Article Date: 3/1/2003

in-office labs
The In-Office Lab Advantage
With dedication, optometrists can control costs, delight patients and compete against the super optical chains.
BY JIM THOMAS, executive editor

When he was fresh out of optometry school, R. Whitman Lord, O.D., became fascinated with the process for manufacturing eyeglasses. "I worked in an office that offered one-hour glasses service long before there was any such thing as 'super opticals,'" he says. "In those days, the optician had to be quite a craftsman to fabricate glasses with the equipment that was available."

After 18 months, Dr. Lord struck out on his own and was determined to include a surfacing and finishing lab in his practice. He saw patients during the day and he fabricated lenses at night with used equipment that he purchased. Slowly, he acquired a trained lab staff and updated equipment. "Back then you could buy used surfacing equipment for a reasonable price," he says.

Not for everyone

Because of his success, Dr. Lord recommended lab equipment to "almost anyone who would listen." But his perspective changed when some of his friends, who owned successful practices, purchased labs only to find that surfacing wasn't a good fit. "These guys subsequently sold their equipment and lost a lot of money," he says. "Now I don't recommend surfacing to anyone who isn't extremely interested in the manufacturing aspects of optical."

Clearly, in some practice situations an in-office lab isn't advantageous. For example, many managed vision care plans require optometrists to use contract labs, so a practice would have difficulty generating enough volume for its lab if the majority of its patients were enrolled in such vision plans.

The success factors

Yet optometrists such as Dr. Lord and Neil Gailmard, O.D., have found substantial advantages in fabricating glasses on site.

"I like being in control of as many aspects of my practice as possible," says Dr. Gailmard. "I didn't like being dependent on an outside lab for every pair of glasses we dispense."

With an in-office lab, Dr. Gailmard can control factors that influence patient satisfaction, retention and referrals, including prescription accuracy, cosmetic appearance, quality, delivery time and remakes on errors.

"I place a high value on excellent patient service and consumers today want products fast," he says. "We can say that patients really don't need their glasses in an hour, but I see how happy they are when we deliver them in an hour -- or even in a day."

The lab allowed Dr. Gailmard better control over his expenses. "My cost of goods sold is always a concern and I knew I could decrease them dramatically," he says. "The reduction in my lab bills more than paid for the lab equipment, inventory and staff."

Dr. Gailmard also notes that his practice can offer a higher level of patient care with an in-office lab. "Many situations arise when you need to place lenses into a patient's own frame, which they can't conveniently give up," he says. "This includes patients who need prescription changes and want to reuse their own frames, or patients who need replacements for broken or scratched lenses. The best way to make a lens fit properly and securely into a frame is to have the frame in the lab when the lenses are cut. Having our own edger allows us to cut and edge any lens in a few minutes while the patient waits. Patients love this."

Choosing a route

According to Dr. Lord, a practice can choose one of two different routes to develop a full-service lab, which offers both surfacing and finishing. "You can buy much less expensive manual equipment or take the plunge and purchase computerized labs," he says. "Though the manual equipment is much less expensive to purchase, it requires more experienced and highly trained technicians. In addition, you can anticipate a higher rate of spoilage."

Conversely, a computerized, fully integrated finishing and surfacing lab is "infinitely more user friendly" and can produce more jobs per hour, but it will cost about $150,000, says Dr. Lord. These costs don't include items such as tinting units, back-surface coating equipment, service contracts or hand stones.

The choice between a manual or computerized lab depends largely on volume and staff expertise, says Dr. Lord. "I use computerized labs for high-volume offices and manual labs for offices with lower volume," he says. "Fortunately, some of our opticians are mechanically astute and can trouble shoot most problems that arise with manual equipment."

Dr. Gailmard says his practice experiences good employee retention in the lab. "We've been able to find skilled technicians when needed," he explains. "We've also been able to train general optometric technicians to perform lab work fairly easily. Some people prefer lab work to working with the public and are better suited for it based on their personalities."

