Article Date: 4/1/2006

profits
Which is More Profitable —Contact Lenses or Glasses?
You may be surprised which wins out in  the not-so-long run.
BY RENE LUTHE Senior Associate Editor

Deeply-rooted in the hearts of many O.D.s is a perception that spectacles are more profitable than contact lenses. This perception is so entrenched that in 2001, The European Federation of National Associations for Contact Lens Manufacturers (Euromcontact), asked Mark Ritson, Ph.D., of Melbourne, Australia, to conduct a study to determine if it was accurate. He found that the wide-spread perception was really a misperception: Across the average lifetime value of a patient, contact lenses are the more profitable revenue stream. But, to realize this in your practice, you may have to make some changes.

Just the facts

Dr. Ritson and a team from the London Business School surveyed 220 practitioners in five European countries over six months. Euromcontact had found that many practitioners were reluctant to offer or promote contact lenses. To get to the truth of the matter, Dr. Ritson examined the costs associated with both contact lens and spectacle patients as well as the "lifetime value" of each — that is, how much they spend, how often and for how long over 10 years. Revenues for each group were derived from costs-of-goods sold plus labor costs.

He found that spectacles are more profitable only if you compare the first transaction of a spectacle vs. contact lens wearer. Looking at the lifetime value, it was clear that contact lens wearers are the more profitable group — 60% more profitable. Part of the reason is that most contact lens wearers also purchase a pair of back-up glasses.

Assuming practices charge appropriate fees, contact lens patients should generate more profit because they visit the practice more frequently than spectacle wearers. According to optometrist Pete Van Hoven, of Brentwood, Tenn., the typical spectacle wearer visits every two to two and a half years and spends approximately $350-$650 for an exam and a pair of glasses. Contact lens patients, on the other hand, come in an average of one to four times a year. "In our practice, during the same time frame, a patient wearing a premium two-week disposable lens generates at least $1,200 in revenue (minimum of $340 in exam and fitting fees, $560 for contacts during the period, $200 in back-up spectacles and $100 in sunglasses)," Dr. Van Hoven says. In addition to the fee for the visit, "Consider the opportunity created with each visit for selling solutions, etc."

Defying logic

Yet Dr. Ritson's findings may come as a surprise to many. John Rumpakis, O.D., M.B.A., of Lake Oswego, Ore., points out that contact lens revenue has been declining for the last 10 years. The reason, he claims, is optometry's response to the commoditization of contact lenses. "O.D.s have for years put the vast majority of their profit margin in the product itself," he says. "The reality is that the profit margin has pretty much been eliminated" from material sales. Thus the profitability of contacts lenses has declined because there's been no commensurate increase in professional fees.

He believes that optometrists should charge fitting and follow-up fees that reflect your expertise. "Patients have no problem paying the doctor for service," Dr. Rumpakis says, whereas "They'll shop around for the lowest-priced product."

Charge what you're worth

Dr. Ritson advocates taking a patient-driven approach rather than a product-driven one (look at the products as solutions to the patient's needs).

Dr. James C. Lanier, of Jacksonville, Fla., says that the proper fee schedule is crucial. He charges patients for a contact lens evaluation, in addition to a comprehensive annual exam. The fee varies depending on the patient's needs and the type of fitting — if it's a refitting for a new type of lens, for example, the cost would be higher. Contact lens prescriptions expire every 12 months or less, so the patient must return for an exam and evaluation.

Charging for follow-up visits is frequently a sticky issue because for many years, doctors didn't. Ann Hoscheit, O.D., of Gastonia, N.C., says that in this instance, the medical model serves O.D.s well. "If you go to your primary care doctor for a sinus infection, but it doesn't go away, or recurs, what happens?" she asks. "You go back for a follow-up visit and you're charged for that plus the new antibiotic."

Getting the most out of CLs

While most contact lens patients see the value of a pair of back-up glasses on their own, Dr. Lanier adds that the professional recommendation is helpful. "When I get through with an exam and summarize my findings, I tell the patient I recommend contacts for X-Y-Z reasons, but my secondary recommendation is always for a backup pair of glasses," he says.

Patient loyalty

Keeping your patients loyal to your practice helps maximize the profitability of contact lenses. Dr. Ritson found that while practitioners value patient loyalty, they didn't put much effort into stimulating it. "It comes down to communication with the patient," Dr. Rumpakis says. "Patients stay with doctors who communicate with them." Today's contact lenses help deliver superior vision, says Christian P. Guier, O.D., of Jacksonville, Fla., and when patients see that you're on their side regarding their visual needs, they will be loyal .

Dr. Hoscheit points out that contacts are more profitable when dispensed annually. Manufacturers' rebates are a helpful incentive, she says, so her practice is utilizing them as part of a strategy to make dispensing an annual supply of lenses, shipped directly to the patient, the norm. She also uses the prescription itself to drive home the advantages of filling it with her practice: Diagnostic or trial lenses are only available to patients who purchase their lenses from her.

It's a sure thing

Contact lens patients may mean a smaller profit margin and more of your time at that first visit, but they are significantly more profitable over time. Price your services appropriately and educate patients fully to provide them the best possible vision and obtain a higher profit margin, too.



Optometric Management, Issue: April 2006