How to Create and Manage Profit Centers to Create and Manage Profit Ce… · 1. Pre-sell - ask...
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How to Create and Manage Profit Centers Mark R. Wright, OD, FCOVD
Transcript of How to Create and Manage Profit Centers to Create and Manage Profit Ce… · 1. Pre-sell - ask...
How to Create and Manage Profit Centers
Mark R. Wright, OD, FCOVD
TOPICS and EMAILS
• FRAMES• Toni McElroy <[email protected]>
• SPECTACLE LENSES• Stephen SHAWLER <[email protected]>
• CONTACT LENSES• Roe, Kevin <[email protected]>
• LOW VISION• Tom Porter <[email protected]>
• LOW VISION and CLINIC• Mark Wright <[email protected]>
What is a 'Profit Center'
• A profit center is a branch or division of a company that is accounted for on a standalone basis for the purposes of profit calculation.
• A profit center is responsible for generating its own results and earnings.
• Profit centers are crucial in determining which units are the most and least profitable within an organization.
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
Revenue
Expenses
Profit or (Loss)
_
4.8%
Before we look at the pieces,Let’s start with the entire practice
Prescription Eyewear
43%
Contact Lenses
16%Other Materials
2%
Medical Eyecare
17%
Eye Exams22%
REVENUE SOURCES
61%Materials
Fees
39%Service
Fees
Clinic Eyewear CL Other $1M
$390,000 $430,000 $160,000 $20,000 = $1M
But what are your EXPENSES for each of these portions?
GROSS REVENUE per FTE OD $700,000Eye exams 22%Medical eyecare 17%Prescription eyewear 43%Contact lenses 16%Other 2%
EXPENSESCOGS 25%Staff payroll 20%Doctor payroll 20%Occupancy 8%Marketing 1%Cinical equipment 1%Overhead 10%
NET 15%
20%+15% = 35%
ENTIRE PRACTICE
• Revenue• By source
• Expenses• COGS• Staff Payroll• Doctor Payroll• Occupancy• Clinical Equipment• Marketing• Overhead
• Profit or (Loss)
PROFIT CENTER
• Assign Revenue
• Assign Expenses• COGS
• Staff Payroll %
• Doctor Payroll %
• Occupancy %
• Clinical Equipment%
• Marketing %
• Overhead %
• Profit or (Loss)
ENTIRE PRACTICE
• Revenue• By source
• Expenses• COGS
• Staff Payroll
• Doctor Payroll
• Occupancy
• Clinical Equipment
• Marketing
• Overhead
• Profit or (Loss)
PROFIT CENTER
• Assign Revenue
• Assign Expenses• COGS
• Staff Payroll %
• Doctor Payroll %
• Occupancy %
• Clinical Equipment%
• Marketing %
• Overhead %
• Profit or (Loss)
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
Secrets to Inventory Management Success
Why is Inventory Management Important?
The Optical is a Profit Center for Practices
Lenses – 37%
Source: The Vision Council Research, 2015
Other – 1%
Frames– 29%
Exams– 23%Contact Lenses– 10%
Why is Inventory Management Important?
Benefits to the Practice:
1. More Satisfied Patients
2. More Productive Staff
Why is Inventory Management Important?
Benefits to the Practice:
6. Increase Sales
7. Measure ROI for higher profits
8. Stabilize your cash flow
Implementing an Inventory Management System
• Begin by evaluating your
current frame inventory.
• Start with the total number
of frames you have in your optical
versus the number you should have.
Implementing an Inventory Management System
1,000 exams per year 450 - 550 frames
2,000 exams per year 600 - 700 frames
3,000 exams per year 700 - 900 frames
4,000 exams per year 900 - 1,200 frames
The total number of frames you have, should depend on the number of exams you perform per year in your practice.
Implementing an Inventory Management System
• Determine what your frame inventory
should be based on the demographics of
your practice.
• What types of frames appeal to your
demographic?
