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Don't Play the Percentages

"Industry norms" are at best a distraction, at worst an irresponsible way to set goals.
By Gary Gerber, OD

1/15/2015

It’s often stated by many practitioners, “A larger percentage of my practice is dedicated to medical eye care vs. contact lenses because it’s more profitable.” Unsurprisingly, in many practices, contact lens patients comprise only about 15% of the total patient base. The key question remains, however: Is this number too low, too high or just right? What is the best percentage breakdown of medical care, eyeglasses and contact lenses?

Robbing Peter to Pay Paul
From a purely profit perspective, you might think that if a practice with 10% of its total services—we’ll use the term “points”—devoted to medical eye care doubles that amount to 20%, that practice’s profit margin would also increase.

Unfortunately, it’s not quite that simple: there are only 100 percentage points or “slices” in the pie, so to speak, and those extra 10 points have to come from somewhere. Putting clinical considerations aside for the moment, you want to make sure the points “stolen” by the increase in medical services are more profitable there than in the division they were initially allocated to.

Consider this example: patient A hands you a check for $100 for something medically related, while patient B hands you a check for $100 for something non-medically related. Which is more profitable? Without more specifics, you can’t answer this question. Similarly, those who believe non-contact lens related care is more profitable than contact lenses without considering the details are not always correct. It really depends on the particular services you’re talking about: for example, $100 vision care plan eyeglass dollars are probably less profitable than $100 corneal reshaping dollars (given the much lower cost of goods sold for services) or, for that matter, a higher margin pair of glasses (for self-evident reasons).

 When looking at net income, not gross, in our experience the practice with the highest net incomes are still the ones with larger proportions of contact lens-related sales. Yes, there is no cost of goods sold associated with an OCT exam (after the capital equipment cost is covered), but you shouldn’t just take a snapshot of a single visit. In a well-run office, with a great recall system, a patient who buys a pair of glasses will return and do the same many times over their lifetime. Ideally, they get a pair of glasses and an OCT scan. Or in the case of contact lenses, a patient who purchases lenses from the practice now will eventually get back-up glasses, and may require medically-related services as well.

No Right Answer
So, what is the best combination? Thus far, we’ve only discussed it from the perspective of profitability. 

When doctors make comments like, “My contact lens practice is X% of my total practice,” they are usually thinking the same way. The big problem with this thinking, which is unfortunately pervasive in our industry, is that it is just plain wrong.

Simply put, there is no single “best” combination; rather, it’s a function of how you best care for your patients. If a patient will benefit from multifocal GP lenses, fit them with such; if an OCT and fundus photos are medically indicated, perform those tests—in short, do what the situation requires. Approached this way, your ideal mix of percentages will form based on the belief that the pursuit of clinical excellence and best patient care supersedes any other metrics. If something is appropriate for a patient, let the percentage points fall where they may. 

 While most practitioners do what’s best for patients, sometimes they unnecessarily fret when they look back at their percentages of services and revenues if those metrics don’t match so-called industry norms. Following advice from the podium, colleagues or articles that espouse, “Your contact lens practice should be X% of your total practice” is irresponsible and backwards. Don’t worry about it! Rather, consider what your practice could be. Decide for yourself what you want to focus on, and the profit will come accordingly.  



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