NAVIGATION GUIDE TO PRIVATE PRACTICE TRANSFORMATION · Vision Source Next: An initiative to ensure...

N A V I G A T I O N G U I D E T O PRIVATE PRACTICE TRANSFORMATIONA PRACTICE GROWTH AND STRATEGIC PLANNING REPORT

SEPTEMBER 2018

Produced by For

TABLE OF CONTENTS

© Review of Optometric Business 2018

Richard Edlow, OD, Guest EditorMargery Weinstein, Executive EditorBill Scott, Jobson Research Marjolijn Bijlefeld, Vision Source OD, Consulting Editor

www.ReviewOB.com

Al Greco, PublisherRoger Mummert, Content DirectorMark Wright, OD, FCOVD, Professional Editor Carole Burns, OD, FCOVD, Professional Editor

N A V I G A T I O N G U I D E T O

PRIVATE PRACTICE TRANSFORMATIONA Practice Growth and Strategic Planning Report

Transforming Our World, Transforming Our Practices...........................3

Overview: Set a Strategic Plan for Growth...........................................4

Eyecare Needs in America.....................................................................5

Eyecare Workforce...................................................................................6

Technology.................................................................................................7

Formulate A Transformative Strategic Growth Plan...............................8

Track Performance, Project Growth.........................................................9

Formulate a Simple Practice Budget.....................................................10

The Simple Budget...................................................................................11

Communications......................................................................................12

The Patient Journey...................................................................................13

Practice Financing....................................................................................14

Ownership Transition...............................................................................15

Vision Source Programs and Resources........................................16 - 17

WO

RK

BO

OK

Practice Growth and Strategic Planning Report |3

TRANSFORMING OUR WORLD, TRANSFORMING OUR PRACTICES By Glenn D. Ellisor, OD, Founder, Vision Source,and Jim Greenwood, CEO & President, Vision Source

It often is said that business never stands still. The same is true of optometric practices.

The many market forces, changing consumer preferences, and economic and demographic trends that drive change in business directly affect how we practice now and in the future.

At Vision Source, we’re committed to leading this great profession into that bright future. As an organization, we continue to develop and refine growth-generating programs that place us at the forefront of innovations in practice management. To note a few:

Vision Source Next: An initiative to ensure the legacy of private practice optometry by providing guidance and assistance to mentor with, work in, acquire, start or sell a private practice.

The Optical Dream: A practice development initiative providing enhanced knowledge and unique sales training for staff in the presentation of contact lens annual supplies, second pairs, and prescription sunwear.

My Treatment Monitor: An exclusive network referring patients taking medications with ocular side effects to Vision Source offices.

Mentor OD: This creates a learning-based link between emerging, mid-career and mature ODs, all of whom have valued insights to share for the benefit of all.

As a leader in the continuous transformation of our profession, it is incumbent upon Vision Source to keep the profession informed of trends that will impact us all, member and non-member alike.

Over the past five years, we have produced the Vision Source Navigation Guide, in coordination with Review of Optometric Business and the Jobson Optical Group. Our intent is simple: to present all of optometry with the full range of trends that shape how optometry is practiced now and in years to come.

Today, the Vision Source commitment to see our profession flourish in the future remains stronger than ever. We hope you will utilize this guide in transforming your practice of today into a flourishing practice of tomorrow!

All the best!

Glenn and Jim

Glenn D. Ellisor, OD

Jim Greenwood

WE’RE COMMITTED TO LEADING THIS GREAT

PROFESSION INTO A BRIGHT FUTURE.

"

"

4| Practice Growth and Strategic Planning Report

SET A STRATEGIC PLAN FOR GROWTH by Richard Edlow, OD, Guest Editor

O V E R V I E W :

Transformation in business is not a one-and-done; it’s a constant.

This is as true for an optometric practice as it is for any other business. In my 30-plus years in practice, and in my experience chairing the AOA Information & Data Committee, I’ve seen our profession transform greatly. The good news: We continue to grow and prosper. But we also continue to be challenged by forces within and without.

The pathway to meeting those challenges is threefold: Understand the what, how, and why of the forces that challenge the way we practice and manage. Equip yourself with the informational tools required to meet those challenges. Set a strategic plan for growth and get there.

As an independent practice owner, you are a practice CEO. You need to not just see patients, though for most that remains your primary task. You need to provide a vision for your practice, and you need to set that strategic growth plan that you and your staff can carry out.

It has been a pleasure to work with Review of Optometric Business to create this Navigation Guide To Private Practice Transformation. Together, our hope is that we take a meaningful step in providing you with the insights that equip you to make the kind of transformations that will guide your practice into the future.

The following are a few critical points to keep in mind on your own transformative journey.

Change is a constant. Business continually changes, and “disruptors” such as online eyewear and contact lens vendors, as well as smart phone apps to self-refract, are accelerating those changes. Instead of complaining, examine the underlying ways that disruptors serve changing consumer preferences for convenience and value.

