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There are two sides to The Associate Question: to become
an associate and to hire an associate. Both sides can be professionally
and financially rewarding. Understanding the desire and motivation
of both parties involved is critical for success.
As a new doctor just graduating and beginning practice, you
have one major objective: get a job and pay back those loans!
Over $100,000 in student loans is not unusual these days and
shortly after those boards, it's payback time. An associate
salary can definitely help with that: in the first year your
income should easily exceed $80,000 (salaries may vary in
different regions of the country).
As a seasoned professional, thoughts of an associate are
different indeed: "It would be nice to have another doctor
covering these Saturdays. If I just had an associate, I could
take that vacation I've been wanting. Maybe if I got another
doctor in here, I could hit $1,000,000."
In more cases than not, the desire to hire an associate is
emotional – hoping someone will take on some of the
stress, reduce work hours and provide more time for the good
life. The reality, however, could be just the opposite. Hiring
an associate can increase your hours: you need to work the
new doctor into the schedule, make adjustments to staff hours,
and make changes to bookkeeping. These changes take time.
As a doctor interviewing for an associate position, it's
important you interview the practice as well. What is the
current patient load and how much will it need to increase
to reach a break even point? Is the doctor willing to put
in the extra time to make this work and invest in marketing
dollars to increase the patient base? Are the two of you in
complete agreement on what needs to be done in order to be
successful?
As the doctor looking to hire an associate, you need to look
within yourself and your practice and determine if you are
making this decision for the right reasons. Are there other
ways to increase your revenue per patient? Is your practice
as streamlined as it could be? Are there other changes you
could make to decrease your hours without sacrificing the
bottom line? Are you willing to put the hard work into making
an associate work?
Consider the Costs, Do the Math
Adding a staff member can have the same financial impact
as the purchase of a large piece of equipment or capital expansion.
The practice must be able to generate the necessary cash flow
to ensure an adequate return on investment. Below are some
financial guidelines to help with this decision using the
contribution margin accounting principle. However, if you
aren't comfortable with numbers or feel you lack the necessary
accounting and financial management expertise to "work
the numbers", consult someone who does. This decision
is too important to be made without doing your homework first.
Every business has two types of costs: fixed costs and variable
costs. Fixed costs are those that are independent of the number
of patients you see, such as the monthly rent for office space.
Variable costs are just the opposite. These costs change when
you produce more, like the cost of opening the office on a
Saturday to see patients on the weekend. Examples are salaries,
postage, long distance charges, office supplies, etc. When
the total revenue equals the total fixed and variable costs,
that is the break even point for the practice, or when profit
equals zero. From the break even point forward, every dollar
produced is available for profit.
Here is where contribution margin (CM) comes into play. With
the CM, you can analyze revenue and variable costs to figure
out how to pay for a new expense (i.e., hiring an associate)
while maintaining your same percentage of profit. In the optometric
industry, we can make a couple of assumptions after your practice
reaches the break even point each month: cost of goods equals
about 32% of revenue and cost of running the business equals
about 12-15 % of revenue. (Notice that the cost of running
the business is significantly lower after the break even point.)
Using these two assumptions, CM can be expressed as a decimal
by using the following example:
| Revenue |
|
$1.00 |
| Variable cost: |
|
|
| Cost of goods |
$0.32 |
|
| Cost of running the business |
$0.13 |
($0.45) |
| Contribution margin |
|
$0.55 |
Once you have determined the contribution margin, divide
the new expense, which in this case is the associate's salary,
by the CM to figure out the revenue needed to break even.
For example, the average salary of an associate in private
practice is around $80,000. Using the contribution margin
accounting principle, we find that approximately $145,455
($80,000 ÷ .55) in additional revenue is needed for
the practice to break even. At an average transaction per
patient of $250, that's 582 new patients. Remember, the break
even point is where total revenues equal total costs, and
profits equal zero. Additional new patients beyond the 582
are necessary to realize a profit.
Consider the Options, Make a Plan
These numbers can appear daunting, and whether you've been
practicing for 25 years or you are a recent graduate starting
your career, several factors come into play if this transition
is to go well. First, you can increase the number of patients
seen each year. This is the most common way to make up the
additional needed revenue, however this can lead to working
harder and not necessarily smarter. Secondly, you can increase
fees. Although, in today's health care environment 70% of
Americans are covered by some form of third-party vision or
eye health plan, and increases in professional fees won't
always add to the bottom line.
