By Kimberly K. Friedman, OD, FAAO
June 2, 2021
Providing eyecare can be rewarding as you change the lives of patients–and costly. Here are a few key ways I reduced costs in my practice, and the impact on profitability for taking those actions.
Closely Managing Frame Inventory
I was prompted to take a closer look at frame inventory management by being temporarily short-staffed. We are fortunate to have had the same optical staff in our office for many years. However, with a long-running staff, it is easy for operations to become status quo. As an owner, you are so busy, you pay attention to the “squeaky wheels” and you ignore the parts that appear to be working fine at the surface. When we temporarily lost an optical staff member who had taken short-term family leave, I jumped in to fill the hole and discovered problems that had quietly snowballed in the background. This did not happen because my staff member was inept, but because it is extremely easy to find yourself falling into a pattern of inventory creep– sales reps are great at what they do!
I did a full frame inventory analysis and quickly discovered we had double the number of frames I thought we had. That discovery sparked a frame-buying moratorium that lasted over six months. We marked down old inventory to go through it, and we created a second-pair program to entice second-pair sales using older inventory items.
Prior to taking a deeper look at frame management, our COGS were at 30 percent of gross. Six months after my in-depth frame analysis and frame-buying moratorium, we were down to 24 percent of gross. That kind of COGS reduction makes a huge impact on profitability. Depending on your practice size, it can equate to more than $100,000!
How did we do it? Decide BEFORE the frame rep walks in the door what your budget is for that visit in dollars and board space. And work with fewer reps. You will get bigger discounts and better service if you are a big account with a few companies rather than a small account with many.
In addition, force yourself to run monthly optical COGS reports. Put it on your schedule and block off time for this important management duty. We always hear that a doctor’s time is more valuable than support staff’s, but there are some things that no one will care about as much as the practice owner. An hour away from patient care here and there to look at the numbers that make or break your profitability is well worth your time.
Click HERE to read more about how Dr. Friedman profitably manages her frame inventory investment.
Result: COGS reduced 6%
Stopping Paid Advertising & Focusing on Free Marketing Opportunities
Prior to making this decision, we budgeted 5 percent of gross for advertising and marketing. In one fell swoop it went down to close to zero. Here are the three ways we did this:
Join local service organizations. Join the Lions Club, Rotary Club and other groups that align with your personal passions. This could include local amateur sports leagues, business associations and local Facebook groups. One meeting a month can lead to a lot of patients and new friends, too!
Set up and maintain a strong social media presence. The posts that get the most attention from current and prospective patients are the ones that are personalized to our practice, rather than those with generic eyecare facts, figures and tips. Examples of powerful posts for us are those celebrating birthdays of staff, the post showing our whole staff getting COVID-19 vaccinations and photos of our practice’s service dog. Another winner on social media for us has been giving $5 off glasses for anyone who likes our Facebook page. This has been a great boost to helping us gain followers.
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Distributing Press Releases to Media Outlets. I write these press releases myself, or create them by editing resources from the American Optometric Association or my state associations. The press releases were picked up by local newspapers and television stations, and ultimately, went national. Within two years of distributing the press releases, I had a regular spot on a local morning television show. I even made national appearances on CNN and the Rachael Ray Show. We looped these appearances on the television in our reception area, and the word started to spread that we were a well known, widely respected practice.
Result: Marketing expense reduced 5%
Not Accepting Every Vision Plan
I don’t enable a low-reimbursing vision plan to determine my value, and you shouldn’t either. You’re better than that.
We take two vision plans and many medical plans. Our office bills medically over 70 percent of the time. We decided to accept these two vision plans based on large employers near our office that offered that plan combined with that fact that it was a decent payer.
In addition, we learned how to make the two vision plans we accept work for us. We read those third-party payer contracts that few practice owners probably bother to read to learn the nuances of the plans. You can generate a significant increase in income on certain plans by learning which products to use. Brand A lenses versus B lenses could mean up to a $100 difference per patient, but it takes time to dive into the contracts to figure that out.
Fortunately, I have a business partner who is excellent at finding those hidden nuances while I am better at public relations. Capitalize on the strengths of the people in your office! You can work as a team to discover new ways of lowering the cost of doing business.
Result: Generate as much as $100 more per patient