Then look for ways that you as an independent practice (benefitting from the services and collective knowledge of your optometric alliance) can improve your services to meet those needs while delivering the superior care that sets you apart.

Opportunities abound. The medical model provides a framework to practice to the full extent of your training–and medical eyecare needs are growing far faster than the refractive needs. Seize this opportunity by expanding and promoting the medical services you provide. Hire an associate with advanced skills in medical eyecare. A new hire can more than pay for him/herself right off the bat.

Retooling is a way of life. In all businesses (and optometry is a business as well as a medical profession), expanding your skills and incorporating new technology is critical to staying competitive. Pledge to continually enhance your skill set, and to fully employ the alliance programs outlined at the end of this report, to keep your practice moving forward.

Measure to manage. Knowing the Key Productivity Indicators that determine your profitability is good management, and tracking performance metrics is easier than ever with dashboard systems that let you drill down into growth areas and challenge areas. Data-based management also increases practice valuation, which is critical in your long-range career trajectory.

WORKBOOK:

Plan your work, work your plan. Attending an alliance meeting or reading a growth guide such as this is only a first step. For change to occur and for your practice to grow, you must create a strategic growth plan (see pages 8-9), and carry it out by adhering to a budget (see pages 10-11).

Transformation is possible if you visualize it, plan it, and work your plan. And today is a great day to begin transforming your practice into the practice of the future!


A R E A O F T R A N S F O R M A T I O N :

EYECARE NEEDS IN AMERICA

The need for eyecare goods and services is growing rapidly, and at the same time the demand for medical eyecare services is growing faster than refractive care.

US Census data combined with historical utilization data for eyecare services reveals a significant challenge for the eyecare industry. Eyecare providers (ECPs) will need to deliver 3.5 million more comprehensive refractive exams in 2025 than were provided in 2015. Moreover, ECPs must deliver 16 million more medical eye exams, along with an additional 11 million diagnostic tests (e.g., visual fields, OCTs, retinal imaging) in 2025 versus 2015. That’s a 32 percent increase for the medically related eye exams.* The question arises: Is the optometric profession properly positioned to manage this huge opportunity?

The Centers for Medicare & Medicaid Services (CMS) annually releases utilization and payment data for all physician services billed and paid by the Medicare fee-for-

service program. The data can be sorted by a number of variables, including specialty (e.g., optometry and ophthalmology), procedure codes, geography, etc. The most recently released data is for calendar year 2016.

Analysis of the data reveals some interesting facts specifically related to medically necessary eyecare

services. It is important to remember that all services paid by Medicare are, by definition, medically necessary.

For example, we can calculate how many providers billed for specific services and utilize this as a proxy for the specialty’s involvement in medical eyecare. In 2016, there were 11,980 individual ODs who billed Medicare for at least one visual field examination (CPT codes 92082 or 92083). This represents only 28 percent of all ODs in the U.S. in 2016. ODs billing for OCTs amounted to just 26 percent of the profession.

At minimum, visual field testing is regarded as a requirement for any practitioner looking to provide medical eyecare services. In addition, any OD providing a minimal level of medical eyecare is involved in providing care to the Medicare population. That said, less than 30 percent of optometrists provide any form of medically related eyecare. (There may be a few exceptions to these assumptions, such as a pediatric focused practice or an OD in a staff model HMO.)

Opportunities for the independent eyecare practice lie in the eyecare industry’s workforce and it’s ability to properly meet the demands of an aging population.

* The term “comprehensive refractive exams” is applied when the primary ICD-10 diagnostic code is a refractive code, and the term “medical eye exams (or care)” is applied when the primary diagnostic codes is a medical diagnosis such as those covered by Medicare or commercial major medical insurance carriers.

Source: The Future of Optometry, Jobson/Essilor

Source: U.S. Census Bureau

+1.0%

+2.8%

+0.9%+1.2%

+1.9%

+4.0%

Population Growth

Price/Fee

Annual GrowthContribution

ProductUpgrade

TotalDemandGrowth

ComprehensiveEye Exams

MedicalEyecare Services

Annual Growth

DEMAND FOR CORRECTIVEDEVICES AND SERVICES

DEMAND FOR MEDICALEYECARE

MORE TESTS NEED TO BE

DONE 2015 TO 2025

+3.5 million

+16 million

ComprehensiveRx Exams

MedicalEye Exams

Source: Centers for Medical and Medicaid Services

Tear Film

OsmolarityOCT

Imaging Visual

Fields

3%

26%28%

0

5

10

15

20

25

30

PERCENT OF ODS BILLING FOR TESTS


EYECARE WORKFORCEThe ranks of optometry are growing, though not as fast as eyecare needs. At the same time, the ophthalmology workforce is projected to remain nearly static.

Analysis of the eyecare workforce demonstrates a significant opportunity for optometric practices. Each year in the U.S., approximately 420 ophthalmologists exit practice and approximately 465 complete their residency program.