Implementing an Inventory Management System
Best Practices for Purchasing
• 25-48 pieces minimum per brand
• Buy deep, not wide
• For example: 10 Styles in three colors and various sizes, not 30 singles
• Verify point-of-sale and display materials are available for the brand
• Higher priced products = Higher practice revenue
Determining Which Vendors to use
70% of frames come
from primary vendors
30% of frames come from
secondary/niche vendors
Determining Which Vendors to use
• Evaluate your current business with
vendors and select how to move forward
• Review the policies of each vendor that
are important to you
Monthly Inventory Reporting
Computerized inventory systems
Monthly Inventory Reporting
Manual with frame tag
Measuring Results
You can accurately
evaluate what is selling,
what is not selling, and
design your purchasing
according to these figures
to maximize your ROI.
Implementing Change
Maximize Your Rep’s Skill Set
• Spend more time with patients
and less time picking out frames
with reps.
• Ask your frame rep to spend
their time merchandising their
product, adjusting frames on the
board and training your staff.
Implementing Change
What image do you want for your practice? A “salesy” bargain destination for eyewear or a quality, professional one?
Want more information for your office?
East - Rob Arruda [email protected]
SE – Keith Padgett [email protected]
Central – Sue Rose Ohneck [email protected]
West – Toni McElroy [email protected]
Secrets to Inventory Management Success
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
Opportunities Key Metrics
April 1 , 2017
Stephen Shawler, MBA, MAT
Opportunities Key Metrics
April 1 , 2017
Stephen Shawler, MBA, MAT
Snap shot situation
Opportunity
YOUR OPTICAL
Category growth
Bring Value/ education
Today
between 2015 and September 2016 –6 Months Ended
CPI COMPONENTS % CHANGE
+0.2%
EYEGLASSES AND EYECARE
+2.8%
DENTAL
+5.1%
MEDICAL CARE
+2.6%
ALL CONSUMER ITEMS
Consumer price changes
In her lifetime,
She’ll have over
160 DENTAL
CHECK-UPS.
but just
16 EYE EXAMS.
33.632.5
31.832.6
34.5
35.9 37.1
39.4 40.3
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
In Billions of dollars
Source: VisionWatch Survey from the Vision Council
OPTICAL INDUSTRY REVENUE SINCE 2008
Source: VisionWatch Survey from the Vision Council
69%31%
46%54%
Retail & Other
WHERE DO PEOPLE GO?
Independent
1.92
EYE CARE INDUSTRY TRENDS
Increasing Practice Revenue
Increase Patient Flow
1. Marketing
2. Referrals
3. Decrease exam time
4. Add O.D.s
5. Add Techs
Increase Capture Rate
1. Customer Experience
• Total time of office visit
• Service/Staffing
• Convenience/Hours
• Environment
2. Merchandising
3. Pre-selling
4. Selling from chair
Increase $ per Patient
1. PAL/Premium PAL %
2. High-index %
3. Non-Glare %
4. Polarized Sunwear %
5. Frame/Lens Mark-up
6. Multiple Pairs
7. Photochromic %
8. Raise Exam Fees
9. Add Exam Services
Eyewear Capture Rate
Strategies for improving capture rate
1. Pre-sell - ask patients to bring current eyeglasses and
prescription sunwear with the to exam
2. Merchandise well - structure office experience to
enhance
3. Devote at least 25% of office space to optical
dispensary
4. Recommend eyeglasses to all contact lens wearing
patients
5. If patient asks for Rx to take with them, ask why
6. Feature new lenses and frames prominently
What % Penetration USA - Sun / Transition –Opportunity
polarized sun lenses
Xperio UV superiority…
No other sun lens meets consumer expectations better than Xperio UVpolarized sun lenses:
•Durability – (resists scratches)- Xperio UV polarized sun lenses resist abrasions that would scratch most
sun lenses (like sand).
