Welcoming an associate provider to your eye care practice can provide many benefits to your patients, office, and bottom line. Additionally, for those ECPs whose exit strategy includes an independent OD-to-OD practice transition, adding the ideal candidate at the right stage of the practice lifecycle will pave the way for the future.
If you’re thinking about adding an associate OD to your practice, I recommend four key considerations to ensure the optimal fit for financial viability.
- State Your Objective
The first step to ensuring economic sustainability when adding an associate to your practice is to identify your objective. There are three common reasons why you may be considering the addition of an associate to your practice:
- Increasing Capacity: You’re operating at capacity in your practice (i.e. the schedule is booked weeks or months out) and adding an associate will increase throughput — serving more patients, growing the practice.
- Transition Planning: It is time to establish the foundation for your transition (even if it may be years down the line), thus you’re seeking an associate provider who desires to be on the path to partnership or purchase.
- Work/Life Balancing: You simply wish to work less, play more (did someone say three-day weekend?!)! Bringing on an associate will allow you to reduce your patient load.
Each objective will present different circumstances and targets, short and long term, to ensure financial viability.
- Know Your Numbers
Having identified your exact reason for adding an associate doctor to your practice, it’s time to compile and evaluate appropriate analytics to inform an optimal strategy. Possessing a robust understanding of the economics of your practice and community will empower you to create an optimal strategy including compensation, marketing, operations, and more. Key analytics to employ include:
- Production: Determine your patient segmentation and conversions across the scope of care of the practice. Sales analytics provide visibility and drilldowns across the clinic and optical revenue channels of the practice.
- Profit: Assess your income statement (profit-and-loss), paying particular attention to operating expenses. (Pro Tip: A commonly sized income statement will allow you to compare your practice economics to industry benchmarks.)
- Geo-spatial: This includes localized demographics, socioeconomic segmentation, and competitive analysis. Understand your community’s lifestyles, interests, wants and needs, and the competitive climate.
- Digital: Analyze your online presence across your website, social media, listings, and rankings. These are critical building blocks for an omnichannel marketing strategy to grow patient base and conversions in an increasingly competitive environment.
- Determine Financial Feasibility
Determining financial feasibility is a key step for any business decision, and it is critically important for those milestone decisions, such as adding an associate to the practice. Constructing a financial pro forma inclusive will position all parties for success. Construct your financial pro forma by including the following:
- Startup costs: Aggregate up-front costs associated with adding a doctor to the practice. These costs shall include the direct HR, employment, and onboarding costs of the associating doctor, and a variety of other infrastructural, operational, and marketing costs necessary for the expansion, such as building out an additional lane, adding staff headcount, deploying technology, and investing in strategic marketing.
- Cash Flow: Financial forecasting is necessary to create a sustainable growth plan for the new provider. Identifying benchmarks and production targets, cash flow forecasting shall include revenue and expense modeling over a desired time horizon. Start by constructing revenue projections using historic production, adjusted accordingly for the new doctor’s proficiencies and additional revenue channels that the associating doctor’s scope of care may open for the practice. Next, forecast applicable operating expenses, being mindful of adjustments to the expense ratios as the practice achieves various production thresholds over time, and additional capital expenditures that are necessary over the time horizon. Lastly, calculate cash flows as the difference between revenue and expenses for each time period.
- Financial Feasibility: The modern employment market for associate optometrists is hyper-competitive as corporate, private equity, and health care systems across the nation have bid-up compensation packages. According to the U.S. Bureau of Labor Statistics, mean annual wage for optometrists is $133,100, with the 90th percentile earning upwards of $191,430. Constructing a feasibility analysis around full compensation (base pay, bonus/production, health and wellness, retirement, professional benefits, etc.) will determine the appropriate production goals that are necessary to position the practice to offer top-dollar compensation. (Pro Tip: Identify the target compensation package for the new provider, then work backwards to determine the production targets necessary to achieve desired outcome — financial feasibility!)
- Create a Win-Win-Win-Win
For many doctors looking to add an associate to their practice, the single biggest concern is ensuring that the strategy and terms are sustainable. Thus, establishing a stakeholder-centric action plan is imperative to ensure all parties are served in the arrangements. In the case of adding an associate provider to your practice, there are four key stakeholders to be served:
- Your Patients: The scope of modern eye care is expanding rapidly to meet growing public health needs for vision, medical, and specialty eye care. Evaluating your practice analytics — patient demographics, CPT codes, service and materials conversions, and conducting geo-spatial and competitive analyses will identify the patient and community eye care needs that would be appropriate for the new provider to serve.
- The Associate: The market for doctor recruitment is highly competitive, and providing a robust compensation package is integral to attracting top talent. Conducting due diligence across your financial statements and production analytics provides the building blocks to create a competitive, modern compensation plan, including: base pay, bonus/production, health and wellness, retirement, and professional benefits.
- Your Practice: Adding an associate is a big commitment. However, careful assessment of practice analytics and financials can empower the proactive practice owner to determine all relevant breakeven thresholds that must be covered to ensure adding the associate is in the financial best interest of the practice. Additionally, if the new associate is brought in to be on a partner/purchase track, it is imperative to understand implications to practice economics and start forging that plan from the beginning when onboarding as an associate provider.
- Your Team: Adding an associate provider to the practice necessitates the full engagement and commitment of your team in support of the new provider as a clinician and a leader within the practice.
Establishing a strategy that benefits all key stakeholders is imperative to achieving sustainability of any decision for your practice. In the case of adding an associate, construct a plan of mutual benefit to all parties.
Whether you’re adding an associate doctor to your practice to serve more patients, chart your exit plan, or simply enjoy more time out-of-office, establish the structure for sustainable results by knowing your numbers, determining financial viability, and creating a stakeholder-centric implementation plan.