Additionally, we must apply a factor for full-time equivalents (FTE) based on historical work data, so that the net impact is merely 35 new FTE ophthalmologists each year for the entire country for the foreseeable future. This is an increase in the number of practicing ophthalmologists in the U.S. of just 0.2 percent per year. At the same time, the supply of FTE ODs is increasing 1.4 percent per year.

Analysis of the demand for medical eyecare services produces an annual growth rate of 2.8 percent. This is primarily driven by an aging population with a significantly higher utilization rate for eyecare secondary to the various age-

related eye disorders. In addition, the increased caseload for surgical eyecare procedures, especially cataract surgery, will necessitate more ophthalmologists shifting their time from office-based care to surgical care.

Consider the following: In 2025, the eyecare industry needs to deliver 16 million more medically related eye exams than are currently provided today, 3 million more comprehensive refractive exams, and approximately 1.5 million cataract surgeries.

The supply-and-demand data presented here will create market forces that are best managed by the optometric profession. The question: Will this be handled by independent optometric practices, corporate retail practices, vertically integrated OD/MD practices, or a mix of all the various practice settings?

The independent optometric practice has a very short window of opportunity to strategically position the practice to best manage these market forces. Now, as one prepares a practice plan for 2019, it is time to assess and implement a data-based strategy. This should include

patient and surrounding community demographic analysis, patient flow processes, staffing skill sets, practice technology assessment with a focus on diagnostic testing, and a look into what future technology might impact the eyecare industry.

MOST PROFESSIONAL WORKFORCE GROWTH WILL

COME FROM ODs

Compound Annual Growth

+1.5% +0.3% +1.1%

42,90348,191

16,671 17,023

59,57465,214 2015

Optometrists Ophthalmologists Total

2025

Source: Jobson Optical Group/Eyeconomist projections



TECHNOLOGYNew technology is defining the delivery of healthcare generally and eyecare specifically. This includes instruments that help ODs to diagnose, present, and monitor treatment plans with greater patient engagement, efficiencies, and cost savings, both in comprehensive refractive care and medical eyecare services. The increasing patient demand for medical exams will necessitate a full array of diagnostic testing equipment and their streamlined interface with practice management/ medical records systems.

REFRACTIVE EXAMS: Increased patient volume with efficient flow requires adoption of basic automated equipment, including auto refractors and non-mydriatic digital imaging. This must be incorporated in concert with the interface into the patient’s electronic record. Often, the additional cost of a digital automated phoropter is offset by increased eyewear sales.

DIAGNOSTIC TESTING: Providing just the basics for managing medical eyecare patients requires the latest for visual fields, OCTs, tear film osmolarity, and corneal pachymetry. There is significant room for improvement here in optometry. CMS data reveals the profession’s engagement in testing where only 28 percent of ODs billed for visual field testing, 26 percent for OCT imaging and 3 percent for tear film osmolarity analysis. The 28 percent billing for visual field testing and interpretation is notably less than half of those ODs in independent practices. The break-even cost for an OCT is as

few as 35 reimbursed procedures per month.

PATIENT ENGAGEMENT: A variety of options are available to better engage and educate patients and to, in turn, create an environment for better patient care and compliance. The independent optometric practice must incorporate these to deliver the medical eyecare services that the market will demand. Basic systems allow patients to schedule their appointments online and complete their patient history remotely. The practice then can manage a higher patient volume without adding resources.

OPTICAL DISPENSING: The independent practice can level the optical playing field against corporate chains by adopting online frame selection programs and proprietary web-based stores. Practices, if they haven’t already, should offer the full complement of lens technology for computer vision syndrome and blue light blocking lenses.

ON THE HORIZON: A variety of innovations are being adapted and tailored for the eyecare industry including tele-health (e.g., doctor monitored remote comprehensive eye exams), blockchain encryption for patient medical records, and applications for artificial intelligence and augmented reality. One should keep a close watch on how these technologies will assist the independent practice to enhance the level of patient care.

Strategically, the independent practice should include in its technology implementation plan requirements for physical space, staff training, time, and costs, expected reimbursement or increased revenue estimates, along with break-even calculations.

TECHNOLOGY UPGRADES GROWTH OPPORTUNITIES

DIGITAL PHOROPTER

ELECTRONIC PATIENT RECORDS

INTERACTIVE WEBSITE/PATIENT PORTAL

MEDICAL MODEL DIAGNOSTICS

Automated, accurate data points transferAbility to show enhanced vision of new Rx

Capture and display year-to-year eye healthShare patient data with specialists, HIPAA secure

More exams through self-schedulingGreater patient engagement in treatment plans

Elevate eye health services, focus on wellnessIncrease billings with OCT, visual fields, and tear film osmolarity



FORMULATE A TRANSFORMATIVE STRATEGIC GROWTH PLANIf you want your practice to grow, for example, 5.7 percent (the average Vision Source practice growth for 2017), just waving a magic wand hoping the growth takes place is not a plan.

