The “Secret Sauce” in Achieving Extraordinary Practice Results

1. The “Secret Sauce” in Achieving Extraordinary Practice Results Presented by: Amanda Ortlip Allergan Practice Consultant

2. Session Objectives • Report on results of Five Year Benchmarking Analysis • Provide education on how you can use practice benchmarks to enhance performance • Share insights of key success factors of better performing practices

3. Program History BSM Consulting and Allergan have been administering a benchmarking survey for 13 years. Survey is available to Medical Aesthetic practices across the United States. Results reported for three specialties within the medical aesthetics industry.

4. Survey Participant Specialties Footnote: 1Three years of data is collected for new practices participating in the survey. As this additional data is added to the databases, the number of practices reporting for prior years increases year over year.

5. Medical Aesthetic Practice Size

6. Highlights of the Analysis

7. Analysis Objectives • Compare practice results over five year timeframe • Evaluate trends for key production and efficiency performance indicators • Identify key success factors for better performing practices

8. Key Performance Indicators (KPIs) Type of performance measurement that is essential to the practice reaching its goals. An objective to be targeted that will add the most value to the business. Should be understandable, meaningful, and measurable.

9. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITION • All practice income including: • Professional services • Product sales • Consulting and research • Other

10. Practice Revenue

11. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITION • Physician professional service income. • Measured on a full-time equivalent (FTE) basis, where 1 FTE physician = 1,600+ hours per year (including office and surgery days) • Example: • Physician Revenue = $1,200,000 • Hours = 1,600 = 1.00 FTE • Revenue per FTE Physician = $1,200,000

12. Revenue per FTE Physician

13. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITION • Includes Physician Assistant and Nurse Practitioner professional service income. • Measured on a full-time equivalent (FTE) basis, where 1 FTE non-physician provider = 2,080+ hours per year • Example: • Non-Physician Provider Revenue = $400,000 • Hours = 2,080 = 1.00 FTE • Revenue per FTE Non-Physician Provider = $400,000

14. Revenue per FTE Non-Physician Provider

15. Revenue per FTE Physician vs. All Other Providers and Service Lines Footnote: 1Other provider and service line revenue includes income from physician assistants, nurse practitioners, nurse injectors, licensed aestheticians, retail sales, consulting and research, and other non-provider sources.

16. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITION • Number of procedures per physician. • Surgical Procedures: • Eyelid • Facelift • Abdominoplasty • Liposuction • Breast Augmentation • Nose Reshaping • Non-Surgical Procedures: • Neurotoxin Injections • Filler Injections • Microdermabrasion • Chemical Peel • Skin Rejuvenation • Laser Hair Removal

17. Procedure Volume

18. Procedure Volume

19. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITIONS: • Operating Expense Ratio • All Operating Expenses and Cost of Goods divided by Practice Revenue • Excludes provider compensation, bonuses, and retirement contributions. • Example: • Practice Revenue = $1,250,000 • Operating Expenses = $725,000 • Operating Expense Ratio = 58% • Staff Payroll Ratio • All Staff Payroll divided by Practice Revenue • Example: • Practice Revenue = $1,250,000 • Staff Payroll Expenses = $225,000 • Staff Payroll Ratio = 18%

20. Operating Expense Ratio Benchmark Range: 58% – 72%

21. Staff Payroll Ratio Benchmark Range: 12% – 19%

22. Review of Key Performance Indicators • Practice Revenue • Revenue per FTE Physician • Revenue per FTE Non-Physician Provider • Procedure Volume (Surgical and Non-Surgical) • Practice Efficiency: • Operating Expense • Staff Payroll Ratios • Practice Efficiency: • Marketing and Advertising • Rent Expense • Revenue per FTE Support Staff • DEFINITIONS: • Marketing and Advertising Expense Ratio • All Marketing and Advertising Expenses divided by Practice Revenue • Rent Expense Ratio • Practice Rent Expenses divided by Practice Revenue • (Includes rent and/or lease expense only) • Revenue per FTE Support Staff Ratio • Practice Revenue divided by FTE Staff

