every patient will choose laser-assisted in situ keratomileusis (LASIK) in lieu
of eyeglasses or contact lenses. Even at the crazy prices we're seeing, LASIK
will never be an option for all patients. However, for those patients who do
elect the LASIK route, you must wonder if those patients are lost. At a
minimum, you probably feel the impact from the changed purchasing patterns of
the mostly younger patients who'll no longer need prescription eyewear � at
least until presbyopia sets in.
If LASIK patients who were purchasing
eyeglasses or contact lenses from you no longer do so, that's a direct annual
or biennial hit to your core business. If the trend continues, and if
refractive surgery volumes continue to rise, will the promise of increased
co-management opportunities and revenue more than offset any losses to your
That's the $64,000 question. Given the
pricing madness now sweeping the refractive surgery industry, I suspect the
answer is "no" for most of you in the short term. As for the long
term, we'll see.
I find it interesting to consider that some
significant portion of the resulting loss in core business for many O.D.s may
be the result of refractive surgery programs designed and aggressively marketed
by their "friends" in some of the traditional vision plans.
The emperor isn't wearing clothes
In March 1991, I was a guest speaker at the
American Optometric Association (AOA) symposium, "Managed Eye Care: The
Window of Opportunity." Along with five other speakers, all of us
representing optometrically oriented third party vision plans, we were each
given an opportunity to address the AOA leadership on our companies and the
corporate vision for optometry in a managed care world.
The other speakers all gave the expected
"fluff" presentations. They self-promoted how each company was
working hard to advance optometry's interests in managed care, and how their
companies were dedicated to doing what was good for their panel O.D.s.
Then I stood up and dropped an unexpected
bombshell. I told the AOA leadership that each of the companies, my own
included, was first and foremost out to serve its own interests � to make a
profit. And, we were all going to do that by using optometrists in whatever way
we determined would best maximize our business objectives.
I put it plainly and simply. "It's time
to face reality. It's time to realize that the emperor isn't wearing any clothes."
Immediately following this presentation, I
had a lot of inquiries from those who'd heard the unexpected. Apparently, no
one had ever dared to question, at least in a high-profile forum, the common
belief that optometrically oriented vision plans were optometry's "best
friends" in the managed care wars.
Now, please understand that I'm not saying
all vision plans are bad for optometrists. Some plans have done well for the
majority of their O.D. participants � while turning the profit that every business
needs to survive and grow. But O.D.s have also had some let-downs and even some
logistical and economic problems brought about in full or substantial part by
the very vision plans they'd trusted for so long.
You can see it more and more often these days
in numerous postings to Internet bulletin boards, in letters to the editor and
commentaries in the professional journals. I'm sad to say the overall trend
appears to be going in the wrong direction for many independent O.D.s.
It's been a long, long road
California Vision Services was born in 1955
� a milestone year. That company, the present Vision Service Plan (VSP),
legitimately can be described as the progenitor of what we all know today as
third party vision care.
Since 1955, many other players have come
into the third party vision care game. Some are huge, some are smaller, but we
all recognize the names. Here are a few from a very long list:
� Coast to Coast
� Eye Care International
� Preferred Vision Care.
Early on, vision plans marketed directly to
employers, unions, municipalities and other similar organizations. However,
with the rapid growth of managed care in the 1980s and continuing into the
early '90s, third party vision plans branched out and started selling directly
to the health maintenance organizations (HMOs) and other insurance companies.
As a result, huge blocks of the population were taken out of general
circulation and directed to exclusive provider panels controlled by the vision
For some optometrists, third party vision
care was a bonanza. For example, in Southern California in the mid-to- late
'70s and early '80s, some practices generated six-figure incomes from third
party plans. This was back when most practices had a much higher percentage of
private pay patients. For virtually all independent optometrists, third party
vision plans meant at least some increase in business and bottom-line income.
Certainly, most of the traditional vision
plans were seen as O.D.-friendly. Whether founded and directed by optometrists,
or run by companies that employed or contracted with optometrists, third party
vision care was almost exclusively managed by companies riveted on an optometric
agenda. For many years, all was well, or all was tolerable, given the
constraints of managed care.