Transformative strategic growth requires drilling down into your practice’s various revenue streams. The macro industry data presented in this report allows you to focus energy on where the greatest potential lies, while reinforcing the basic building blocks of an independent optometric practice. Examining your practice budget and recent period income statement, the total revenue/income should be teased apart into the various categories before targeting specific growth measures. It is not enough to look at exam fee revenue and eyewear. You need to examine the following revenue groups, then apply that to a projected target chart.

Comprehensive (Refractive) Exam FeesVarious sources indicate that the average optometrist provides about 1.5 exams per hour and 2,000 comprehensive exams per year. By adding a technician and automated testing equipment, the average OD should be able to easily increase that to three exams per hour. This has dramatic impact on both exam fee revenue and optical revenues.

Medical Eye Exams (ICD-10 medical diagnoses)Adjusting the patient flow and schedule to accommodate exams for medically related eye conditions will allow for a significant increase in reimbursement and greater patient satisfaction. Typically, the initial patients to manage are those with tear film and/or MGD, AODM along with digital imaging and those with borderline glaucoma findings.

Contact Lens Exam FeesYou should regularly assess contact lens fitting and annual re-evaluation fees to make sure you are properly compensated for the time, energy, and professional services provided.

Diagnostic Testing FeesWith the proper equipment (VF, OCT, retinal

imaging, tear analysis) this area will grow in conjunction with the medical exams component of practice growth.

Ophthalmic Frame RevenueOpportunities abound for the independent practice to grow frame and lens revenue. Aside from frame selection and inventory, personalized service is the independent’s secret weapon. Growth of online sales of eyewear peaked in 2015, followed by a return to the brick-and-mortar retail experience.

Ophthalmic Lens RevenueAlong with the surge in medical eyecare, some of the greatest opportunities lie within the exam room with the education of the comprehensive eyecare patient on the latest lens technology. Discussions with patients in today’s digital world should include separate single vision or occupational computer glasses along with blue light protection in almost every pair of lenses. Likewise, individual free-form digital lenses provide even greater comfort with progressive lenses. This type of discussion and education does not typically play out well with the online experience.

Contact Lens Material FeesTransitioning to disposable modalities, multifocal options for the aging population, and toric options for astigmats should generate increased contact lens revenue and healthier, more satisfied patients. Also, increasing the penetration of annual supply sales and direct delivery saves staff transaction time and expenses—which can add up to increased profits.

Additional Revenue (e.g., Eye-Related Nutritional Supplements)Incorporating the nutritional supplement arena requires minimal time on the part of the doctor but can yield significant long-term benefits for patients. While these benefits are questioned by some, most practitioners find that their dry eye patients see positive improvements with supplements. Additionally, patients with any signs of or family history of macular degeneration ought to be taking the appropriate supplements for better macular health. There are several quality vendors that allow the practice to participate in the process.

W O R K B O O K :


TRACK PERFORMANCE, PROJECT GROWTH2017 2018

PROCESSActual

Revenue% OF TOTAL

Various Industry Growth Metrics

Practice's Growth Target

Projected Revenue

% OF TOTAL

ACTION

Comprehensive (Refractive) Exam Fees

$150,000 19.4% +1.0% +6.0% $159,000 19.1%

Quantity of exams, fee charged, 3rd party reimbursement levels

Medical Eye Exams (ICD-10 medical diagnoses)

$75,000 9.7% +2.8% +12.0% $84,000 10.1%

Marketing: Dry eye, age-related eye disease

Contact Lens Exam Fees

$20,000 2.6% +4.1% +6.0% $21,200 2.6%New contact lens modalities

Diagnostic Testing Fees

$30,000 3.9% +2.8% +12.0% $33,600 4.0%

Building medical eye care practices, necessary testing equipment

Ophthalmic Frame Revenue

$200,000 25.8% +1.2% +5.0% $210,000 25.3%Re-evaluate frame lines/vendors

Ophthalmic Lens Revenue

$200,000 25.8% +1.4% +8.0% $216,000 26.0%

Re-evaluate new lens technologies, computer vision lens options

Contact Lens Material Fees

$80,000 10.3% +4.1% +6.0% $84,800 10.2%

New modalities will increase fees, annual supplies

Additional Revenue ( e.g., Eye-Related Nutritional Supplements)

$20,000 2.6% +2.8% +12.0% $22,400 2.7%

Supplements for dry eye, retinal issues, plano sunglasses

$775,000 100.0% $831,000 100.0%

Year over Year % Change +7.2%Projection Sources: Vision Council, Jobson Optical Group/Eyeconomist


FORMULATE A SIMPLE PRACTICE BUDGET

PERIOD: First, select the period of time that you would like to include in your budget. This could be for an entire year, quarter, or a month. Enter your starting and ending dates here.