23. Marketing and Advertising Expense Ratio Benchmark Range: 2% – 6%

24. Rent Expense Ratio Benchmark Range: 4% – 7%

25. Revenue per FTE Support Staff Benchmark Range: $270,000 – $400,000

26. Summary of Findings • Practice revenue has recovered to levels above those of 2007. • Physician productivity has returned to 2007 levels. • Non-Physician provider productivity has increased since 2007. • Surgical procedures have declined but are trending positive over the past three years, while Non-Surgical procedures have trended higher over the last five years. • Practices have done a good job in controlling overhead costs.

27. The “Secret Sauce” in Achieving Extraordinary Results Key Success Factors

28. Exercise Financial Discipline

29. Adopt Financial Discipline • Work with financial advisors to assess your financial standing. • Evaluate your balance sheet ratios: • Current ratio • Debt to equity ratio • Assess your overall personal and practice debt levels. • Strengthen internal controls to minimize risk of embezzlement. Are there some specific things you should be doing to safeguard your assets?

30. Aggressively Manage Practice Finances • Scrutinize • every line item • of expense on • your P&L. • Create a • practice budget. • Increase accountability • for new capital purchases. • Identify • resources that are • “must have” vs. • “nice to have.” • Benchmark practice results on a regular basis. $

31. Adopt and Maintain a Business Plan

32. Why develop a business plan? • Bring structure and discipline to the practice. • Build consensus among key stakeholders on vision, strategy, and goals. • Establish accountability for agreed upon projects. • Provide a foundation • for budgeting.

33. Where do we start? Achieve buy-in from the owners and other key stakeholders. • 1 • Complete a benchmarking assessment of • the practice. • 2 Conduct stakeholder surveys. • 3 • Have an initial meeting to review your SWOT. • 4 Strive to gain consensus on key areas of opportunity. • 5

34. Tools to Consider in YourPractice Assessment • Implement • patient satisfaction surveys. • Reassess your website, SEO, • and social media presence. • Evaluate staff efficiency. • Conduct an employee survey. • Complete a financial and production analysis. • Complete a procedure value per hour analysis.

35. Keys to Successful Implementation Develop an implementation plan. Define objectives in “actionable” terms. Assign an “owner” to each initiative. Set forth timelines for completion. Evaluate results periodically: • Written updates are helpful. • Have regular meetings. • Integrate with practice budget.

36. The Key to Success It’s easy to develop a plan, but what separates average performers from best practices is one’s ability to implement a plan.

37. Successful Implementation Requires: Strong physician leadership. Consensusamong stakeholders. Communicationwith staff. Proper alignment of economic incentivesbetween physicians and with staff. Accountability and measurement.

38. Embrace Your Role as a Leader

39. Ask Yourself Three Questions: ? What does my team need from me as a leader of the practice? What steps can or should I take in order to “keep it together?” What do I need to work on in order to enhance my skills as a leader in the practice? • 1 • 2 • 3

40. Best Practices Establish and promote a strong sense of purpose and values. Provide a clear sense of direction. Behave in the “right” manner: • Arrive on time. • Be respectful to staff and patients. • Stick to the schedule. • Maintain a positive attitude. • Maintain an even keel.

41. Best Practices Surround yourself with caring and committed individuals. Share the wealth; align incentives in a thoughtful and strategic way. Maintain a discipline of planning, budgeting, and measuring. Be more transparent about sharing information.

42. Best Practices Enhance your communication skills. Practice the LAER (Listen, Acknowledge, Explore, Respond) technique. Maintain your humility.

43. It is fair to ask the “WIIFM” question! • Low, but healthy turnover. Reduction or elimination of drama. • Enhanced productivity and efficiency. Greater engagement of the team in achieving shared goals. • Feeling of contentment from building legacy value.