The third and most successful way is to increase revenue
per patient. This is easier said than done. You will have
to analyze your process from the beginning of each patient
encounter to the end, streamline as you go, and work toward
increasing the value you give your patients. This process
can be difficult—most change is! But increasing revenue
per patient is the smartest way to add to your bottom line.
Here's an example of how to rethink a typical patient encounter.
Divide patient encounters into two parts and explain simply
what is going to happen in each part. First, check their vision
and make recommendations at the end of the exam to solve their
visual problems. Second, check the health of their eyes. Explain
that seeing well is more than just seeing 20/20. During both
parts of the exam, it is critically important to tell them
what you are doing, what equipment you're using and why. It's
also important to tell them what you are seeing during the
exam process. For example, when using the slit lamp or the
BIO, as you look at their interior segment or retina describe
exactly what you're seeing. Nothing builds the perception
of patient care quite like this process. It is important that
patients perceive they are seeing their doctor, not coming
just to get eyewear or contact lenses. Finally, finish the
process by making your recommendations and telling them why
you have preappointed them and want to see them again next
year.
The key here is to increase the patient's perception of value.
You already know you are providing a valuable service to them.
This process helps the patient understand that, too! And by
recommending care and preappointing them, you take control
over their care and your revenues. It's a win win!
Increasing revenue per patient will make revenue goals more
attainable, however the need to increase the patient base
is still a reality. Optometry practices in general do not
have a sufficient backlog of patients to ensure the early
success of an additional doctor. Therefore, a well developed
and implemented professional marketing campaign is needed.
Both practice owner and associate must build a marketing calendar
to ensure success. Getting out into the community and developing
contacts through professional business and service organizations
is also critical. And evening and weekend appointment hours
can be added to give the associate the needed chair time to
generate patients and revenue.
Most doctors hope an associateship will lead to a partnership
within two years. However, many of these relationships don't
work out because the expectations of both doctors are misaligned.
Long-term value and return on investment can be increased,
but only through an associateship which is properly planned.
If there is a clear understanding of the increased management
and marketing efforts required, and both parties are willing
to work hard at building the practice, success is sure to
follow.
Lincoln, NE — March 21, 2005 — Williams Group™,
the worldwide leader in eyecare practice management consulting,
is proud to announce the addition of Dr. Charles Brownlow
to their staff of experienced consultants. An expert in medical
records, third-party coding, fee analysis and chart analysis,
Dr. Brownlow has conducted over 150 optometric office consultations
and nearly 300 seminars on these subjects in addition to having
provided hundreds of fee analyses and chart reviews for eye
doctors around the country.
Dr. Brownlow has served as Executive Vice President of the
Wisconsin Optometric Association (WOA) since January, 1990.
He practiced optometry in Weyauwega (WI) from 1971 through
1989.
During his years in practice, Dr. Brownlow was a very active
volunteer, serving on the local Chamber of Commerce, hospital
planning board and all the chairs of the Weyauwega-Fremont
Lions Club. He volunteered in his profession, also, serving
as president of the Wisconsin Optometric Association in 1981-82,
of the North Central States Optometric Council in 1984 and
acting as chair of public relations for the American Optometric
Association from 1986-1989. For several years, Dr. Brownlow
was a member of the AOA Eye Care Benefits Center.
In his present position, Dr. Brownlow is very active in legislation,
regulation and public relations, especially with respect to
health care reform. He is a frequent author and speaker on
the future of health care and often helps citizen groups understand
the complicated health care issues by referring to the development
of the current health system.
"In the passing years, our consulting staff identified
the increasing need to add a third party patient medical records
expert to our practice management team," explains Dr.
Brad Williams, founder and CEO of Williams Group™. "We
know Dr. Brownlow is certainly one of the best to work with
for our clients."
"The Williams Group™ and I have worked together
on many projects over the past ten years, doing our best to
help doctors of optometry and their staff get better at what
they do," adds Dr. Brownlow. "My niche is quite
narrowly focused and fits quite well with Williams consultants'
broader range of skills and interests. I am very excited about
our mutual decision to share information and work together
to the benefit of the clients of Williams Group™."
Dr. Williams is very pleased to announce the addition of
another expert to the Williams Group™ team. "As
a practice management consultant, I realized early on, I couldn't
be all things to all clients," says Dr. Williams. "That's
why I put together the most diverse eyecare practice consulting
team in the industry. Dr. Brownlow's expertise provides us
with yet another level of ongoing specialized consultation
support for our clients in this area of practice management."
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