“Is Your Practice Overstaffed?”
ã2000 J. Pinto & Associates, Inc All Rights Reserved
I’d like to launch this new Ocular Surgery News column with a quote from an old professor of mine, who enjoyed saying, “If you torture the data long enough they will confess.” Ophthalmic practice management doesn’t yet enjoy the support of university research departments. However, there are emerging, objective standards that can help you run a better practice. We’ll explore these in the months ahead.
Let’s start with one of the most common questions asked today as practice costs rise and reimbursements decline: “Are we overstaffed? Are our staffing costs too high?” The fundamental productivity of your practice’s non-physician support staff can be assessed with two common ratios.
The first is a simple percentile ratio derived by adding up annual support staff wages, payroll taxes and benefits, and dividing the resulting total figure by your practice’s annual collections. In a general ophthalmology practice, the typical range falls between 18 and 28 percent…with that much of each dollar collected going back out for lay support staffing costs. It’s likely your largest single cost of doing business.
Too low a wage/tax/benefits ratio can indicate that you have insufficient support in one or more areas of the practice. The result can be doctors who are held back from reaching their full efficiency, or reimbursement claims that go unpaid for lack of accounting staff. With too few staff, burn-out among the remaining staff can precipitate further staff loss, leading to critical operating deficiencies and low morale.
Spending at or above the upper end of this percentile range doesn’t necessarily mean the practice is healthy…or even sufficiently staffed. In this increasingly cost-conscious era, it’s still not unusual for me to evaluate practices where staffing costs exceed 30% of revenue. This is most commonly observed in fine, older practices with well-intended, long-term staff, whose doctors and managers have never adjusted to the new economic climate. Walking the halls of these practices, I’ll often find tech staff standing around waiting on call to do the next doctor’s bidding, rather than having sufficient training and supervision to simply leap in and do the next task before being asked.
The second common ratio you can use to evaluate staffing efficiency is to add up the number of support staff “Full-Time Equivalents” or “FTEs” (a technician working 40 hours per week is 1.0 FTE; a clerk working 30 hours per week is 0.75 FTE), and divide this into the practice’s annual collections. Normal limits for this ratio is $110,000 to $130,000 in annual revenue per FTE in a typical general ophthalmology practice, with many variations depending on your circumstances.
For example, in practices dominated by retinal or refractive surgery subspecialty care, or in practices with a high percentage of co-managed patients, annual revenue per FTE commonly exceeds $200,000. At the other extreme, young practices, pediatric ophthalmology clinics, and settings with a high penetration of capitated managed care reimbursement may have difficulties exceeding $100,000 in annual revenue per FTE.
It’s not unusual for practices to have one ratio be within normal limits, and the other ratio be outside of norms. An urban practice in Chicago or Manhattan with high regional labor costs (where tech wages can often reach and exceed $20 per hour) will commonly have excessive percentile labor costs, but be within norms for annual revenue per FTE. Rural practices often experience the reverse effect. Low wages depress percentile costs to 15% or less, but annual revenue per FTE is held back because household income is too low to drive ancillary optical sales or elective care.
The ideal environment—both low percentile costs and high revenue per FTE—is most often seen in well-established rural practices with lower levels of competition, a free-standing surgery center, and higher surgical densities generated by referring optometrists. Such practices, which also operate in an environment of low managed care penetration and high elderly populations, enjoy the highest levels of stability and profitability in America today.
Please keep in mind that your practice’s numbers (like your patient’s physiologic measurements) need to be examined as a composite of many different scores, some of which are likely to be a little off even in the healthiest practices. This underscores the importance of using all comparative ratios not just as an external reference standard for how your practice compares to sister organizations, but as an internal benchmark to measure the impact of your efforts to continuously improve the practice over time.
These two ratios are important, albeit gross, monitors of your practice’s staffing efficiency. In future columns I’ll review staff efficiency at deeper levels. We’ll examine how many technical staff payroll hours you reasonably need to cover the floor, the number of billing staff needed to traffic the claims submission process, and the number of telemarketing staff it takes to support your LASIK practice. Please call or e-mail me with any topics you would like to see covered.
* * *
I’d like to close with a special word of thanks to Dr. Herve Byron, whose zeal for everything associated with ophthalmic practice management has buoyed the careers of many fine managers, and inspired his colleagues to become more involved with the business side of their practices. His efforts have helped to create Slack’s “Survival Strategies” workshops and breathed life into this new column.
# # #