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 business benefit.

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