Photo credit: Dr. Ann M. Hoscheit. Dr. Hoscheit at work in her office. She shares a few key cost cuts that made a significant impact.
Implementing practice cost cuts
By Ann M. Hoscheit, OD, FAAO, FAARM, CHC
April 9, 2025
In the ever-evolving landscape of optometry, managing expenses is crucial for maintaining a healthy practice. Over the years, our team has identified several cost-cutting strategies that preserve quality care while enhancing profitability.
Here’s a look at three significant areas where we achieved significant savings, along with the metrics that demonstrate their impact
Practice Cost Cut #1: Reducing Cost of Goods Sold (COGS)
What Was It?
The first area we tackle when deploying cost-cutting strategies is Cost of Goods Sold (COGS), which includes ophthalmic lenses, frames and contact lenses.
Why Did We Do It?
COGS is one of the largest expense categories for nearly every practice. By shaving just 1-2% off this category we can significantly boost net revenue.
For instance, in a practice generating $1.2 million in gross receipts, a 1 percent reduction translates to a savings of $12,000 annually. Experience informs us that most practices can reduce expenses in this category by as much as 5-10%.
How Did We Do It?
We conducted a thorough review of our frame lines and their turnover rates. By negotiating with vendors for better discounts and exploring bulk purchases, we maximize savings.
For ophthalmic lenses, we met with our current lab representatives to negotiate pricing and also seek bids from other labs. I recommend reviewing this category annually to ensure you’re getting the best deals.
For contact lenses, compare wholesale costs through various buying groups and align prescribing patterns with lenses that offer optimal profit margins.
Impact on Operations
While some changes, like adjusting frame lines, typically has minimal impact, switching ophthalmic lens labs required more effort from our staff to familiarize themselves with new products. However, it is important to commit to a consistent patient experience while also introducing desirable new frame styles and perhaps even better pricing.
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How much did we save?
Standard advice was to keep COGS under 20 percent, but in 2025, it’s common to see COGS at 26-28%. Thus, a 1-2% reduction has a powerful impact on the bottom line.
Variables impacting COGS include ratio of contact lenses to eyewear sales (COGS will be higher in a practice selling a high volume of contact lenses) and overall optical volume (lens/frame companies tend to reward growing practices with better wholesale pricing and other reward programs).
Practice Cost Cut #2: Managing Cost of Employment (COE)
What Was It?
The second area that warrants our attention is Cost of Employment (COE), which is typically the second-largest expense category in a practice.
Why Did We Do It?
With COE ballooning to 30% in 2025, we recognized the need to manage this expense more effectively. Hiring and retaining quality employees has become increasingly challenging, and we need to find ways to control costs without sacrificing the patient care model.
How Did We Do It?
Implementing a “Total Employee Compensation Summary Form” to provide transparency about the full compensation package helps employees appreciate what they receive from the practice, beyond their paycheck. For example, it could be pointed out that the full compensation includes health insurance, complimentary or deeply discounted eyewear and sponsorship of continuing education.
We recommend disconnecting annual performance reviews from raises, linking salary adjustments to overall practice performance instead.
Too frequently, we see employers base salary adjustments on their “gut feel.” By utilizing regional salary surveys and analyzing practice metrics, you can be fair while avoiding excessive raises.
Impact on Operations
Employees who understand their total compensation tend to be more satisfied and loyal. For example, our accounts receivable employee appreciated the opportunity to take an Excel class, which not only benefited her, but also improved our practice’s efficiency.
Long-Term Benefit of this Cost Cut?
While this cost cut is more about preventing COE from escalating, it’s essential to take a strategic approach. By focusing on employee satisfaction and growth, you foster a healthier work environment that ultimately enhances patient care.
Practice Cost Cut #3: Preventing Workplace Fraud and Abuse
What Was It?
An area not to be overlooked is workplace fraud and abuse, which can significantly impact the bottom line.
Why Did We Do It?
My consultancy frequently discovers instances of fraud in various practices, such as employees pocketing cash payments or misusing reward points. These issues highlighted the need for better oversight and accountability.
How Did We Do It?
We establish systems of checks and balances to prevent fraud. For example, implement monthly adjustment reports to monitor any unusual activity; also establish a systems so that the same employee does not handle both payables and bank reconciliations.
Impact on Operations
By addressing these issues, we enable the practices we work with to create a culture of trust and integrity, which improves employee morale and patient satisfaction.
How Much Can this Cost Cut Save?
While it’s challenging to quantify the exact savings from preventing fraud, the potential losses can be substantial. For instance, one practice discovered over $500,000 in fraudulent checks written by a manager over several years. Stopping such practices can lead to significant financial recovery.
Total Annual Savings: A Path to Increased Revenue
By implementing these cost-cutting measures, a practice owner can significantly increase practice net profit.
As previously cited, for a practice with 1.0 full-time-equivalent (FTE) optometrists and gross receipts of $1.2 million, a 1 percent savings translates to $12,000 added to the bottom line. Achieving a 2 percent reduction can lead to even more substantial changes in take-home revenue and overall practice success.
In conclusion, while cutting costs requires effort and strategic planning, the rewards are well worth it. By focusing on COGS, COE and preventing fraud, you can create a more efficient practice that benefits both your team and your patients.
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Ann M. Hoscheit, OD, FAAO, FAARM, CHC, is the president of EyeBridge Consulting Associates, ODPA. To contact her: drann@eyebridgeconsulting.com
