$1.2 Million Realistic For A Solo OD?
Dear Jerry,
I am in my thirteenth year as a solo practitioner in a rural part of southern Indiana. My town has four optometrists in various settings, plus a Wal-Mart Vision Center.
I see patients 35 hours per week and expect to gross $500,000 with a net of 35% in 2009.
I see possibly one private pay patient per day, with the rest being Medicare, Medicaid, VSP and EyeMed.
Here is my question: You frequently discuss the topic of Collected Gross Revenue without any qualifying information such as patient care hours, geographic location and insurance saturation.
I am trying to use your data to evaluate my practice, but find it difficult just using the gross revenue.
For example, Dr. Gailmard was recently quoted on your blog saying that a one location, solo optometrist could gross $1.2 million annually.
Assuming 5 days per week seeing patients and allowing at least two weeks out of the office, that would equate an average daily gross of $4,800 for 250 practice days.
Using his maximum number of 25 exams per day, you would need to gross on average $192 per patient. Is this truly realistic?
I would also like to know also if the above scenario has the optometrist performing or delegating refraction?
Thank you as always for this forum.
Wade Conners, OD
Dear Dr. Conners,
It sounds to me like you have a good solid practice. Congratulations!
I love the question because it tells me you are thinking. I can almost hear the wheels turning in your head.
My first piece of advice is, don’t make the analysis more complicated than it needs to be.
Calculating Revenue $ Per Patient
The two most important metrics are the ones you are focused on: total number of patients seen and average revenue per patient exam.
We calculate average revenue per patient exam by simply dividing total gross income by the number of ‘complete’ exams performed.
You can decide what a ‘complete exam’ is in your practice. Just be consistent year-to-year in your analysis.
For example, if you saw 2,000 ‘complete’ patient exams and grossed $500,000 in 2008, your average revenue per patient would be $250. ($500,000 ÷ 2,000 = $250)
Of course, there is a built-in flaw with this methodology. Every optometrist will generate some level of income from a variety of office visits and product sales other than ‘complete exams’.
But, we live with that imperfection because it is not worth the trouble for most ODs to separate their revenue sources.
Is $192 Per Patient Realistic?
Yes, but let’s first clarify that we are referring to traditional dispensing practices. That means all the revenue associated with the sale of spectacles and contact lenses is part of that $192.
Having said that, I can state categorically that an average of $192 per patient exam is not just realistic. It’s actually quite low.
Median Revenue Per Patient Is $307
I have had the pleasure over the last four years to be involved as a speaker and consultant with the highly successful CibaVision-Essilor MBA program that is now administered by Jobson.
According to data that Hayes Consulting has collected from over 1,000 practices attending the MBA since 2005, the median (midpoint) revenue per exam for independent OD practices is $307.
Based on the sheer number of practices surveyed and the methods used, I consider this to be the most reliable data available for independent optometric practices.
The five quintiles broke out like this:
Quintile Revenue Per Exam
Top 20% $447
Second 20% $352
Median 20% $307
Fourth 20% $264
Bottom 20% $203
As you can see, $192 would put you below the fifth quintile.
I really don’t consider hours or location to be significant variables when comparing gross revenues. My consulting experience has taught me that a Million Dollar practice in Mississippi is pretty similar to a Million Dollar practice in Minnesota.
The effect of insurance on average revenue per patient is debatable. But, part of growing a big practice is learning how to deal with third-party plans.
What Does It Take To Gross $1.2 Million Per Year?
Now using the MBA median of $307 revenue per patient, let’s flip your question around.
How many patients per day would an OD who does all his own refractions, and works 48 weeks per year, have to see to gross $1.2 Million?
$1,200,000 ÷ 48 weeks = $25,000 per week in revenue
$25,000 ÷ $307 = 81.4 patients per week
81.4 patients per week ÷ 5 days = 16.3 patients per day
I’ll close by asking you, and my readers, assuming the demand is there, is it realistic for a solo OD to perform 16 ‘complete exams’ per day at an average of $307 per patient?
Regards,
Jerry
(A note from Jerry) In addition to being one of optometry’s top speakers and writers, Dr. Gailmard is also available for one on one practice management consultation at neil@gailmard.com. Any doctor looking to grow his or her practice is encouraged to contact him.
Agree with this blog? Disagree? Have a comment or question of your own? Click here to send me an e-mail.
Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2009 Jerry Hayes, OD. Not to be reproduced without written permission of the author.
Back To Top
Dr. Hayes, Very nice
Dr. Hayes,
Very nice reply.
Many practices experiencing low nets & low per patient revenue are merely participating with too many low fee vision plans. As you've pointed out for decades - doctors cannot make up fee discounts via increased volume.
I know of dozens of O.D.s collecting well north of $1M per year. Some urban, some small town & some rural. Most are heavily medical.
Terry
My favorite subject. As I
My favorite subject. As I approach my 30th year in practice I continue to ask myself...can I get over that $1m mark working five days a week with my 2.5 employees. I get close every year but never have gone over it. I am always told...just add a couple of employees and you can do it. The two I have seem to spend a bit of their time on various celebrity web sites. I can't imagine what they would do with another person playing on the computer.
But I digress. The real question is "how to do that magical say...$375/patient."
The answer has been by selling high end frames and specialty contact lenses.
"Specialty" you say? You mean Acuvue Oasys for presbyopia?
No! I do not. Anyone and everyone can fit those. You mean "keratoconic" lenses..aren't those too hard to fit? Nope, not just those.
What I am talking about is a real specialty lens. Post RK, Keratoconic,orthoK,Synergeyes, RGP bifocals etc. Those will command a real premium. We will not discuss price, but suffice it to say that we are talking real money here.
These patients will not ask price, they will only ask can you help me?
How about outrageously priced frames? You say..I live in a rural area, no one will pay for Cazal, Gucci, etc. You couldn't be more wrong.
What I will say is that it costs a fortune to put in the product. But you can't sell it if you don't have it.
Let me close by saying the following. Those who know me will instantly recognize my statement. WE SELL WIDGITS!!!!! So, there are three components to a WIDGIT. Number of Widgits sold! Price of Widgit! And price you paid for the Widgit.
Its about that simple. There are simply no other variables.
Some of us do not sell Widgits. WE work in box stores. So, we have to sell medical care. But can you do that when the Box store decides your hours and pretty much sets your fees and pretty much allots you a certain space?
Nope. But the cost of doing business there is much lower and your margin can be higher. You must be on medical plans and have technology to make money. At least until the next few weeks I will continue to try to bill medical.
But with national health care beating on the door...all bets are off.
You can rush out and buy equipment and not be able to bill for it.
We live in a frightening time for health care. Lets hope its a bust. If not you will be seeing 35 patients per day but at a fixed fee.
I hope my comments are ever so slightly helpful and do not offend anyone.
Dr. Conners needs to raise
Dr. Conners needs to raise his fees and make sure that he is maximizing his reimbursement. I have a new solo practice that opened this past November 2008 and has a current revenue per refraction of $464 and has only been open for 10 months. My projected gross revenue for this new practice year one is roughly $500,000. I feel that 1.2 million for a solo practitioner can be an obtainable goal. I am also an Essilor MBA graduate and use the metrics in evaluating my own practice as well. Good luck Dr. Conners.
i've been doing metrics for
i've been doing metrics for years. can you define "gross revenue" as you use it, please. is it billed amounts prior to insurance reimbursement deductions, bad debt, discounts given, etc. or is it collected dollars only? in my practice there is a 10-20% difference between these two revenue amounts.