PROJECTIONS: Here you will need to make some predictions on the percentages for your Net Operating Income and each individual expense “bucket.” It’s best to use historical data from your own practice. If you’re not sure, use these guidelines based on previously published data:

INCOME: Here you will project your Income for the given period that you have chosen. Again, this can be accomplished by looking at historical data and building in growth over the prior period or prior year. Enter your projected income in the “Projected” box. You will enter the “Actual” information after the period is completed.

EXPENSES: Projected (%) – enter the percentage that you chose above. Multiply this percentage by your Income projection. This will give you the actual dollar amount projected for each expense category. Do this for each of the following categories:

Now enter any additional expenses you have unrelated to the above expense categories. These include:

Finally, enter your projected Net Income. This is the amount of income you expect to make prior to paying yourself, any associate ODs, taxes, and interest.

After you have completed the period and have gathered all of your financial results, enter your actual data in the “Actual” boxes and calculate the percentages for each category.

ANALYZE YOUR DATA: Now take a few minutes and look at your results. How close were you to hitting your projections both in income and expenses? What areas need attention? What caused your projections to be off in any particular category? What could have been done differently to achieve your goals?

These must total 100%.

• COGS• People• Place

• Bank notes• Bank debt• Lines of credit

• Things• Net Operating Income (NOI)

• Equipment loans• Other debt

Net Operating Income 25-30%

Cost of Goods Sold (COGS) 25-30%

People 20-25%

Place 6-10%

Things 5-15%

Projected % Actual %

Cost of Goods Sold: %

People: %

Place: %

Things: %

Net Operating Income (NOI): %

Practice Note:

Bank Debt:

Line of Credit:

Equip Loan #1:

Equip Loan #2:

Other Debt:

NET INCOME: (Before doctor compensation, interest and taxes)

W O R K B O O K :


THE SIMPLE BUDGET

PROJECTIONS:*

EXPENSES:

INCOME:

Budget template courtesy of Michael A. Kling, OD, Founder of Impact Leadership. May not be reproduced without permission. Contact: [email protected].

PERIOD FROM:

PROJECTED ($):

TO:

ACTUAL ($):

Net Operating Income: % People: %

Cost of Goods Sold (COGS): % Place: %

* Must total 100% Things: %

Projected % Actual %

Cost of Goods Sold: %

People: %

Place: %

Things: %

Net Operating Income (NOI): %

Practice Note:

Bank Debt:

Line of Credit:

Equip Loan #1:

Equip Loan #2:

Other Debt:

NET INCOME: (Before doctor compensation, interest and taxes)


COMMUNICATIONSTechnology is transforming the way we communicate, as doctors, patients, in fact, as human beings. This poses both opportunities and challenges.

As eyecare providers, we are tasked with the same goals as all medical providers: to provide wider access to better care and to improve outcomes economically. Further, we are required to embrace digital communications in securely exchanging patient medical data with patients and other medical providers to benefit our patients and further medical knowledge.

This is a tall order, but ECPs who are embracing digital communications are reaping measureable benefits. Trends include:

Interoperability. HIPAA-secure medical communications allow the targeted exchange of patient data between medical professionals. The ability of an OD to securely communicate with a primary physician about a diabetic patient provides distinct benefits to that patient and both practices.

Patient portals. Providing patients with a secure place to readily and easily communicate with their OD—and vice versa—is a building block

of increasing patient engagement and effecting better outcomes.

Telehealth. The mobile telephone now is a vital communications tool between doctor and patient. Among prime opportunities: Patients can pose questions or send images of eye irritations, a first step in diagnosis and treatment either remotely or in an emergency office visit. Among challenges: Some technology players encourage consumers to self-refract and blur the lines between an initial acuity scan and a comprehensive eye exam.

Blockchain. Blockchain technology is being incorporated rapidly into medical communications. This encryption system creates a digital trail that records who has handled patient medical information in a way that cannot be altered. This holds great potential for secure communications and mitigating liability.

Self-appointing, reminders, retrieval. Communications systems can provide and, in some cases, automate the critical self-appointing and exam reminder process that greatly reduces costly no-shows. In addition, some systems can affect retrieval of dormant patients and boost revenues. These systems have become more affordable and easy to use, allowing independents to compete with optical chains that have greater resources.

Patient engagement. Best of all, communications systems hold the potential to alter the nature of the doctor-patient relationship. They can move that relationship from one of a once-a-year discussion of a medical check-up to an ongoing dialogue about wellness and the process of living a healthy life, with eye health integrated into general wellness.



THE PATIENT JOURNEY

In optometric practice, as in all retail experiences, there is new thinking about the patient experience. Imagine your patient going on a journey in all of your patient encounters.

Progressive ECPs are taking a fresh look at this journey, in terms of overall design and in specific aspects of patient flow.

The ease of access. Patients want to visit you because they either have problems seeing well, have discomfort issues, or realize the need to preserve their eye health and vision. How easy is it for them to do so? Is your web site welcoming? Can patients self-appoint? Does your schedule allow for emergency visits?

