Step 3. Pricing calculation

The next step is to calculate the true cost of clinical time in your practice. Once this is known, you can determine a realistic monthly fee to charge contact lens or spectacle wearers. Before entering any data into the Professional Fee Template, you will need some practice performance information. None of the information required should be too onerous to acquire, as it can be found within your most recent practice accounts and the appointment diary. If you have a new practice without any business history, any trading forecasts will be a good basis for the data required.

Fees

Now download the The Professional Fee Template, if you have not done so already. This template has three main parts; the first to help calculate the true cost of chair time when providing eye examinations, the second to apply a desired mark-up to contact lenses and solutions and the final part to calculate a total monthly amount for a patient dependent on lens type and solutions where necessary.

The template provides an accurate means of determining the true cost of the chairtime in your practice. Other templates are also available including those from the AOP, Practice Plan and Eyeplan. The Professional Fee Template available here has additional features which enable you to compensate for factors such as utilisation of appointments and additional profit requirements. However, the accuracy of the information it provides will be totally dependent on the information inputted by you. You may be well advised to check the figures to be entered with your accountant to ensure accuracy.

Enter your data

Starting at the top of the template, enter in the first dark blue box the total annual turnover for your practice. This number can be obtained from the last full set of practice accounts. To avoid corrupting any of the template formulae only enter data in the dark blue coloured boxes. It is advisable to save a copy of the template to your computer.

In the next box enter the gross profit expressed as a percentage of the total turnover. The gross profit is the total turnover, after the cost of goods purchased for resale, i.e. frames, lenses, contact lenses, etc, has been subtracted. It will often be shown in a set of accounts, on the page entitled ‘Profit and Loss Account’, beneath the turnover. Some accountants will express this as a percentage for you. A typical range for an independent optical practice would be 65-75%.

If an increase in gross profit is desired for investment in the practice or to simply cover inflationary costs, an amount can be entered in the next box down. If you have any doubt about the correct figures to enter please consult your accountant.

Clinic hours

The following sub-section requires details relating to the number of optometrist and contact lens optician hours in the consulting room. From this the total number of clinic hours can be calculated. For example, if the consulting room is occupied by an optometrist or contact lens optician who is available to see patients from 9.00am to 5.30pm , with breaks totalling an hour, they will be available to see patients for seven and a half hours. Therefore ‘7.5’ should be entered in the first dark blue box of this second section. The following box requires the number of clinic days per week, i.e. if one consulting room is occupied by an optometrist for five days and a contact lens optician for one day, the number to be entered is ‘6’. Alternatively, if there are two consulting rooms each occupied five days each week, ‘10’ would be entered. The subsequent box requires the number of weeks worked in practice each year by the optometrists/contact lens opticians. Do allow for holidays, including Bank holidays and time out of practice for training courses, illness etc. The number of weeks worked may typically be 45 or 46 weeks. However, if locums are used to cover for holidays this will make the figure higher. A figure stating the total number of clinic hours optometrists and contact lens opticians are available to see patients will appear below and to the right of this section.

If not all available appointments are fully utilised, either due to a lack of bookings or patients failing to attend, this should be represented as a percentage. To calculate a fair estimate for this figure look back through the appointment book to determine how many appointments were not filled over last month or two and convert it into a percentage of appointments available. Once this has been entered, the template will calculate the true cost of clinic time for your practice. Depending on practice overheads and number of clinics held this figure is likely to be in the range of £100 - £250, which can be a shock to many practice owners.

When the number of minutes for an eye examination appointment have been entered, the actual cost to the practice, as an allocation of gross profit, will be calculated. When entering the time for an eye examination do allow for any additional procedures, i.e. retinal photography, nerve head analysis, etc, which you would like to perform on the majority of your patients. This will ensure that a realistic amount can be calculated for a fully comprehensive eye examination, including any ancillary tests for all your patients, allowing you to provide the highest standard of care.

If this hourly rate is charged for all clinic time then the current practice turnover can be achieved before any product has been sold to your patients.