•Cleanability – (easy to keep clean)- Xperio UV polarized sun lenses stay cleaner than other sun lenses
(especially important outside)
•Protection – (reduces UV exposure) - Xperio UV polarized sun lenses provide more
UV protection than other sun lenses.
Xperio UV polarized sun lenses will be the best sunglasses they’ve ever worn!
Essilor sun portfolio…
adaptive lenses
Transitions® superiority…
No other photochromic lens matches the performance of Transitions adaptive lenses:
•Comfort in all lighting conditions.•Convenience•Adaptive protection from Harmful Blue Light •Selection of materials, designs, and colors
Transitions adaptive lenses provide superior performance across the key attributes of photochromic lenses- fast activation, dark activation- even in hot weather or behind a windshield (Transitions XTRActive).
Transitions® portfolio…
Improving lives by improving sight
© ESSILOR 2016 – All rights reservedDo not disclose, copy or distribute
Essilor’s Commitment to Eye Care Professionals
• Optometry & Opticianry School Support– Cash Donations
• Schools• Student Groups• Student Grants• Event Sponsorships• Specific School Initiatives
– In-kind Donations• Equipment for Clinics• Speaker Payments• Varilux Optometry Student Bowl• Reimbursement for School Attire
– Student Internships– Business Simulations
• Association support– SECO, AOA, American Board of Opticianry– Event Sponsorships– Education Sponsorships (i.e. Spectacle Lens Track at Vision Expo)– Speaker Payments
• ECP University
Over $3 Million Annually
“We engage, develop and advance optical
industry professionals through meaningful
partnerships and education to build
influence, create brand awareness, instill
loyalty, and bring value to assist in growing
their business”
51
Professional Relations & Customer Education Team Mission
Support through Funding and Education
Practice & Staff Fundamentals
● 100+ online courses to help onboard new staff and
improve the dispensing skills of current staff
● ABO Exam Prep Course
Management Development Program- for Managers
● 6-month business course designed to help
practice and optical managers gain confidence
and business expertise
CEO.D./MBA-for Doctors
● Practice insights, metrics and events to help
ODs and owners learn proven strategies for
practice success
Your choice – resource -partner
• Growing Industry-TAYE • Partnership Independent ECP’s
• Consumer Awareness spending
• Education
• Essilor Vision Foundation( Our Case, Our “Why”)
Your choice – resource -partner
• Growing Industry-TAYE
• Partnership Independent ECP’s
• Consumer Awareness spending
• Education
• Essilor Vision Foundation ( Our Case, Our “Why”)
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
How to Create and Manage Profit Centers:
Kevin S. Roe, OD, FAAO
Contact Lenses
• Net revenue from the “spectacles only” patient• “Spectacles only” patients on average purchase a new pair every 2.4
years
• Less frequent XMs - approximately every 2½ years
• Net revenue from the “contact lens only” patient• Contact lens patients provide ongoing revenue
• More frequent examinations - approximately every 15 months
1. Ritson M. Which Patients are More Profitable? Contact Lens Spectrum March 2006:38-42.
Which Patients are More Profitable?
Conclusions• Most ECP’s do not judge the profitability of their patients
over the lifetime of their relationship with them• Tendency to overestimate the impact of the initial cash flow and
underestimate those of later periods
• Makes spectacles “appear” more profitable since the initial sale of spectacles almost always generates more profit than the initial sale of contact lenses
•On average, a contact lens patient is 1.5 times more profitable than a spectacle patient
Ritson M. Which Patients are More Profitable? Contact Lens Spectrum March 2006:38-42.
