Use These 5 Performance Indicators to Assess Your Practice’s Health
When evaluating the health of an ophthalmic practice, use these 5 key performance indicators, noted Andrew Maller and Laurie Brown, senior consultants with BSM Consulting in Incline Village, NV, during the American Society of Cataract and Refractive Surgery’s 2018 annual meeting in Washington, DC.
- Operating expense ratio. This is used to measure how effectively the practice converts revenue into compensation. The performance standard should fall between 50% and 70%. The formula is total operating expenses/net collections.
- Net operating income. This is the amount of income available physician income and other nonoperating expenses. Performance standard: 30% to 50%. Formula: net operating income/net collections.
- Supporting staff payroll ratio. Assesses how effectively a practice utilizes nonprofessional personnel (note that very low percentages could indicate practice inefficiencies). Performance standard: 20% to 26%. Formula: staff payroll/net collections.
- Occupancy expense ratio. Assesses how effectively the physical plant is utilized. Performance standard: 6% to 8%. Formula: occupancy expenses/net collections.
- Marketing expense ratio. Assesses the effectiveness of the marketing spend. Performance standard: 2% to 5%. Formula: marketing expense/net collections.
Maller A, Brown L. Financial Statements 101: Evaluating the health of your practice. Talk presented at: 2018 ASCRS-ASOA Annual Meeting; April 13-17, 2018; Washington, DC.