Optometric Management Tip # 196 - Wednesday, October 19, 2005
Wish you could raise your fees?
(But vision plans make it ineffective)
There is no question that raising fees is the fastest way to increase your gross and net income,
and you donít even have to increase your patient load or change your office procedures. Since
your fixed expenses donít change, an increase in your exam fee would fall directly to the bottom
line as more profit. Incremental fee increases, say in the range of 10%, are well tolerated by
patients. Indeed, most patients donít even notice an annual fee increase and they expect the
cost of our services to go up over time, like everything else. On top of all that, most
optometrists simply arenít charging what their services are worth, which is a mystery.
So we can probably all agree that increasing fees is a highly desirable management action. Yet,
the response to that suggestion from many ODs is that they could set their fees wherever they
like, but it would make no difference in their bottom line because they have such a high percentage
of vision plan patients. And doctors often reason that if they did raise their fees, they would
only be penalizing the small percentage of loyal, private-pay patients that they still have, and
they are reluctant to do that.
If this scenario describes your situation, my response is that itís time to consider dropping some
vision plans! Your practice has become vision plan dominant and letís face facts: you canít
achieve high gross and net incomes in a practice that is mostly vision plans. The plan fees are
just too low. You may be able to earn average income levels for an optometrist, but you canít
realistically expect resounding practice success.
Take a step back and evaluate
Consider these questions:
Some aspects of practice management have their own inertia. They simply drift along without any
action by the practice owner, and yet they can invisibly evolve into a situation that is nothing
like the original concept. Vision plans are that way. A practitioner could start out with the
notion that he or she would like to fill some empty chair time, and even a discount plan is better
than nothing at all. Joining the plan is a fast and easy way to bring in some new patients, and
most of the other docs in town are on the panel, which makes one think itís smart to join also.
Maybe the percentage of plan patients is only 10% at first, and it seems to be providing a nice
- Do you want a ďvision planĒ practice?
- When you started your practice, did you plan for it to be dominated by vision plans?
- Has your practice always been dominated by vision plans, or has it grown into that modality?
Fast-forward 10 years, and the practice has joined a few more vision plan panels and all the plans
have grown significantly as more and more employers offer vision benefits to employees. In order
to keep profits up, in the face of capped fees and limited gross revenue, the practitioner makes a
few cost-cutting moves. The number of staff is kept constant, even though more patients are being
served, because it seems like there is no money to hire more staff. Office furnishings and frame
displays are not updated, and might be described as basic. The downward cycle begins, as private
pay patients seek what they perceive to be higher quality care, but vision plan patients keep coming
in droves, because they are just happy to receive free services.
This can happen pretty easily, but it can also be changed. Practice owners made the decision to
join panels when they thought it made sense and they can get out when it stops making sense. It
may seem scary, but a good way to test the effect of reducing your participation with vision plans
is to drop just one, and monitor the effect. Iíd choose the lowest paying plan that has a small
percentage of your patient base. See what happens when patients call for an appointment and are
told you are not a provider. See if you can use the free time you gain (if there is any) for a
better purpose. See what happens to your net income.
ďBut, everyone in my area has a vision plan benefitĒ
I admit that some regions of the country are extremely dependent on several large employers, and
if they all provide vision plans as a benefit to employees, most of the local population will be
covered by a vision plan. Is it realistic to think that many people would opt to go outside of
their plan and pay out of pocket for eye care, when it would be covered by a participating provider?
Well, yes and no. I doubt that many patients would stay with the hypothetical practice that I
described above. There is no compelling reason to pay more and file oneís own claim, or pay out of
pocket, if the practice offers similar care as other doctors who are on the plan. But if your
practice is far above the participating provider practices when it comes to convenience, dťcor,
customer service, product selection, high-tech instrumentation, friendly staff, etc., then I think
many patients will stay. Or may go away once and return. I believe there will always be a market
for excellence in any field Ė even at a higher price.
It is a serious mistake to assume that an area that is mostly blue-collar working class will not
want fine things. Many people in this group drive nice cars, have nice clothes and go to nice salons
for haircuts (when they could go to a low-priced chain). They also want excellence in eye care and
high quality eye wear.
So, the master plan may be to slowly drop out of the worst plans as you invest in your practice.
By positioning your practice well above the norm in both physical appearance and customer service,
you give patients a significant reason to stay with you.
Donít let the vision plans dictate the eye care standards in your community Ė develop them yourself.
Next week, Iíll discuss the mechanics of dropping a vision plan.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management