The pre-entry impression. Patients form an initial impression from such things as your outdoor sign, the appeal of your entranceway—even the process of driving acess and parking (easy and plentiful vs. hard to find a spot). The Vision Source Geo Site Selector can analyze the best location for a practice.

Ease of entry. One of the most frustrating aspects of the patient journey is the bottleneck at reception. A reception desk is an intersection for intake, an exit point for payment, an eyewear pickup station, and commonly a verification station for insurance issues. These functions are at odds with one another, and progressive ECPs are eliminating this bottleneck. Some eliminate the station altogether, favoring a coffee bar and intake cubicles where

staff can have private conversations about insurance coverage or medical issues.

The allocated hour. Patients psychologically allocate about one hour to their visit to the eye doctor. If the exam takes too long, that comes out of the time at the end of the exam to select new eyewear—a costly loss for a practice. New office designs take a page from Apple stores and engage patients with an open plan where they can see and touch exciting eyewear fashions at the onset of the patient journey.

Prescribing from the chair. Patients value the doctor’s recommendation, studies show. By “prescribing from the chair,” that is, discussing and then writing on an Rx pad your brand-specific choice of ophthalmic lenses and treatments and contact lenses for the patient, you greatly increase the capture rate for your treatment plan.

The optical experience. New designs and smart display technology can engage the patient as never before. Such things as smart displays that measure touches and try-ons, virtual inventory extensions, as well as small screens (iPads) that tell brand stories, create excitement, and bring the optical experience into the world of the contemporary shopping experience.

The continuing experience. Through digital communications and patient communications systems, you and your practice can extend the patient journey from being a once-a-year event to being an ongoing top-of-mind discussion about eye health and exciting new options in eyewear technology and fashion.



PRACTICE FINANCINGOptometric practices once tended to be family-run businesses, more tradition-based than data-driven, but they now must be run according to sound management techniques. Foremost among them is the judicious use of investment financing to manage and grow a practice.

While the mechanics and terms of practice financing have not changed from years past, the amount of debt incurred by ODs has escalated dramatically. An OD emerging from optometry school commonly enters practice with student debt of $175,000.

Place upon that the mounting financial pressures of acquiring or buying into a practice, combined with life passages of beginning a family, buying a home, financing cars, saving for retirement, college funds, and caring for aging parents. In view of thse factors, the importance of financing to grow is paramount.

It is often said that there is good debt and bad debt. Financing to leverage growth is regarded as good; paying down residual debt is a drain on your growth plan.

ESSENTIAL FINANCIAL DOCUMENTS In order to take on “good debt” from a local or regional bank or a credit union, a practice buyer or owner must present a number of financial forms that document the performance and growth forecast of the practice. These documents can be generated from your accounting software (e.g., QuickBooks). Profit & Loss Statement (aka P&L or Income Statement). Your practice profit or loss should be monitored regularly to compare performance month-to-month and year-to-year. Also, this form is used to determine your tax liability.

Balance Sheet. This measures assets, liabilities and the remainder: equity. This is a critical measure for lenders. It reflects your cash position and shows what you owe, short- and long-term.

Statement of Cash Flows. This measures cash coming in and cash going out. Having a positive cash flow is critical to a lender.

TERMS OF FINANCINGThe most important terms of financing are interest rate (fixed or variable) and term (repayment period, usually represented in months).

BORROW BY PLANA growing practice often requires waves of financing, and it’s advisable to construct a financing timeline. Typically, new diagnostic equipment is acquired or upgraded every four to five years. Offices need to be remodeled every seven years or so. Purchasing your building and land provides a major means to build wealth, and opportunities to do so arise at any time. Financing through an established relationship with one or more lenders makes it possible.

PLAN & PROJECTIn seeking financing, an OD looking to buy or expand must show a business plan that outlines a route to profitability, assuring a lender they will be repaid. The business plan includes an executive summary, marketing analysis and plan, transition and contingency plans, as well as capital investments and growth projections.

COMPUTE ROIProject a break-even analysis on capital investments. With new equipment purchases or leases, examine your monthly payments versus revenue increases from the additional tests/procedures they can generate per month. FACTOR IN TAX IMPLICATIONSYour investments in equipment and remodeling are deductible, as is depreciation on these investments over time. Tax law is complicated and changeable; work with your accountant to chart the best plan.

MANAGE FINANCINGA plan for managing debt service must be formulated before borrowing capital. Bear in mind that practice growth may require successive borrowing, and loan sequencing must be planned.

2002 2008 2017

$99,208 $132,630 $174,765

STUDENT DEBT GROWING

Source: Association of Schools and Colleges of Optometry



OWNERSHIP TRANSITIONSuccessful practice transition is the lifeblood of independent optometry, so an OD owner always should be building value that is transferable.