A little change
Then, starting in the mid-1990s, several of
the traditional vision plans started to expand product offerings and change marketing
focus. For example, they added medical/surgical eyecare components to the
traditional vision care business.
In those markets where HMOs contracted with
these third party vision care administrators for such services, credentialed
O.D.s could provide certain services beyond the routine exam and eyewear. And,
for the most part, that seems to have worked reasonably well for participating
optometrists. That's because the addition of medical/surgical services served
as a complement to the O.D.'s routine vision care. There was no conflict for a
participating optometrist whether a patient was seen under the vision plan or
Of course, all was not perfect. In the late
1990s, it became clear with at least one influential vision plan that a huge
conflict existed for those who chose not to participate in these expanded
medical/surgical programs. O.D.s who chose not to obtain the mandated
therapeutic pharmaceutical agent (TPA) licensure for participation in
medical/surgical programs were removed from the vision care panels. That was a
rude shock, a slap in the face to many optometrists who'd been loyal
participants in these optometrically oriented vision plans.
Although a vision plan might describe the
mandated requirements as necessary for quality assurance, or for competitive
marketing purposes, or to ensure a homogeneous panel, for many this was the
first, unmistakable, nationwide sign that all wasn't well with some companies
long perceived as optometry-friendly. Many opined that in a competitive rush to
be all things to all HMOs, some vision plans were losing sight of optometry's
A big change
Then starting in the late 1990s, something
happened that ultimately could exert profound, negative change on the
"friendly" dynamic between O.D.s and several of the traditional
vision plans. We started to see vision plans branch out into a new category of
services that clearly has the potential to disrupt every optometrist's core
business of exams, refractions and eyewear.
With the new millennium, some prominent
vision care vendors are teaming with corporate LASIK vendors to provide
discounted refractive surgery to managed care plans. In the majority of these
programs, the patient pays the full cost of a pre-negotiated fee, and the
sponsoring insurer pays nothing. So they're quite different from a funded
insured benefit covering, for example, an annual vision exam with refraction
and a defined pair of eyeglasses once every 24 months.
Traditional vision plans found it a natural
progression of their very competitive business to align with LASIK centers, and
then go to payers with discounted refractive surgery offerings. For example,
VSP teamed with TLC, Cole teamed with LCA-Vision, and Coast to Coast teamed
with VisionAmerica. And seeing opportunity, new players started to enter the
market. For example, TruVision recently teamed with ICON.
In the ideal world envisioned by some, these
arrangements will result in more opportunities for you to co-manage surgical
cases and realize increased revenues from co-management fees. Whether such
arrangements ultimately prove beneficial to you remains to be seen.
What's clear is that as vision plans succeed
in selling discounted refractive surgery packages to payers, they'll exert profound
� the patients
� patients' options for vision correction
� the price differential between refractive surgery and
annual/biennial eyewear purchases
� the fees paid to providers
� the co-management arrangements between operating
surgeons and optometrists.
How all of that shakes out to your bottom
line is a direct function of each company's business model. Those models
ultimately will determine:
� if the LASIK programs offered to HMOs and employers
can benefit community optometrists
� if they're financially nothing more than smoke and
� if they're closed to you.
Read for yourself
For example, Eye Care Plan of America (ECPA)
contracts only with independent practitioners, not with corporate LASIK firms.
Vice President Laura Arnold states, "It
has been ECPA's policy not to be intrusive in the running of a practitioner's
practice. Therefore, involving ourselves in co-management relationships wasn't
an option. To date, there's only one LVC panel surgeon not offering some form
of co-management opportunity to the vision care panel in his area."
"ECPA's only policy regarding
co-management is that it's none of our business, and we don't � and won't
�interfere with the surgeon and O.D. relationships."
Contrast that with ICON, a corporate LASIK
firm partnered with TruVision, that's opening centers across the nation but
using "hired hands."
ICON's Joe Krupa states, "ICON has from
day one used direct marketing to reach its end customers. The company employs
its own O.D.s under contract to ICON."
