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 By Neil B. Gailmard, OD, MBA, FAAO, Editor July 2, 2008 - Tip #335 
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I get lots of emails with excellent questions from readers about all kinds of practice management topics. I've always felt that if one person asks a question, there are many more who wonder the same thing, so this tip and some future ones will share actual (honest!) email questions I've received and my answers.

Q. (Editor's note: this question was in response to Tip #333) Interestingly, I read your column, most all of the time. You really threw me a curve this time. I believe as you do that discounts do not belong in a professional office. Several months ago you stated you disagree with all discounts or courtesies, except on second pairs of prescription specs...so I started giving courtesies (I hate the word discount) to patients desiring 2nd pairs. We used to only sell 2nd pairs once in a blue moon, now it's very common...why do you now contradict yourself??

A. You have really summarized my feelings perfectly. The only discount I offer in my practice is the multiple pair of prescription glasses discount, and then I go big with the 50% discount. I've found, just as you have, that the discount in this case truly creates additional sales that would not have occurred without it. That's when accepting a reduced profit makes sense. I've done the math and with my fee structure, we still make a decent profit on the additional pairs of glasses even with the discount. And, as I tell our patients, it's easier for us to process multiple pairs of glasses at the same time. We write the order once, we cut and edge them at once, we call the patient once and we dispense both pairs at the same time. There is some economy of scale. The dramatic example in Tip #333 was to get you to see the true impact of a discount on net income, but there are still some special cases where it makes good business sense to offer a discount.

Q. (Editor's note: This is a long one, but it's worth it!) Thanks for all the great tips, I already implement a lot of them and they seem to work a lot of the time. As a new practice (two years old this July) in a rural, but very competitive area, it's been a challenge just getting patients through the door. I feel we are doing quite well for a new practice, but still have a very long way to go. Most patients come because we are on their insurance panel -- fine enough, I've made that agreement. We also receive more and more referrals by word of mouth from existing patients because we do a great job. We have some private pay and small benefit insurance plans which pay some towards an exam and materials with the patient required to pay the difference.

My question is this: If I don't discount my high, modern fees, will patients leave their current docs, when many do a great job at a much lower fee, to come to me to pay more? Or more specifically, should I have different levels of fees, or discount the difference on what they owe for an exam when insurance doesn't cover the full fee, so they aren't paying way more than ever before for an eye exam?!

For example, the plan (not Medicare) pays $60 towards an exam. I've set my fees to a level so a 92004 and 92015 would be more than $150 (not too outrageous according to your philosophy of setting fees high and providing great service which we do). So the patient's balance is over $100 with this insurance. The patient's previous doctors do not even charge $100 for their eye exam so the patient's balance with the same insurance was $50 or less! I feel almost compelled to give a significant discount so they don't go screaming out the door, never come back and never refer their friends! Many private pay patients have never paid more than $60-$90 for an eye exam. Also, many of my competitors are also doing great, eye exams including retinal screening photos or optomap (at no extra charge), dilation when needed, automated refractions, medical care at the same time as the vision exam, etc. for MUCH less than most medical plans, Medicare, or Medicaid reimburse and for much less than I charge.

So you can see a new practice's dilemma to be competitive with existing practices which do an excellent job, have great service, technology, etc. but which still charge well below what they should. I implemented a lesser fee S code exam for non-medical, routine private pay exams and discounts for 92 codes for small benefit vision plans. Of course, for most vision plans with contracted amounts, there's nothing that can be done no matter what I charge.

However, I would starve to death and not be able to pay school debt, business debt, operating expenses and of course, myself (last to be paid), if we did not take vision plans or if patients didn't come because we only had one high fee for everything. Some patients don't schedule once they hear our exam fees from phone shopping or are shocked at how much we charge and don't come back (not too often but it happens). And it is somewhat tiresome trying to explain fee schedules, discounts, figuring out how to code the exam, etc.

I feel like my frame/lens prices are fairly profitable, actually more than at least two of the practices in the area that I know of, but again I don't want to cut my own throat by being extremely high. Also, most patients don't shop around for specific frame and lens models.

I want every patient possible to come through the door, and I'm afraid they won't schedule or return if our fees are too high (the highest fees in the area before any discounts). Ideally I want just the great, private pay patients that spend $700-$900 every time they come in, but that's not realistic since our town has only 13,000 people with three ODs including me, with a larger community of 30,000 with nine or ten ODs plus one OMD only 15 minutes away.