51.6%48.1%
44.1%
39.8%36.9%
34.0%31.6%
29.6%27.8%
38.9%44.4%
47.1%50.2% 51.1% 51.6% 51.8% 51.1% 50.0%
5.9% 7.5% 8.8% 10.1%12.1% 14.4%
16.5%19.2% 22.1%
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
2-Week Replacement EQ Sales Monthly Replacement EQ Sales Daily Disposable Replacement EQ Sales
“If you do not change direction, you may end up where you are heading”
~ Lao Tzu
51.6%
38.9%
5.9%
Patient Compliance
2013 study of 9,677 contact lens patients1
% Patients Who Replace Their Contact Lenses on
Time*
*In accordance with the Manufacturer’s Recommended Replacement Frequency. 1. Guthrie S, Dumbleton K, Jones L. Financial implications of patient compliance. Contact Lens Spectrum. December 2014.
2-week
Replacement
Lens Wearers
79%
Daily Disposable
Lens Wearers
65%
Monthly
Replacement
Lens Wearers
30%
© 2017 Novartis 02/17 US-PRA-16-E-0235
61
Average Consumer Repurchase/Exam Repurchase By Product
0 5 10 15 20 25 30
Compliant Contact Lens Patient
Non-Compliant Contact Lens Patient
Eyeglases
Average Consumer Repurchase/Exam Repurchase By Product
Impact of Reducing Interval Between Contact Lens Exams
Practice Gross Revenue
$500,000 $750,000 $1,000,000
Eye Exams Performed –Annually
1,700 2,550 3,400
Months between contact lens exams
Contact Lens Exams – Annually
18 months –National Average
510 765 1,020
17 540 810 1,080
16 574 861 1,148
15 612 918 1,224
14 656 984 1,312
Reducing the average interval between contact lens exams from 18 months to 16 months results in a 12.5% increase in the number of exams performed each year from existing
wearer base.
Reference: MBA Best Practices of Contact Lens Management, March 2010
Impact of Reducing Interval Between Contact Lens ExamsPractice Gross Revenue
$500,000 $750,000 $1,000,000
Eye Exams Performed –Annually
1,700 2,550 3,400
Months between contact lens exams
Contact Lens Exams – Annually
18 months –National Average
510 765 1,020
17 540 810 1,080
16 574 861 1,148
15 612 918 1,224
14 656 984 1,312
Reducing the average interval between contact lens exams from 18 months to 14 months results in a 28.6% increase in the number of exams performed each year from existing
wearer base.
Reference: MBA Best Practices of Contact Lens Management, March 2010
The average practice sees 2000 contact lens patients annually
Patient Compliance
2013 study of 9,677 contact lens patients1
% Patients Who Replace Their Contact Lenses on
Time*
*In accordance with the Manufacturer’s Recommended Replacement Frequency. 1. Guthrie S, Dumbleton K, Jones L. Financial implications of patient compliance. Contact Lens Spectrum. December 2014.
2-week
Replacement
Lens Wearers
79%
Daily Disposable
Lens Wearers
65%
Monthly
Replacement
Lens Wearers
30%
© 2017 Novartis 02/17 US-PRA-16-E-0235
Patients wearing DAILIES® brand (nefilicon A)
contact lenses were 93% compliant with the daily replacement schedule*1-2
A growing interest in daily disposable lenses is shared by both patients and ECPs
80%
of patients say “they are more interested” in wearing daily disposable lenses when recommended by their ECP1
of ECPs want to fit more of their patients in daily disposable lenses2
99.2%
Introducing the Alcon DAILIES® Choice Program
• Alcon DAILIES® Choice Program can help you bring a healthy replacement schedule to more of your patients by removing the traditional price barrier
• DAILIES® Choice is a 360° program, including direct to consumer advertising in social media, digital, and print for maximum exposure, which will drive patients to your practice
• New patients to DAILIES TOTAL1® or DAILIES®
AquaComfort Plus® are eligible to receive a high-value rebate
Rebate is in the form of an Alcon Visa Prepaid Card. Must be a new patient to DAILIES TOTAL1® or DAILIES® AquaComfort Plus® contact lenses and must purchase an annual supply ($200 rebate savings) or a semi-annual supply ($75 rebate savings) of DAILIES TOTAL1® or DAILIES ® AquaComfort Plus® contact lenses within 90 days of eye exam and/or contact lens fitting. Applies to purchases from participating retailers only. Visit DAILIESCHOICE.COM for full terms and conditions. Offer ends 12-31-17.