"ICON is in the process of developing
policies that may one day incorporate certain aspects of co-management, but we
don't currently have any such policies or systems in place."
"ICON believes that co-management as it
exists today simply isn't viable as a functional business model."
So, if ECPA signed one of your local HMOs or
employers for a refractive surgery program, the possibility exists that you could
participate and benefit. On the other hand, if ICON and its marketing allies
signed a local plan, those patients are most likely gone if they obtain LASIK
under that program.
The biggest change
We can argue all day whether some
significant number of post-op LASIK patients will or will not return to you for
annual or biennial vision care. Here, though, I want to look closer at the
position taken by some of these refractive surgery alliances that the
co-management opportunities they're creating are sure-fire revenue enhancers
Even if many or most HMOs eventually offer
refractive surgery, discounted or partially funded, that increase in overall
surgical volume may mean little or no benefit for you if the door to
co-management is inadvertently forced shut by the precipitous price decreases.
If fees fall to the point that many or most surgeons no longer deem it viable
to carve out a co-management fee, and if they start doing it all themselves or
using employed O.D.s, co-management opportunities may decrease. From what I'm
seeing and hearing from O.D.s across the nation, that appears to be what's
The shrinking pie
Obviously, the whole idea of surgical
co-management is controversial for many ophthalmologists. And these alliances
don't change that. I'm sure you've read the American Academy of Ophthalmology's
(AAO) and the American Society of Cataract and Refractive Surgery's (ASCRS)
position paper. Some physicians won't co-manage. Others do, but send the
patient for co-management on a case-by-case basis, resulting in varying amounts
of co-management time and varying fees. Still others routinely refer the
patient to the optometrist and use 20% as the co-manager's slice of the pie.
Proper patient care notwithstanding, when
photorefractive keratectomy (PRK) and LASIK fees were running $1,500 to $2,000
per eye, a "comfort zone" existed within the fee structure that made
it financially viable for physicians who co-managed to turn over post-surgical
care to another practitioner. Many physicians were willing to allocate 20% per
case because the pie was big enough to pay all of the professional and facility
costs associated with the procedure and still allow an acceptable profit. In a
very few of the vision plan/LASIK center alliances, the discounted pricing
still allows an acceptable profit margin.
However, independent surgeons are also
facing off against alliances offering super discounts, down to $499 per eye.
And with vision plans promoting discounted LASIK to large blocks of
"captive" managed care patients, the financial picture may be
dramatically changing. The entire dynamic of refractive surgery co-management
may have been dealt a serious body blow by some of those who've been perceived
as representing optometric interests.
When competing against the likes of $499
fees and huge corporate advertising budgets, independent ophthalmologists are
now forced to rethink co-management, or if the economics mean they must do the
follow-up care in their practices. It seems intuitively obvious that a lot of
profitability margin won't be left once all costs are deducted from a deeply
discounted fee. So for some, the share previously allocated as a discretionary
co-management expense may no longer remain discretionary. It may represent the
difference between profit and loss. And, for that practice, it may mean no more
The numbers don't lie
If you look at the recent financial reports
of the corporate LASIK centers, it's clear that for virtually all of them huge
increases in surgical volume aren't resulting in significant bottom-line
performance. Instead, they're taking a hammering, and it's clear that they
can't sustain these prices long term. At some point the discounters, especially
the super-discounters, must accept that they can't take market share to the
bank. They can only take profitable patients to the bank.
In partial response to these ever-thinning
margins, and in an attempt to reduce the flow of outgoing dollars, I'm also
hearing that some of the corporate LASIK centers are now moving toward more
in-house case management. Some are even moving toward eliminating co-management
by community optometrists. It will be very interesting to see if this is more
than anecdotal "chat." If corporate LASIK center policies and pricing
do reduce co-management fees paid into the community, then we're sure to see an
interesting shuffle for control of patients and fees among the HMOs, vision
plans and providers.
For non-managed care patients, it's clear
that the operating surgeon will make the co-management decision. If you're in a
successful arrangement now, it's likely to continue. However, for those
patients seen through a vision plan or HMO, it isn't necessarily clear how
things will shake out over the next year or two. Discounts and enforced protocols
may not be conducive to co-managing your patients.
