Optometry is poised for continued growth as the public health need for vision, medical, & specialty eye care grows, and the modern scope of care expands to meet patient demand. Many established private practices are well-positioned to capitalize on the opportunities in modern optometry. However, doing so warrants careful study of key analytics to develop the right strategies for the practice. In this article, we identify business analytics for proactive decision-making across 6 key areas of the modern practice, providing pointers on how established practices can leverage these insights for sustainable impact to the bottom-line, and positioning owners for a strategic transition.
Modern practice management is an approach to operations emphasizing proactive leadership & decision-making across 6 core aspects of the modern practice: Profit, Team, Strategy, Analytics, Digital, & Transition.
The goal? To generate sustainable profit and formulate strategic exit plan! Let’s explore each area further.
Capitalize on opportunity across direct pay & managed care.
There are many ways to grow the bottom-line of a modern practice, but it all starts with understanding the economics of the business so as to make informed decisions. Optimizing profitability is a function of revenue and operating expenses. Analytics such as Total Revenue, No. of Comp. Exams, and Revenue per Patient provide a view of top-line revenue across the practice. Regarding expenses, common-sized P&L will allow for benchmarking to industry, thus identifying areas where there may be opportunities for improvement. According to a McKinsey & Company study improving fixed expenses by 1% has a 7.8% improvement in operating margin! Pricing is also critically important to profitability of the modern practice. In fact, according to McKinsey & Co., a 1% improvement may lead to an 11% improvement in operating margin. Therefore, performing Medicare allowable, service fee, & materials pricing audits at regular intervals may identify opportunities for appropriate price changes.
Harness the power and abilities of your people.
The modern workplace has changed radically in recent years– remote work opportunities, HR & employment regulations, office culture, and more have upended conventional workplace norms. Fostering a positive, empowering workplace, promoting collaboration & quality, can have significant impact on office culture and performance. Analytics such as Production by Staff (which can be drilled-down to variety of measurable conversion factors & functional items), Production by Doctor (also, immensely drillable!), and “net promoter scores” (NPS) provide insights into technical proficiencies of team members & doctors, thus identifying individual development opportunities. But that is only part of the collaboration equation! In addition to these quantitative measures, qualitative assessment of behavior & communication styles can have profound impact on teamwork, performance, & leadership effectiveness. Behavioral Assessments such as DISC provide critical insights—understanding individual behavioral styles empowers individuals, leadership, & fellow team members to tailor communication approach ultimately leading to improved patient satisfaction, teamwork, and overall practice efficiency.
Align operations with core values, Mission, Vision, & Purpose.
The scope of primary, medical, & specialty care of modern optometry is broad, affording doctors the opportunity to create a practice around their vision of the care they seek to provide their patients, and the impact they wish to have in their community. Therefore, understanding the demographics & healthcare needs of the community, and how the practice serves patients, can provide insights for optimizing operations to live out the practice’s core values, mission, vision, & purpose. Geo-spatial analysis featuring competitive, socio-economic, & healthcare data provides key insights that can inform a variety of strategic decisions including: scope of care & product offerings; managed care credentialing; and marketing mix & strategy. Additionally, CPT, Sales, and Patient Exam analytics provide insights to better understand patient conversions across the scope of the practice and optical, and where there is opportunity to better serve patients & the grow the practice. Collectively, understanding the surrounding community & patient conversions shines a light on opportunities to align operations with core value, mission, vision, & purpose.
What makes the most business sense?
Which would you prefer, taking risk– “If you build it, they will come”; or formulating a data-informed, strategic plan– “Build what people want”? Much like patient care, wherein data provides the basis for diagnoses and treatment prescribed, business analytics present insights for strategic decision-making across every aspect of the modern practice. Production Reporting powered through integration with the practice’s EHR provide visibility of patient conversions & top-line performance across the practice. Geo-Spatial analysis offer a deeper understanding of the population, competition, & local economic climate. Better understanding the surrounding areas of the practice can inform scope of care (especially as it pertains to adding a specialty to the practice!), product mix, and marketing & pricing strategy. Digital analytics provide insights into patient & community engagement with your brand on-line. Most website companies provide monthly reporting assessing site traffic & conversions, and platforms such as Google Analytics and Brightlocal offer deeper dive into both website activity and broader competitive activity. Lastly, possessing a clear understanding of financial performance is critical for any business. Analysis of common-sized financial statements at regular intervals, provides full snapshot of cash flow and identifies areas where the practice can impact the bottom-line.
Transformation from “clinic-to-commerce”
(Adopt a knack for tech!) The modern patient journey and day-to-day operations of the modern eyecare practice are increasingly going digital! Over 90% of consumers consult the internet along their buyer journey, and the modern eyecare patient journey is no exception. Providing an omnichannel experience including modern, user-friendly digital accessibility, is vital for a thriving practice. Thanks to native website reporting, Google Analytics, and variety of other analytics tools provide insights into site traffic assessing conversion, bounce rates, & a myriad of metrics that provide vital information to guide site optimization. But the digital transformation does not solely pertain to web presence & digital marketing. Many workflows across day-to-day operations have also been digitized thus improving efficiency, accuracy, & conversions. Examples include revenue cycle management (RCM), managed care benefits verification, patient CRM/recall system, on-line optical (w/ virtual try-on!), contact lens ordering & e-commerce, and much more! These SaaS solutions provide analytics reporting through which careful analysis can uncover opportunities to maximize ROI.
Independent exit strategy.
There are 2 goals that all established businesses share in common regardless of location, scope of work, and stage of business lifecycle: growth strategy, and exit plan. The aforementioned items of this article explore key analytics providing foundation for sustainability & growth of the bottom-line, which impact the value of the practice at any given point in time. However, there are key analytics to monitor at regular intervals that explicitly impact valuation & transition of the practice, including:
- Common-sized Income Statement (Profit-&-Loss)
- Common-sized Balance Sheet
- Seller’s Discretionary Cash Flow (SDCF)
- Earnings Before Interest, Taxes, Depreciation, & Amortization (EBITDA)
- Net Cash Flow
- Accounts Receivable/Aging Report
Each of these items provide premises to optimize decision-making for maximum valuation of the practice. To learn more, checkout Transitioning Your Eyecare Practice: The Steps to Passing the Torch providing a high-level overview of the entire process; and, the series Practice Valuations 101 offering a deep-dive into valuations and providing calculators to construct earnings basis measures (SDCF, EBITDA, & Net Cash Flow) & valuation simulations. With the growing public health need for vision, medical, & specialty eye care, and the expanding scope of care of modern optometry, the future is bright for independent private practice. Utilizing analytics discussed in this article empower proactive decision-making across the practice for sustainable profit, and provide the foundations to formulate a long-term growth plan & strategic exit.