Up to$200
OFF THEIR FIRST ANNUAL SUPPLY PURCHASE VIA MAIL-IN OR ONLINE REBATE*
*
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
Dry Eye
Resources
DryEyeCoach.com Oculusocp.com
Dry Eye
• Create an in-office protocol for screening• Every man and woman over age 40
• Every CL wearer over 35
• Create a protocol for testing
• Create a protocol for billing
• Get your lab reps to help you
Eyewear
Contact Lenses
Dry Eye
Low Vision
Clinic
Your Practice
= Frames and Lenses
Thomas I. Porter, ODAssistant Professor and Director,Low Vision ServiceSaint Louis University Department of Ophthalmology
Low Vision Care A service provided by eye care professionals (and others like vision
rehabilitation professionals) to patients who have uncorrectable vision loss—typically those with an acuity of 20/50 or worse.
The major eye diseases that cause vision loss include:
Macular Degeneration
Diabetic Retinopathy
Glaucoma
Inoperable Cataracts
Some of these eye diseases have treatment options, but they often do not provide results good enough for patients to be able to accomplish tasks they want to perform like reading or watching TV.
Other eye diseases have no real treatment available at all (like the dry form of macular degeneration) so patients are in desperate need of help.
Low Vision Care Low Vision Care involves an exam, the recommendation of
behavior modifications, and the dispensing of devices to help patients maximize their remaining vision through magnification and contrast enhancement.
Devices can be high-powered spectacles, optical magnifiers, monoculars & telescopes, electronic magnifiers, and absorptive filters.
Most patients get more than 1 device because each category of device is typically best for specific tasks (e.g., a telescope is ideal for watching TV and a hand-held magnifier is ideal for looking at price tags).
Low Vision Care Low Vision Care is a proven way to help patients:
Read again—everything from newspapers to prescription bottles and recipes
Engage in crafts & hobbies like sewing
Watch TV or play cards
Write letters and do their finances
It’s such a valuable and successful service that the American Academy of Ophthalmology recently stated that “vision rehabilitation is a standard of care”.
Low Vision Care And the need for Low Vision Care continues to grow:
The fastest growing segment of the US population is 55 years and older—the age range of most people with vison loss
Already there are 20 million people right now in the US alone that have low vision
Due to the improvement of treatments for the major eye diseases causing vision loss, about half of the LV patients seen in low vision clinics today have BVA’s of about 20/50 to 20/120 so they can be easily cared for in primary eye care practices because: These patients can often be helped with little additional chair time
Much of the service can be done by support staff
Quick case example…
“Classic AMD………
5 years ago A.J. was diagnosed by you with “dry” AMD and
was referred her to the local Vitreous and Retina Consultants for further evaluation and management……….
Other than vitamins, Amsler Grid and periodic retinal exams, no treatment was offered for her AMD
And of course, they told her….. “nothing more could be done”
Mrs. A.J………
Your staff found her best corrected VA today is about 20/100 in her better eye. You found her refraction hasn’t changed
That doesn’t matter, she can no longer read the mail, bills, food packages, medicine bottle labels and bank statements.
What do you do? Changing the glasses won’t help and there is nothing medically to treat.
Mrs. A.J………
Here’s what I did……..
I used a “brightfield” type stand magnifier…. This has the effect of doubling the add without reducing
the reading distance. This was used for mail, bills, bank statements and other
basic home reading tasks.
Mrs. A.J.………
Here’s what else I did……..