Professional care plan

If you wish to offer a professional care payment plan for spectacle wearers, this figure can be used as a basis to calculate your monthly fee. For example, if the Professional Fee Template calculates the cost of providing an eye examination as £90, it can be divided by 24 to give £3.75 as a guide to a monthly fee for those who require an eye examination every two years. You should add the cost of collecting the fee each month, either by Direct Debit through your own bank or via a third party broker, which may add up to £1.50 to the fee. There are many benefits both to the practice and patients. These include greater patient loyalty, more realistic professional fees, less reliance on the sale of spectacles, and patients can spread the cost of comprehensive professional eyecare, as well as purchase eye wear more economically.

Because patients paying this fee are covering the true cost of any chairtime they utilise their clinical time will not need to be subsidised by the sale of spectacles. Therefore you can offer them a substantial discount off any spectacles they purchase. Typically, practices offering such schemes provide discounts of 20 – 30%. Generally, the higher the discount the more attractive your scheme will be. Of course, knowing they will get such a discount encourages the majority to purchase new spectacles more frequently than before and they also tend to spend a similar amount on each pair to what they used to, before the discount was available to them. Many will make multiple purchases, i.e. prescription sunglasses, sports eyewear, spectacles for vocational and hobby needs.

Note – in this example and in many practices the discounted product prices are only offered to patients who sign up to your care scheme. Other patients pay the same price you currently charge. This means that if not all your patients are on the scheme you do not lose the revenue you are currently making, plus it acts as incentive for patients to join the scheme.

Some practices encourage patients on their scheme to receive an annual eye examination. Using the example above this would require charging a fee of £7.50 (2 x £3.75) plus any administration fee. However, dispensing rates will often be lower (>30%) instead of 60+% for those, on this type of scheme, seen every two years. This is unlikely to be a huge issue as the practice is no longer financially dependent on the sale of spectacles to meet overheads and profit requirements from these patients. Initially, you may choose to start contact lens scheme first and once the practice team have gained confidence with this a scheme for spectacle wearers can be introduced.

Contact lens care & fitting options

Now that the template has calculated the actual cost of providing clinical care, the fees relating to the fitting of contact lenses and providing annual aftercare is calculated. The next box requires a figure to be entered for the total time taken to fit a new wearer with contact lenses. Do include the time taken for insertion and removal training, if this is done by either an optometrist or contact lens optician. When the time spent on aftercare for an average patient is entered in the next box, monthly fees for various care and fitting options are provided. For example, Option 1 provides a monthly fee for providing annual aftercare and option 2, which tends to be the most popular, provides a fee for annual aftercare and an eye examination every two years. Options 3 and 4 include allow for the initial fitting time to be included. These are not as popular as practices will have to reduce the Direct Debit amount for years two, three and beyond. The cost of the initial fitting can be recouped by charging an initial fitting fee.

If you have any questions relating to the use of the Professional Fee Template or implementation of this plan, help is available free of charge from an independent web consultant.

Product pricing

Because all practice overheads and profitability are covered by the monthly fee, practices operating these schemes may choose to offer contact lenses and solutions at very competitive rates. Product prices may often be as competitive as those offered by internet based and mail order companies. Therefore patients will be confident in your pricing policies and remain loyal to your practice for all their eyewear needs. Remember in the example only patients who sign on to your professional care scheme receive a discounted price. Some practices in fact show 2 prices per product, the standard cost and the discounted scheme member price.

In the ‘Contact lens types’ section you can enter the lens brand name in the first column followed by the net cost, excluding VAT, paid for the lenses per pack. It is advisable to include any postage and packing costs apportioned per pack where appropriate. The number of packs needed per year should be entered in the next column. For example, for a full time wearer of a monthly disposable lens, supplied three lenses to a pack, eight packs will be required.

The percentage mark up required to handle and supply the lenses should be entered in the next column. Anecdotally typical product mark up chosen by some practices charging for their clinical time is usually 15-20% depending on local market market competition. A few practitioners charge a slightly higher mark up for more unusual lens types, i.e. custom torics, RGPs, etc.

The fee template will automatically calculate the monthly charge for the patient and add VAT at 17.5%.

Go through exactly the same process for contact lens solutions and the template will provide monthly costs for patients.

You now have the basis for a new contact lens and solutions price list for patients on your scheme. For those who do not wish to join this new scheme you may wish to continue charging higher prices for lenses and solutions, as well as making a cash charge for each appointment, eye examinations and aftercare visits.