Article Date: 6/1/2013

How to Join a Vision Plan

How to Join a Vision Plan

Follow these steps before signing on the dotted line.



Many of you are signing agreements with vision plans (which are contracts, i.e. a legally binding document) without any type of analysis, thought or consideration of its impact on your practice.

The lifeblood of virtually every optometric practice is refractive care (the majority of which is paid for by these vision plans), and conducting a thorough analysis prior to signing on the dotted line is in your best interest.

Here, I discuss the process you should go through when deciding whether to join a plan.

1 Conduct a geographic analysis.

As in any business analysis, it is important to understand the fundamental concept of supply and demand. The first component is an analysis of the supply side, i.e., other providers. It’s important to understand who in your immediate area, expressed in miles radius, sees patients under this plan. Most plans provide a directory online, or you can contact the plan directly to see other providers who are in your community.

If you agree to open your practice to see patients for what is assumed to be (but not in all cases) a reduced fee for increased volume, evaluate whether the “promised volume” is going to be there. Understand your product mix, to what extent you want to create access to this particular service and whether it can meet your requirements for volume production.

For example, if you have sufficient capacity to see 100 patients per month from a particular plan, and you are going to create access for these beneficiaries in your practice, you must make sure the plan will produce 100 patients for you per month. If you are competing for these patients with other individuals within a specific radius, you may not want to become a provider for the plan.

Keep in mind: A third-party insurance plan can only sell policies when it has providers to provide the benefits. Thus, the providers control one side of the supply/demand equation.

2 Determine the population pool of beneficiaries.

You must now look at the demand side of the equation. Determine how many people in your primary demographic reach will have access to your services through the plan. Typically, you can call the carrier to talk to the plan administrator and ask for a distribution of covered lives within a specific radius of your practice.

Be sure that these patients have access to your services and are in your geographic location to be able to take advantage of your services as well. As an example, if a plan represents it has 10,000 covered lives with refractive coverage in your area, make sure the geographic distribution of those patients makes it likely or convenient for the patients to select your practice as their provider of choice for their covered services.

It doesn’t do you much good to sign up as a provider when there is not enough patient population signed with the plan for your services or enough patient density within your geographic location to make joining the plan beneficial for your practice.

3 Define scope of services covered.

Many of us incorrectly assume that all vision plans are created equal. However, they compose their product mixes to attract potential customers.

For example, you may not realize that, when you sign up for a plan, you are also agreeing to provide medical eyecare services for 30% of your established fees. In addition, the plan may allow you to only provide routine eye exams instead of comprehensive levels of eye care. Or perhaps the carrier is bundling the “determination of refractive state” (refraction, CPT code 92015) into the examination and not paying you for your professional services.

There is quite a bit here to consider, so clarify the extent and definition of what professional services and materials are covered within the specific plan after a careful reading of the contract.

4 Review contractual requirements.

Read the entire provider agreement.

Remember: This is a legally binding contractual agreement. You are bound to follow your obligations contained within the final executed agreement, and you risk significant financial exposure and liability should you fail to do so.

Many vision plan provider agreements spell out (with great detail) actual clinical tests that you must perform to meet the requirements of particular covered services.

For example, your carrier may require you to meet a definition for a comprehensive exam that is far more extensive than that of your state optometry law or CPT requirements for that specific service. Even though you are not required to provide this heightened level of service by state law or CPT definition, you are required to provide it to the covered patient under that specific agreement (and face significant consequences if you fail to do so).

Many vision plans may also require you to provide additional visits without additional compensation for your contact lens patients as follow-up, which is in stark contrast to what the CPT rules may allow.

Regardless of what you think is right or wrong, once you have signed an agreement, you are bound to follow the contract to the letter.

5 Determine reimbursement for covered services.

One of the chief areas of displeasure with vision plans is the reimbursement for covered services, both for services and materials.

I continuously hear from practitioners how upset they are about getting paid so little for their professional services. If you have done your analysis correctly, you have already figured out how to make this reduced reimbursement work (more on that in the next section). If you haven’t figured this out, remember it is not the vision plan’s fault. It is your fault for agreeing to provide these contracted services at the contracted reimbursement.

If you don’t like the compensation for a particular plan, don’t sign the agreement to be a provider. Request to negotiate your reimbursement schedule during the negotiation phase of the contract. Of course, this must be done before accepting the agreement.

The vision plans need you more than you need them, and if everyone approached joining a plan by performing an individual, analytical, calculated analysis, the number of practitioners joining may be different than what it is today.

Make sure that you are cognizant of the reimbursement that you have agreed to accept for providing services.

6 Calculate internal chair cost.

To make any business transaction a profitable one, you must have intimate, detailed knowledge of both sides of the financial equation: income and expenses.

While the income side is a negotiated one, as described above, many practitioners are not aware of the cost to them to provide these professional services, or chair cost. This can be calculated in a few different ways, but I prefer to use an hourly basis, as this is not volume dependent, it tends to be a more pure analysis based on true overhead costs.

When properly calculated, chair cost provides you with the dollar-per-hour revenue from professional services alone that allows you to break even. Generally, chair cost for professional services is defined as your total expenses less cost of good sold divided by the number of patient production hours within the defined time period. An employed O.D.’s salary would be included in the expenses. However, owner’s salary or draw (depending on type of legal organization or corporation) wouldn’t be included.

My calculations show that the average chair cost per hour is approximately $92/hour. (This information is from my calculations based on nationally available numbers. Direct chair cost information is not typically published.) Therefore, the average O.D. must produce $92 per hour in professional service revenue for every production hour just to break even. For example, if you agree to accept $55 per comprehensive exam from a vision plan and perform one examination every 30 minutes, you make $18 per hour in profit ($55 × 2 = $110 revenue per hour, less $92 chair cost equals $18 per hour).

There are not too many variables to work with to change this profit picture. You can change the reimbursement by negotiation prior to signing up or if the reimbursement is fixed, you can change the number of examinations you perform per hour. For example, if you change your number of exams to three per hour, your profit per hour increases to $73, or if you perform an examination every 15 minutes, your profit jumps to $128 per hour using the figures for reimbursement above.

In performing this analysis of joining a plan, figure it out ahead of time, so you can adjust your product mix and your schedule to provide these services.

A calculated process

Joining a vision plan should not be an exercise in fear or greed — the two emotions that inappropriately govern many business decisions. Instead, the decision should be a well-thought-out process that involves many aspects of analysis.

With proper knowledge of the business relationship, you should be able to make a decision to “hire the plan,” or not to hire one. And, with proper knowledge, you should clearly know how to make the plan profitable and work for the best interest of your patients and your practice.

So don’t shortcut this essential component of practice success. OM


Dr. Rumpakis is founder, president and CEO of Practice Resource Management, Inc., a consulting, appraisal and management firm for healthcare professionals. E-mail him at, or send comments to

Optometric Management, Issue: June 2013, page(s): 24 - 27