The price is right

Dr. Gailmard's lab produces an average of 400 pairs of glasses in one month using 2.5 full-time equivalent (FTE) units of staff in the lab. Plus he sends out about 200 pairs to outside labs because of vision plans. To calculate the total labor cost of a lab, Dr. Gailmard recommends that practices multiply the FTE by the typical pay rate for ophthalmic technicians. He says that low-volume practices can maximize efficiency by using technicians for non-lab duties, such as dispensing or pre-exam testing.

For other costs related to the lab, Dr. Gailmard provided the following estimated prices for selected pieces of equipment:

Dr. Gailmard's lab requires an inventory cost of approximately $10,000. His lab occupies about 500 square feet of office space. He notes that maintenance costs for the lab are "fairly minimal" at $200 each month.

Where other issues surface

Adding surfacing to an in-office lab changes the expense equation for glasses from being based on the cost of goods to being based on depreciation and the cost of personnel, says Dr. Lord. "To be successful with a surfacing lab, an O.D. must be comfortable in managing highly trained lab personnel and in buying semi-finished material in bulk," he explains.

In addition to management, each practice must consider factors such as patient expectation and competition to determine how quickly it intends to fill prescriptions for glasses. Dr. Gailmard, who operates one location (see "About the Practices" on page 52), says he delivers finished glasses to patients in an average of three days. "We do many one-hour jobs, but specialty lenses and anti-reflective coatings take longer."

Dr. Lord operates multiple facilities, including two mall locations, and he says that a surfacing lab can lose most of its value if the owner doesn't insist on turning out glasses in one hour. He says, "I have the policy that glasses are to be made in one hour whether the patient wants them that soon or not. Without such a policy, a lab can easily slip into a mode of only occasionally offering fast service."

If his practice can't offer one-hour service consistently, an optometrist "would be better served by ordering glasses from a wholesale lab," says Dr. Lord. "Next-day service or even three-hour service puts a lab in a completely different category and is significantly less valuable."

Dr. Lord warns of arrangements where several O.D.s operate a mutually owned lab. "Such a lab has little chance of success because it would struggle to consistently provide one-hour service," he says. "By the same token, I believe it's a mistake for an O.D. to purchase lab equipment with the idea of doing lab work for other O.D.s or retail outlets. The O.D. would be at a disadvantage trying to compete against large wholesale labs."

Focus on one practice

By focusing on a single practice, the surfacing lab can provide unsurpassed levels of service. "We can be gracious with remakes and small changes that would otherwise tend to upset an optometrist," says Dr. Lord. "For example, we don't hesitate to remake progressive lenses for patients, even if they have minor complaints such as wanting their reading section moved ever so slightly higher or lower."

Dr. Lord's largest lab makes specialty and unusual prescriptions for all of his offices. The lab surfaces any type of material that requires back surface coatings such as polycarbonate and certain other high-index materials. "We can handle almost any prescription," he says. "We only send out things such as slab-off prism and we'll occasionally even grind slab off in our lab."

About the Practices

Drs. Neil and Susan Gailmard

Gailmard Eye Center, Munster, Ind.
Number of locations: one freestanding office
Number of staff optometrists: four
Number of staff: 26

Dr. Whit Lord

Lord Eye Centers, Inc., Statesboro, Ga.
Number of locations: two freestanding offices and two mall locations
Number of staff optometrists: five
Number of employees: 35

Dr. Lord's practice participates in some managed care plans that, because of reimbursement fees, wouldn't be practical without a lab. However, he cautions that a lab won't make every managed care plan's reimbursement fees attractive. "We continue to be selective as to which plans we accept," he says.

Despite his success, Dr. Lord says he understands how optometrists "may not be as enamored with optical labs" as he is. "Labs require a commitment to the manufacturing process that is at least equal to an optometrist's commitment to professional services," he says.

Defining success

However, both optometrists agree that if an O.D. is willing to make the commitment, the results can be rewarding to both patients and the practice.

Says Dr. Gailmard, "I believe people buy some things on impulse -- and knowing that they can receive glasses quickly makes them buy more and it can prevent them from shopping around with their prescription."

He continues, "The lab increases patient satisfaction and generates referrals. And the savings in costs of materials can easily amount to 75% of the finished lab cost. If a practice could reduce it's lab bill by 75%, how many dollars would be available to finance equipment, pay lab staff and cover other lab expenses?"

 



Optometric Management, Issue: March 2003