We provide great service in a modern, clean office with sharp looking wooden bookcase displays and at least 450 frames. The practice includes autorefractor/topgrapher, visual fields, computer VA chart system, computerized records, a fundus camera - used only for medical photos, pach, etc., return medical visits utilizing medical insurance....

I've thought about charging only one fee for a comprehensive exam like you recommend with no discounts for anyone, maybe somewhere in the middle, less than what I currently charge for the most expensive codes/plans but more than an S code private pay exam. I'm just a little timid about patients not coming in based on price or leaving money on the table with Medicaid, Medicare, and medical insurance by not charging enough!

Any help or comments would be appreciated.

A. You raise many excellent points and questions and your email describes very well the issues that many eye care practitioners (ECPs) are wrestling with. I'll itemize my responses to correspond with your main points.

  • Stop worrying and watching your competition so much! Who cares what they do or don't do? Just because they grossly undervalue their services doesn't mean you have to. When you build the kind of practice you are striving for (and already have), patients are really not that price sensitive. If they discover that you charge more than some other office, they simply presume you must be better. It does not drive them away very often and if only a few are driven away, the increased revenue more than makes up for that. To paraphrase my friend Jerry Hayes... I assume there are some practices in your area that charge higher fees than you do. If that's true, why don't you have all their patients?
  • Have any patients actually gone screaming out the door when you charge your usual fees (I know you mean this figuratively - and so do I)? Most ECPs have a fear of losing patients because of higher fees, but the fear is actually without any foundation. Besides, one of the great things about owning a small business is that if you try something and you see it's not working, you can change it immediately! You really won't do any long term harm by testing higher fees.
  • High tech advanced instruments are great, but those bells and whistles are only part of the story. It is not the entire justification for a higher fee basis. It does not define you as a practitioner or your worth. Personal care and outstanding service in every respect is more important.
  • I agree with your decision to accept the better vision plans. I know they require large discounts, but that is still a good business decision for most practices because they deliver such a large volume of patients. You are simply providing a volume discount to a company that is in a position to deliver a high number of guaranteed sales.
  • Realize that phone shoppers don't always make an appointment right away. Many are calling several offices in the area and once they get all the information, they call one office back and schedule. Your receptionist may not know that a person who calls and sets up an appointment today was yesterday's phone shopper.
  • I like your thought of charging one fee for all. Follow your instincts to keep your fees simple and easily explainable to patients. Don't bait and switch them. When you look at the various medical plans and the fees they pay, keep an eye on how prevalent those are in your practice. A plan that offers high reimbursement levels but is hardly ever actually used is not very important and should not be used as a basis for all fees. Many ECPs set their fees much higher than Medicare or other medical fee schedules and simply write off any balance not paid. If you are going to set only one fee for all exams regardless of whether it is routine or medical and regardless if it's private pay or billed to insurance, it makes sense to set it just slightly higher than the highest accepted medical plan.
  • As your cash flow allows, keep investing in your practice, such as increasing your frame inventory to 800 and adding instrumentation. Why not offer retinal photos as an optional screening for an additional fee?
  • Your point about having return medical visits covered by medical insurance is fine, as long as you truly need those visits. Patients can spot unnecessary visits in an instant and it will kill your reputation.
  • Don't feel like you must work toward having "every patient come through your door." You really don't want all segments of the market. You want the segment that values the very best eye care services and products and is willing to pay for it. Practices that try to attract everybody have a philosophy that they provide the best service, the highest quality at reasonable prices. Actually, no business can do all three things. The old joke is: pick two and call me back. And you should pick best service and highest quality and let the low price aspect go. So what if your market position does not include low price? So what if you are known for high prices - but fantastic service? People will actually seek you out for that! Do you always look for the restaurant with the lowest price? No. I'll bet you have actually sought out high-priced restaurants at times.
  • Great, private-pay patients who spend $700 to $900 are quite realistic in any market. You're on the right track to develop that type of practice. Just keep pushing for amazing customer service in your practice and look at everything you do from the patient's point of view. It's not cannibalizing patients from other practices, it's free enterprise.

Best wishes for continued success,

Read Past Tips Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week

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Send questions and comments to neil@gailmard.com.

Dr. Gailmard offers consulting services to eye care professionals through Prima Eye Group; information is available at www.primaeyegroup.com.

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