Building a profitable practice means you are not only challenged to deliver high-quality care to your patients; you also need to ensure the financial well-being of your practice. In order to sustain and grow your practice, you need to do more than simply increase patient volume. One of the most effective methods for long-term business health is maximizing the value of your patient encounters.
This article explores the concept of revenue per exam, its importance in building practice profitability, and strategies to help you optimize both the value delivered to and derived from each patient interaction.
Cornerstone of Profitability
Mastering your practice cash flow starts with understanding your two revenue pillars: total revenue and exam counts. These two fundamental metrics meet in a third Key Performance Indicator (KPI), known as Revenue per Exam. This metric tells the business owner how much revenue they can expect to realize every time they perform a refraction. That single piece of information is invaluable. Many industry experts identify it as the single most important metric in your practice.
With an accurate understanding of your revenue per exam, you will have a better idea of how many exams you need to reach your profit or growth goals, and the answers to a host of other critical business management questions. For an eye care practice, where the balance between medical services and retail sales is delicate, understanding total Revenue per Exam as well as clinic and optical Revenue per Exam can reveal patterns and opportunities that dramatically impact the financial health of the business.
Imagine stepping into a bustling eye care practice, where patients stream in and out, appointments are fully booked, yet the bottom line doesn’t seem to be growing. We see this result often. Practitioners have pushed their exam schedules, keep their chairs filled with patients, and yet their revenue is actually falling. This can be disastrous, especially if your overhead is increased with a busier patient schedule, which is typically the case. The key to unraveling this situation is to examine and improve the outcome of each exam.
Defining Revenue per Exam
The basis of this key metric is very straightforward. We need to know how much revenue results from each patient exam. To get that information, we don’t need to track the result of each encounter separately, we just need the average result. That’s the total revenue generated over a specific period by the number of refractive patient exams*1 conducted during that same period.
That simple calculation will give you your total revenue per exam, which is extremely helpful, but it does not tell you where your revenue is generated. Remember that we’re also interested in how each of your two businesses – your clinic and your optical – are performing independently.
| Clinic Business | Optical Business |
|---|---|
| Exams | Frames |
| Medical Services | Lenses |
| Contact Lens Sales | Accessories |
The total gives you an overall picture, but you’ll need to dial down into your total clinic revenue per exam and your total optical revenue per exam to really understand – and potentially improve – your business performance.
Tracking Your Revenue per Exam
To maximize revenue per encounter, you first need to be able to access this number easily and track it consistently over time. Leveraging an analytics program like EDGEPro will make the process simpler and more sustainable, but however you choose to do it, Revenue per Exam needs to become part of your regular metrics routine. It will yield insights into patient behavior, service utilization rates, and revenue distribution across different service categories.
As discussed above, this metric is your revenue measured against your exam count, so you can use the metrics you’ve already been collecting to arrive at the value of your revenue per exam.
Total Revenue per exam
| Week Ending | Clinic Revenue | Optical Revenue | Total Revenue | Exam Count |
|---|---|---|---|---|
| 1/27/2024 | $12,871 | $10,472 | $23,343 | 108 |
| Per Exam: $119.18 | Per Exam: $96.96 | Per Exam: $216.14 | Divide each business’ revenue by number of refractions1 |
For purposes of tracking your revenue per exam, you don’t need to break out patients by exam type, or worry about which ones bypassed the optical because they didn’t have a prescription. We simply need to understand the average behavior, because it tells us what we can usually expect in terms of revenue every time we book a refraction in our practice.
This particular example gives us some extremely helpful information. It should become immediately apparent when looking at these sample numbers, that one side of this business is generating an unusually low number for a refractive exam. If you were just to look at the total revenue and total revenue per exam, you wouldn’t necessarily know where to start. Nobody wants to see a low revenue per exam result, but that total number simply isn’t enough information to begin formulating solutions.
As you begin tracking Revenue per Exam, you will undoubtedly identify areas in your practice that are prime opportunities for improvement. For example, you may discover that certain high-margin services are underpromoted or that there’s a significant variance in revenue per exam among different providers within your practice. If you know where to start working on improvements, your results will be far more impactful. That’s the power of informed decision-making.
Addressing these disparities through training, standardizing service protocols, or adjusting pricing strategies can lead to substantial improvements in overall revenue per encounter. Recognizing and reversing a declining revenue trend enables you as the business owner to sustain growth, even in a challenging marketplace, and Revenue per Exam is one of the most powerful tools for getting and keeping a practice in a growth trend.