SET RETIREMENT GOALS. Set goals in two areas:

Financial goals allow you to retire and live at a level you desire and for a projected period of time.

Timeline goals set your clock to build wealth, transfer wealth, and exit practice. Determine how you want to wind down: all at once or gradually.

Future trends in practice valuation are difficult to predict, and they vary by patient base and geography.

PLAN TRANSITION EARLY. Envision transitioning ownership of your practice in a variety of ways:

Independent to independent or selling to a colleague or competitor.

Owner to associate involves cultivating an associate or associates who have an interest in buying your practice when the time comes.

Incremental buy-in involves an associate or associates buying a stake in your practice over time, as you phase out.

Embrace the CEO model by continuing to own

and operate your practice while building an ongoing annuity by employing associate ODs to preserve the practice owner’s legacy and patient care culture.

Sell outright is selling to an OD, an optical chain, a network or a private equity-backed investor.

WORK TO GOAL. If your goal is to transition out of ownership by a fixed date and with a set income, work your timeline toward the finish line.

ESTABLISH FAIR MARKET VALUE. A successful sale must satisfy both seller and buyer.

SEEK EXPERTISE. Selling your practice is something you likely do once, maybe twice, in a lifetime. However, the individual or group buying your practice may buy practices for a living, over and over again. Level the playing field with good representation.

METHODS OF PRACTICE VALUATIONPercent of Gross Revenue Collected is a cursory but limited method for determining practice valuation. By this formulation, a sale price is about 65 percent of gross revenue collected (note this is dollars collected, not dollars billed). The limitation is that the true net profits of practices can differ greatly, even if their gross collections are similar.

Gross Revenue Collected/ FTE ODs looks at practice value in terms of how much the practice can return in profits per OD-owner or OD-partner. This method shows that a solo practice that generates, for example, $700,000 a year in gross revenues may be more valuable to a buyer than one with two full-time-equivalent ODs that generates $1,200,000 a year.

Weighted EBITDA is a method that determines practice value by multiplying EBITDA (earnings before interest, taxes, depreciation, and amortization) by factor that varies from 2-10 but which often averages to 4.25. This looks at the three most recent years of EBIDTA.

FACTORS THAT BOOST PRACTICE VALUATION Net Cash Flow measures how much profit a buyer can expect to extract if they acquire a practice. The average net cash flow for an optometric practice is about 30 percent. Increasing net cash flow translates directly to greater practice value.

Updates in equipment, technology and décor contribute to practice value. The need to lay out cash or borrow funds to upgrade capital detract from the buyer’s sale price. An updated turnkey operation commands a higher sale price.

Full-Scope Services indicate how involved the practice is in revenue-generating services in high-growth areas. A practice that offers full-scope medical eyecare services has added value.

Compliance Assessments with electronic medical records, inter-discipline HIPAA-compliant data exchange (e.g., sending retinal scans to a specialist) add value. A practice with established compliance protocols (HIPAA, OSHA) has a higher value than a practice potentially exposed to liabilities and penalties.

Patient Base Renewal indicates value and potential value. Practices lose between 5 and 10 percent of their patient base each year, often without noticing, due to patients moving, going elsewhere for eyecare, or dying. One rule of thumb: A healthy practice has 20 percent new patients / 80 percent established patients. On the other hand, a prospective buyer may see the potential to add young and growing families to an aging practice. But the investment they must make in a makeover plan would be deducted from the acquisition price they are willing to pay.



VISION SOURCE PROGRAMS AND RESOURCES

VISION SOURCE PROGRAMS:

Vision Source is a family of some 3,300 locally owned practices and 4,600 doctors collaborating to provide the gold standard of patient care and to support the long-term success of private practice optometry.

The clinicians in the Vision Source network enjoy access to newly evolving patient channels, including an expanding list of leading medical groups and integrated health systems with whom Vision Source optometrists collaborate.

Additionally, members benefit from a wide range of innovative technologies, practice management tools, strategic marketing opportunities, and purchasing power. Leveraging these tools, the clinicians offer comprehensive eyecare to 16 million patients annually.

Vision Source NextSM An initiative to ensure the legacy of private practice optometry by providing guidance and assistance to mentor with, work in, acquire, start, or sell a private practice.

The Vision Source Foundation

A 501(c)(3) corporation that provides financial assistance to optometrists (members and non-members) and their families who suffer catastrophic events. Since its founding, the foundation has distributed more than $1 million, including $308,000 in 2017 alone.


Gold Standard Connection A step-by-step outreach program to build collaborative care relationships between Vision Source doctors and local primary care physicians.

My Treatment Monitor An exclusive network referring patients taking medications with ocular side effects to Vision Source offices.

VSLearning.com An online learning program with more than 100 courses for doctors and staff. To date, 150,000 courses have been completed.

MentorOD A mentor program that creates a learning-based link between emerging, mid-career andmature ODs, all of whom have valued insights to share for the benefit of all.

