takes to execute.

Contact Lenses

When we move into classifying contact lens sales and annual supplies, we’re coming to one of those points where you’ll need to make some decisions for how you categorize your revenue. The traditional view of optometric sales would class this revenue as “materials,” and separate it from the clinic. Your insurance reimbursements undoubtedly list contact lenses in this manner. 

We choose to – and recommend – classifying contact lens sales with clinic services for several reasons. First, contact lenses require an additional service before purchase, aligning them more closely with the clinic. Contact lens services also tend to vary between practices in regards to which department performs the fitting. In some practices, this is done exclusively by optometrists or optometric technicians. In others, it is handled by the optician. Some states restrict contact lenses to the doctor’s office, particularly in corporate practice models or within 2-door states. And finally, the patient often perceives a contact lens as more of a medical device and will respond to it as a medical purchase. When it’s “sometimes this way” and “sometimes that way,” it’s critical to establish a consistent way to group and measure activities.

Ultimately, the classification is up to you as the business owner or manager. We find that tracking contact lenses with the clinic tends to give us the most balanced view between optical and clinic with regard to revenue distribution. The recommendations we make for revenue balance between the two businesses as well as appropriate results for clinic revenue per exam reflect this division, so you’ll need to be aware of it when comparing your results to our guidelines. 

Third Party Payments

Third party payments present another challenging issue for classification. Ideally, your office biller / manager is making accurate, line-item posting of all of your receipts, so you could judge third-party compensation, post-application, as being part of either the optical or the clinic revenue figures. In reality, though, this clarity of income can be severely muddled by variations in plans, coding mistakes, and chargebacks, making it – in many cases – unclear about which business (clinic or optical) is really the beneficiary of these payments. (Correct posting will eliminate much of this confusion.) 

Once again, effective revenue analysis depends on regularity, dependability, and clarity. Your metrics must be easily accessible, and arrived at with very consistent methodology. For purposes of tracking the clinic revenue, classing third party receipts as a bulk addition to the clinic is a completely valid method, making the analytics faster, more consistent, and perfectly effective.

Conclusion

Understanding and effectively managing your clinic revenue is crucial for the financial health and growth of your optometric practice. By breaking down your revenue into specific profit centers, you gain valuable insights that allow you to pinpoint areas of success and identify opportunities for improvement. As we have seen, even a temporary decline in revenue can be addressed with targeted strategies like proper staff training, referral programs, and enhanced marketing efforts.

Remember, the key to successful revenue management lies in consistent tracking and analysis of your metrics. Whether you choose to follow our recommended classifications or develop your own system, maintaining consistency is essential. Tools like EDGEPro can significantly streamline this process, making it easier to monitor your clinic’s financial performance and make informed decisions.

As you continue to refine your approach, think of your clinic as a collection of individual profit centers, each contributing to the overall success of your practice. By applying these principles, you can ensure that every aspect of your clinic is optimized for profitability and growth. Keep exploring and refining your strategies, and you’ll be well on your way to achieving sustainable success in your optometric practice.