For very short reading tasks and reading on the go…. like shopping, etc
To help with mobility……
Mrs. A.J.………
We had her return in 1 month for follow-up
She was doing fairly well with her aids and was able to accomplish each of the initial goals she had mentioned
Just in passing she said she wished we could make her TV clearer, so on her next appointment, we dispensed a pair of MaxTV glasses
Total revenue generatedTwo office calls (99214, 92015 and 30 day follow up 99212) $ 260
(total time face to face for both visits was about 35 min)
Low vision aids visit #1 $ 770
(Makrolux, EZPocket and Rx tinted glasses)
Low vision aid visit #2 $ 195(MaxTV glasses)
Gross income $ 1,225
Less cost of goods - $ 405
Gross profit before overhead $ 820
( all numbers rounded for convenience )
Delivery Model and Revenue Generation
1Initial Low Vision Evaluation Device
3rd
Party Patient Doctor Staff
Succes
s Total
Proc. Code Price Reim. $ pay Time Time Rate Revenue
99214 Initial Low Vision Evaluation $ 90 $ 22 25 0 100% $ 112
0 0 100%
$ - $ - 0 0 100%
$ - $ - 0 0 100%
Recommended Devices:
Near Extended Task Devices $ 300 $ 300 0 10 50% $ 150
Near Spotting Task Devices $ 200 $ 200 0 5 50% $ 100
Contrast Enhancing Filters $ 50 $ 50 0 0 50% $ 25
Totals: Initial Evaluation $ 90 $ 572 25 15 $ 387
Initial Follow-Up Appointment Device
3rd
Party Patient Doctor Staff
Succes
s Total
Proc. Code Price Reim. $ pay Time Time Rate Revenue
99213 Initial Follow-Up Evaluation $ 58 $ 14 15 0 100% $ 72
2
Recommended Devices:
Distance Extended Task Devices $ 200 $ 200 0 5 50% $ 100
Distance Spotting Task Devices $ 200 $ 200 0 15 50% $ 100
Totals: Initial Follow-Up Evaluation $ 58 $ 414 15 20 $ 272
Total Physician time 40
Total Staff time 35
Total Physician Fee Revenue $ 184
Total Device Revenue $ 950
Total Revenue Per New Patient $ 1,134
Revenue per Physician "Chair-hour" $ 1,701
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Months
Month Prof. Fees Devices
Revenue by Type (1 Low Vision patient seen per week)
Break Even Analysis (1 Low Vision patient seen per week)
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Months
Cum. GP Investment
• Source of reimbursement, if any – any analysis should be based on your Medicare payor rates
• Patient volume… use simple marketing to generate external referrals
• Availability of Staff… delegate whenever possible
• Conduct analysis for your practice
Take home points..
Low Vision Care is a proven service that can help those with uncorrectable vision loss maximize their remaining vision so they can again be able to read, watch TV and play cards.
Low Vision Care is a profitable service that produces revenue from both an exam and the sale of devices.
With over 20 million people affected by vision loss, now is the perfect time to incorporate Low Vision Care as a new profit center for your practice!
Clinic Profit Center
ENTIRE PRACTICE
• Revenue• By source
• Expenses• COGS
• Staff Payroll
• Doctor Payroll
• Occupancy
• Clinical Equipment
• Marketing
• Overhead
• Profit or (Loss)
PROFIT CENTER
• Assign Revenue
• Assign Expenses• COGS
• Staff Payroll %
• Doctor Payroll %
• Occupancy %
• Clinical Equipment%
• Marketing %
• Overhead %
• Profit or (Loss)
• Pre-course work• Participants would examine their own practice in these areas and bring to the
meeting a 3 year trend for each area and summary of what they are doing in each area.
• Pull P&Ls for 2014, 2015, 2016
• Post course work• Create Profit Centers
• Have your CPA change your reporting – what should it look like• Set up monthly review• Assign staff – accountability and responsibility• Create a page on optometrybusiness.com
• Contact Lab Reps for Help
ACTION PLAN
• Post course work• Create Profit Centers
• Have your CPA change your reporting – what should it look like
• Set up monthly review
• Assign staff – accountability and responsibility
• Create a page on optometrybusiness.com
• Contact Lab Reps for Help