With financial pressures so great it's more
important than ever to have excellent working relationships with your community
ophthalmologists. That means you must demonstrate superior clinical proficiency.
"Quality by documentation" is everything. "Quality by
declaration" will mean nothing.
Spend time with the ophthalmologists
observing refractive surgery, learning everything you can about the procedure
and possible complications you may encounter during co-management. Become part
of an active patient care team, not merely a referral source. In the coming
years ophthalmologists will become more selective in choosing and using
optometrist co-managers. Build that relationship between the professions.
Cultivate the relationship between your
office staff and the physician's staff. This is crucial to your successful
participation as co-manager. Your office manager must meet on a regular basis
with the physician's practice administrator or designate. Keep the lines of
communication open, and make sure both practices work from the same patient
care and administrative scripts.
Don't make the mistake of thinking that
co-management is automatic, or that ophthalmologists will continue with it
simply because you refer patients. It may have been that way for some
physicians 2 or 3 years ago when they were more dependent upon optometry for
referrals, but today the public knows all about LASIK and is capable of finding
many sources for the procedure.
Yes, many of your patients will still ask
for your guidance and recommendations when considering the procedure. You're
their highly valued resource, and they respect your opinion. However, as the
market changes and the public becomes more educated, an increasing number of
them will find their own way.
Who loves you?
Every optometrist needs to take a careful
look at what's happening in the marketplace. Then, ask yourself who's creating
real, profitable opportunity for the optometric profession and who's creating
something else. It's immediately obvious that the fall in surgical fees has
been brought about, in part, by alliances between certain vision plans and
corporate LASIK centers.
Although a few vision plans are trying to
build relationships that'll support rational LASIK pricing, allowing reasonable
opportunity for co-management, others clearly are out to sell. As usual, in
those situations, providers suffer the collateral damage. Managed care at its
Look long and hard at each vision plan/LASIK
alliance when determining which, if any, you choose to join. The
"friendly" vision plan that brought you routine exams and eyewear
patients in the past may not be your friend when it comes to co-management. It
may have created new scenarios that'll make your practice less profitable.
Food for Thought
Executives from numerous vision plans and
LASIK companies were interviewed for this article. Here are some of their
Question: "Where do you see these
alliances going in the short term, in the next year and in the next 5
Laura Arnold, Eye Care Plan of America:
"ECPA is implementing joint marketing strategies for its laser vision
correction panel to provide the ECPA membership with greater awareness of the
benefits through health fairs, seminars and factual information regarding
Stephen Kilmer, TLC Laser Eye Centers, Inc:
"We have moved from a 'sales mode' to 'service mode' and are actively
working to turn contractees into patients. We're also working on phase three
where more and more vision plans, HMOs and individual corporations will
actually pay toward the procedure."
Joe Krupa, ICON Laser Eye Centers, Inc:
"In the short term these alliances are tested to see if they're of mutual benefit
to each party involved. Signed alliances have been enthusiastically received by
the membership of each and every vision plan that ICON has been associated
with. ICON sees itself as one of the leading refractive providers involved with
the corporate care sector."
Scott Kirk, LCA Vision: "HMOs will
continue to add laser vision correction offerings for their members. From a
competitive standpoint the HMOs must offer a benefits menu that's attractive to
its clients. Certainly, laser vision correction is a procedure in high demand
and, therefore, this demand is carrying over to the employer/HMO negotiations.
We'll continue to see HMO alliances with our network this year and continuing
through the next several years."
R. David Jones, O.D., F.A.A.O., VSP: "We
certainly see continued interest from our employer groups to increase coverage,
and we see that as a positive for everyone involved � from employees to the
doctors and laser centers. As people become more familiar with the procedure,
it's possible that laser surgery could become an increasingly popular part of a
vision care program."
"I wouldn't be surprised if a
significant number of companies offer a benefit beyond discounted access to
laser surgery in 5 years."