Frame DreamSM A proprietary frame board management program the enhances the patient experience while providing the office with improved inventory management.

The Optical Dream℠ A practice development initiative providing enhanced knowledge and unique sales training for staff in the presentation of contact lens annual supplies, second pairs, and prescription sunwear.


VISION SOURCE NEXT can help you WORK IN, ACQUIRE, or START a Vision Source practice with guidance and programs to assist from start to success.

• PRACTICING FULL SCOPE OPTOMETRY• CONTROLLING THE WAY YOU DELIVER CARE• BUILDING LONG TERM EQUITY• INCREASING YOUR POTENTIAL FOR PROFESSIONAL AND FINANCIAL GROWTH

YOUR NEXT STEP STARTS HERE… www.VisionSource .com

TO ENJOY ALL THAT PRIVATE PRACTICE CAN OFFER, INCLUDING…

ARE YOU READY

- Practice Revenue Growth is 10x the industry average* - Unsurpassed buying power- Results-based practice management programs- Access to new patient channels - History of innovation for private practice optometry

*5.7% weighted average Vision Source member practice growth for 2017 vs Industry growth of 0.5% per Vision Watch’s vision care market growth data (adj. to reflect the revenue mix of a typical optometric practice per the Mgmt. & Bus. Academy (MBA) metrics).

WORK IN A PRIVATE PRACTICEStart a career in private practice as an associate working towards an equity position and, ultimately, outright ownership.

ACQUIRE A PRIVATE PRACTICEOpportunities exist to acquire a Vision Source practice outright, or join a practice as an equity partner.

START A PRIVATE PRACTICEVision Source Next provides a proven eight-step plan to guide your entrepreneurial journey.

WHYVISIONSOURCE?


VISION SOURCE NEXT can help you WORK IN, ACQUIRE, or START a Vision Source practice with guidance and programs to assist from start to success.

• PRACTICING FULL SCOPE OPTOMETRY• CONTROLLING THE WAY YOU DELIVER CARE• BUILDING LONG TERM EQUITY• INCREASING YOUR POTENTIAL FOR PROFESSIONAL AND FINANCIAL GROWTH

YOUR NEXT STEP STARTS HERE… www.VisionSource .com

TO ENJOY ALL THAT PRIVATE PRACTICE CAN OFFER, INCLUDING…

ARE YOU READY

- Practice Revenue Growth is 10x the industry average* - Unsurpassed buying power- Results-based practice management programs- Access to new patient channels - History of innovation for private practice optometry


WORK IN A PRIVATE PRACTICEStart a career in private practice as an associate working towards an equity position and, ultimately, outright ownership.

ACQUIRE A PRIVATE PRACTICEOpportunities exist to acquire a Vision Source practice outright, or join a practice as an equity partner.

START A PRIVATE PRACTICEVision Source Next provides a proven eight-step plan to guide your entrepreneurial journey.

WHYVISIONSOURCE?


...................................................A FEW FACTS ABOUT

Vision Source is a family of approximately 3,300 LOCALLY OWNED PRACTICES AND 4,600 DOCTORS collaborating to provide quality professional eye care and to support the long-term success of private practice optometry.

For two consecutive years - 2016 and 2017 - Vision Monday magazine named Vision Source the #1 OPTICAL RETAILER IN THE US, with $2.7 Billion in sales, besting Luxottica and Walmart.

Vision Source clinicians treat an estimated 16 MILLION PATIENTS EVERY YEAR.

On average, more than 1,000 POTENTIAL NEW PATIENTS search for a Vision Source doctor on VisionSource.com every day.

Introduced in May 2018, VISION SOURCE NEXTTM is a professional advancement program shaping the future of private practice optometry by providing pathways to START, BUY, SELL OR WORK IN a private practice.

In 2017, average member practice REVENUE GREW 10 TIMES the industry average.*FA

CTS:

BY FORGING RELATIONSHIPS WITH MORE THAN 100 PHYSICIAN GROUPS, health plans, and managed health plans, Vision Source members are enjoying access to new patient channels by collaborating in the diagnosis of systemic diseases and closing gaps in patient care.

Doctors and their staff members at Vision Source offices have access to ONLINE EDUCATION through 100+ courses on VSLearning.com. To date, more than 150,000 COURSES HAVE BEEN COMPLETED.

We are SHAPING THE FUTURE of independent, private practice optometry, through our Mentor OD program, by connecting practice owners with students to provide COLLEGIAL MENTORING as they transition to practice.www.VisionSource.com

DID YOU KNOW?

NORTH AMERICA'S LARGEST NETWORK OF PRIVATE PRACTICE OPTOMETRISTS

ENRICHING LIVES BY ENABLING INDEPENDENT OPTOMETRISTS TO REACH THEIR FULL POTENTIAL


Date post:	18-Jul-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

NAVIGATION GUIDE TO PRIVATE PRACTICE TRANSFORMATION · Vision Source Next: An initiative to ensure...

Documents