Ophthalmology Business

DEC 2013

Ophthalmology Business is focused on business topics relevant to the entrepreneurial ophthalmologist. It offers editorial, opinion, and practical tips for physicians running an ophthalmic practice. It is a companion publication of EyeWorld.

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labor expenses, including health insurance, dental insurance, and retirement plan contributions that are paid by the center. A healthy range for a typical ophthalmic facility is 22% to 27% of net collections. Depending on your case mix and geographic location, your center may be a bit below or above these benchmarks. A significant retina surgical volume, for example, may elevate the ratio somewhat. • Surgical supplies expenses, including drugs and medications. Take a look at all disposables, consumables, and implants used to provide surgical care. In well-managed centers, the total of these costs is typically between 25% and 30% of net collections. • "Pass through" expenses. These are items that generate roughly equivalent revenue and expense and are individually significant. "Pass through" items routinely seen in ophthalmic ASCs are presbyopiacorrecting IOLs, toric IOLs, and cornea tissue. The benchmark percentages cited above have been adjusted to exclude these costs and revenues, by netting their costs against the payments received and reducing (or increasing) the net collections by the difference. Consider a center that does a significant volume of PIOLs at an average cost of roughly $900 per lens. Leaving these costs in the surgical supplies expense total would likely raise the ratio well above the 30% level and lead you to conclude, erroneously, that your supplies costs are out of control. Identify and analyze case costs for major procedure by surgeon. This can be somewhat time consum- ing and isn't routinely performed as a part of the annual assessment. Instead, consider using the information developed during your assessment to identify high-cost surgeons and procedures, then subject them to further analysis at a later date. Evaluate accounts receivable. The total outstanding accounts receivable should correlate closely with your surgical case volume. Take a hard look at: • The level of outstanding accounts. A larger than normal surgical month will naturally increase the total outstanding, but as most accounts will be current, the increase is nothing to worry about. On the other hand, if you notice the total receivables trending up over a number of months without corresponding increases in case volumes, it may indicate that the billing and collections staff is encountering difficulty. • The age of outstanding accounts. Most managers already pay close attention to the aging of the accounts receivable. When we evaluate an ASC, we look for the current accounts (aged less than 30 days) to be between 50% and 70% of total receivables. Conversely, we expect the more than 90 day accounts to total less than 20% of the total; closer to 10% would be ideal. Anticipate capital purchases and debt obligations. These obligations will have a claim on cash flow. Analyze the center's ability to handle these needs internally, and if you determine that external financing will be required, include that finding in your report to the governing body. If you don't have the time to perform an annual internal assessment … Nonetheless, you and the center's governing body need tools to aid in making decisions that impact viability and profitability. At the very least, develop and continually update a set of benchmarks, both internal and external, and review them monthly, paying particular attention to their trends. You can always call in an objective third party expert to assess the factors we've detailed and identify opportunities for improvement. OB Steve Sheppard, CPA, COE, founded Medical Consulting Group's Ambulatory Surgery Center division in 1998. He has been involved in the development, management and syndication of many successful ASCs, and can be contacted at ssheppard@medcgroup.com. Erin Malloy supports MCG's development projects and management clients by providing management policies, benchmarking tools, and management information systems. She can be contacted at emalloy@medcgroup.com.

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