Kenneth Taylor, O.D., Arthur D. Little, Inc:
"The alliances may have the same effect as managed care did a number of
years ago: You wake up one morning and your patients are all gone! These
alliances are creating channels into the various refractive centers that are
bypassing the local M.D.s and O.D.s at times. In many cases, they're looking to
contractually gain exclusivity."
Question: "Are more or fewer
optometrists interested in laser surgery co-management, and what has been the
Laura Arnold, Eye Care Plan of America:
"Based on the educational agenda and attendance at most of the trade shows
regarding refractive surgery, I'd say the interest has increased. I have more
interest in how the continued drop in prices will affect co-management."
Stephen Kilmer, TLC Laser Eye Centers, Inc:
"More. TLC's affiliated network has grown to include more than 12,500
doctors. This includes one in four O.D.s currently practicing in the United
Joe Krupa, ICON Laser Eye Centers, Inc:
"ICON believes that many O.D.s are becoming less interested in
co-management as they see the obvious industry shift towards direct-marketed
laser surgery. As per procedure prices decrease, so do the relative margins
associated with co-management fees back to the O.D."
Scott Kirk, LCA Vision: "Most O.D.s
recognize that because of excellent outcomes and affordability, LASIK is a very
popular alternative to contact lenses and/or glasses. They're aware that
managed care generally drives members to the in-network provider. They want to
be in-network to co-manage LASIK patients. Most O.D.s also recognize that many
patients will have laser vision correction with or without their approval. They
don't want to be left out of this decision � clinically or financially."
R. David Jones, O.D., F.A.A.O., VSP:
"Optometrists are interested. Nearly 60% of our doctors on our panel are
[interested] and we haven't yet fully developed our network."
Deeply Discounted LASIK: Not a Natural
Some might believe that the drastic drop in
laser-assisted in situ keratomileusis (LASIK) pricing is all a natural
progression of market forces, and that it's unreasonable to place
responsibility on any vision plan or corporate LASIK center. If you're among
them, then try looking at other forms of elective surgery for parallels. I
suggest you'll see nothing like this LASIK marketplace madness.
For example, open any newspaper or
high-class magazine in any metropolitan area. You'll see ads for liposuction,
breast augmentation, septal reconstruction, and more. Many ads for elective
surgery, but no price wars. Lots of ads, but always from independent surgeons
or local centers, not from corporate entities with facilities across the
nation. These fee-for-service arrangements for other types of surgeries are
between the physician and his patient.
And, you'll never see these elective
surgical procedures tied to a health maintenance organization's (HMO's) benefit
plan or marketing strategy. It just isn't happening. Other elective, cosmetic
procedures are outside managed care's intrusive influence, but that isn't the
case with LASIK.
Why? Because HMOs and employers have
well-capitalized entities out there willing and able to create the delivery
systems on which the HMOs and employers wouldn't spend the necessary money
themselves. If corporate LASIK centers weren't scrambling for surgical volume,
and if no vision plans were in place selling the health plans, we probably
wouldn't have the current rapacious price wars.
Why? Because only the ability of an
established vision plan to administer large populations and manage large,
exclusive provider panels makes such a program possible, causing many providers
to participate out of fear of exclusion. And, only the LASIK centers'
willingness to chase market share at a loss makes uniform, super discounting
possible. Without these dominant forces in control, independent physicians and
O.D.s wouldn't play the game. That's exactly why we don't see similar turmoil
with other cosmetic procedures and other providers.
I'm sure those last few paragraphs will draw
scornful remarks from some, but I'm convinced that these crazy happenings in
the LASIK marketplace aren't the natural evolutionary results of market forces
at work. This is unnatural.
My sense is that despite some
"stand-up" efforts by certain vision plans and LASIK providers, in
sum total these alliances ultimately will impact adversely on your
co-management opportunities and on your core business of vision exams and
Assistant Editor Tobin Sharp helped
compile the research for this article.
Gil Weber is an author, lecturer and
practice management consultant to the managed care and ophthalmic industries.
He has served as Managed Care Director for the American Academy of
Ophthalmology. He can be reached at (954) 915-6771 or by e-mail at
firstname.lastname@example.org. Also, visit his Web site at www.gilweber.com.