What Your Revenue per Exam Tells You
Data is just numbers until you understand what it’s telling you. Think about what happens when you have a patient in your chair. You diagnose your patient’s needs, and then you tell them what they need – whether it’s additional diagnostic services, vision therapy, or optical solutions. The patient then makes a decision. That decision (hopefully) generates revenue. The amount of revenue depends on whether the patient agrees with you about the level of services or products that they need and decides they are of sufficient value to justify the purchase.
Evaluating Patient Communication
Revenue per Exam is a direct measure of how successfully you are communicating the value of your services and products to your patients. Every time you express the need for a particular service, lens, coating, contact lens, or occupational eyewear solution to your patient in the exam room, you are creating an opportunity to build and improve revenue per exam. Likewise, recommendations and patient education provided by your tech or optician are also opportunities to increase patient buy-in. When the patient is persuaded to invest in these diagnostics and vision products, Revenue per Exam is increased. There is a direct correlation between how you and your staff present your products and the resulting value of the patient encounter.
Building Patient Satisfaction.
While this may sound like we’re encouraging practitioners to chase dollars instead of patient care, the reverse is actually true. When patients are well-informed about product benefits they generally make better decisions about their vision solutions, the result is usually a higher rate of satisfaction – a better outcome for the patient, and for the practice.
Improving patient conversations has enormous potential to create win-win scenarios. Help your patients make the best decisions about their eye health, maximize their managed vision care benefits, and enjoy better vision. When you are serving your patients well, it’s both easy and natural to offer services to their families and friends as well. Working toward these outcomes can create a positive loop that continues to build your business long after the exam is over.
Balancing Costs and Revenues
Understanding your Revenue per Exam gives you a clear picture of not only how your revenue is generated, but also how much room you have to grow your practice or expand your offerings. For instance, specialized services and diagnostic tests often provide substantial revenue and profit per encounter, but may also involve an investment. On the other side of the business, retail products can yield significant profit margins with proper pricing strategies and effective merchandising. Understanding your clinic and optical revenue per exam enables you to make more carefully considered decisions about managing your practice with increased confidence.
Strategies to Enhance Revenue
Building value for your patient is the best way to build your Revenue per Exam, but it’s also critical that you communicate that value so the patient appreciates their investment as being worthwhile and beneficial to their quality of life. These are just a few ideas to consider when building out your plans for improving the results from your patient exams:
- Optimizing Pricing Strategies: Ensure your pricing reflects the value of services provided while remaining competitive within your market. Consider introducing premium service options that include product enhancements or expedited service delivery.
- Communicate Product Benefits: Train staff to explain why the patient needs the products and services being offered. For example, during pre-testing, staff can discuss the benefits of specialized diagnostic tests or eyewear options that meet the patient’s lifestyle needs.
- Enhancing Patient Experience: Improving patient satisfaction supports credibility and trust, which helps to overcome patient objections. Focus on creating a welcoming environment, optimizing appointment scheduling processes, and providing personalized care that exceeds patient expectations.
- Build Relationships: Approach each interaction from the perspective of building a long-term relationship. This will always support good decision-making for both patients and practice..
These are just a few strategies to ensure that each patient visit helps you build your practice’s bottom line while enhancing overall patient satisfaction and loyalty.
Conclusion
Maximizing revenue is not just about increasing the number of patients seen but optimizing the value derived from each patient interaction. By understanding revenue per exam metrics, analyzing service and product offerings, and implementing targeted strategies, you can ensure that each patient visit provides value to your patient and creates revenue for your bottom line.
Building and growing your revenue per exam requires a proactive approach to practice management, leveraging data-driven insights and patient-centric strategies. By continuously evaluating and optimizing your service mix, pricing strategies, and patient engagement practices, you can build a financially resilient eye care practice, even in a challenging and competitive healthcare marketplace.
As you gain a clearer understanding of the revenue generated per exam and how it impacts your practice’s profitability, it’s equally important to dive deeper into the performance of specific products and services offered. In our final article for this chapter, we’ll drill down a little further to help you find out how your specific products and services are impacting the overall performance of your practice.
You will learn to identify how effectively you and your staff convert opportunities into actual sales, whether it’s eyewear, contact lenses, or specialized testing services. We will also explore how focusing on capture rates can provide actionable insights into each aspect of your practice, helping you to fine-tune your strategies for even greater financial success.
- Revenue per exam should be calculated using exam count based on the number of eligible refractions. (Refractions that are not medical follow-up refractions) For more information on this, please see “Revenue Begins with Exams” ↩︎
