How Much Staff Does A Solo OD Need?

Dear Dr. Hayes, 

1. annual dollar production per employee.  For example; $125,000 per year
2. hourly dollar production per employee. For example; $80 per hour
3. total staff compensation as a percent of collected gross revenues. For example; 20%

For this article, we'll look at just your annual production per employee.  I have found over the years that a reliable rule of thumb for the amount of non OD staff needed in a traditional dispensing practice is one full-time employee per $125,000 of annual gross revenue.

I'll make some assumptions about your practice production. If you see two patients per hour for 27 hours per week that equals 54 patients per week. 

If you work 48 weeks per year, that means you'll see 2592 patients (48 weeks X 54 patients = 2592).

A reasonable billing average for a dispensing practice over the course of a year is about $250 per patient. At that rate, your annual gross revenues would equal $648,000 ($250 per patient X 2592 patients = $648,000).

Now, let's divide your gross of $648,000 by our $125,000 rule of thumb. $648,000/$125,000 = 5.18. 

By this metric, an appropriate staffing level would be approximately 5 full-time employees.  (Note: this is non lab employees only.  Any time you pay employees to cut, edge and surface should be included in your cost of goods expense, not staff overhead.)

Of course, many variables come into play such as; how many of those 54 patients each week actually get glasses?  And, how much contact lens and medical work you do?

You only have three FTE's which means your staff is highly productive.  It also tells me that you are ready to hire one other person if you want to grow your volume. 

I hope this helps! 

Staff Expense

David Miller - 05/13/2010 - 07:24 am

Jerry,
I have generally followed your recommended guidelines/metrics for cost containment. They have been very helpful to make sure we are on the right track. But I disagree with one employee for every $125,000 of practice income. This only allows for $12/hr. employees. It is difficult to find anyone with half a brain that will work for $10-12/hr, especially after a couple of years of employment. It is definitely better to have higher paid employees that are smart, dedicated, and good workers. We have 13 employees, 5 of them are good refractionists, and come in at your recommended 19%. I recommend higher better employees, who will make a more positive impression, and be of more assistance.

David Miller

Staff expense

kjk - 05/11/2010 - 17:37 pm

Dr. Hayes,

I was curious about your 20% cost of staff benchmark. For any given practice, you are suggesting $25k per FTE based on your one FTE per $125k of production. With taxes and benefits, you are looking at $10-11/hr. I don't see how one can develop and retain a well trained professional staff on that kind of compensation. Are these benchmarks skewed toward rural depressed areas? Even at 25% for labor you are looking at $31k per employee.

Love reading your insights. Keep them coming.