Finding Your Number One Dime—Crunching the Numbers
Michael S. Cooper, OD
Special thanks to each of the industry partners for sharing their most up to date pricing details for this month’s newsletter.
For those Scrooge McDuck fans out there, you might not know that his rags to riches story started in Scotland with a shoeshine kit business which was where he acquired his lucky “Number One Dime”.1 He would hold onto this keepsake for the rest of his life in order to remind him of the price of hard work. It was through his enduring trials and tribulations around the world in search of gold when he finally struck successfully in the Klondike region of the Yukon Territory in Canada, eventually making him into a billionaire.1 Feel free to queue the Ducktales theme now (Woo-oo…)!
With this abridged rendition of the McDuck origin story, the core message that we can all relate to is working diligently at our craft with an entrepreneurial spirit. When venturing into the ocular surface space and especially capital equipment, one must establish some guidelines prior to the purchase. While human nature typically draws us to the price tag, nevertheless, there are intangibles including time and cost which will come into focus to assess how to negotiate your new asset. We will confine our discussion to LipiFlow (Johnson & Johnson Vision Care, Jacksonville), TearCare (Sight Sciences, Menlo Park), and iLux (Alcon, Geneva/Ft Worth).
The first measurement is the time factor. Furthermore, this quantity can be broken down into a staff and a procedure segment. The staff portion essentially is all the moments where these individuals are pulled away from their regular duty to consent the patient, potential setup, and coordination of scheduling if there is doctor involvement. Keeping score, invariably all units are tied at this point with a slight edge to iLux due to the fact it does not technically need a doctor to perform the procedure. It can be delegated since it is all in one for heating and expressing meibomian glands (Caveat: adhere to your state’s scope of practice).
Taking things another step leads to parsing out the nuances of the procedure itself. From end to end, there is a setup and there is an overall procedure time. Think of a Formula 1 race car pit stop where the driver pulls in and the crew rapidly replaces tires and refuels to get the car back on the track. The “crew” is your staff doing the aforementioned activities, setting up and breaking down, along with scheduling the patient for follow-up care. Where staging diverges is the approximate time of each procedure by device, which can vary, but here are the average ranges: LipiFlow (18-25 minutes with or without manual expression after), TearCare (15-20 minutes with manual expression after), and iLux (8-10 minutes with expression included). As one could observe easily, there is a disparity in this area—my commentary is to do what you feel is comfortable in controlling the experience.
Ratcheting it up a notch, let’s jump into Scrooge’s money bin in Duckburg now to look at the cost! In the traditional sense, you are expecting total price again, but what about first translating chair cost? If we were to suppose a single doctor practice with an optical generates $700,000 in revenue with estimated operating costs of $26,250 (45% monthly receipts) and optical expenses $8,500 (labor, rent, utilities), there would be a net operating cost for professional services of $17,750 (operating cost minus optical expenses). Coupling this figure with a prorated work schedule yielding approximately 172 hours (assume 8 hr/day, 5 days/wk, 4.3 wks/mo), then our chair cost would be $103.20 per hour (operating cost divided by doctor production hours). Keep this expenditure in mind as we dig next into the cost of goods.
With a drum roll, here is the price breakdown of renewables for each device: LipiFlow Activators ($100/eye = $200 total), iLux Patient Interfaces ($295 total), and TearCare SmartLids ($250 total with 6 mo promo offer). At first blush, LipiFlow takes the cake, but what about time once more? Objectively, remember it took more minutes potentially to perform this process, turning down the profit margin to a certain degree, depending on what you might charge the patient. The time suck eats into overtaking this chair time cost ratio and must be accounted for when assessing the income yield. Nevertheless, it does not take a MBA to figure out that comparing the stress of having to juggle managed care exams versus doing just 2 procedures per week would monetize your bottom line rather nicely for the practice. For a point of reference in the US, the average procedures per month are only 4.
Purposefully, I withheld the capital equipment price until now in order to not influence your opinion on which one you would choose from the start. Here are the raw costs prior to any negotiation: LipiFlow ($29,950/unit), iLux ($12,500/unit), and TearCare ($6,500 for 2 units). Viewing these figures, it is evident that your return on investment would likely be rapid with the latter 2 devices depending on how many procedures performed per month.
Huey, Dewey, and Louie would all be asking right about now, “What would you do, Uncle Scrooge?” My answer and his will be to follow your heart to best assist your patients/customers, but never lose track of the profit! As Scrooge’s father, Fergus, told him, “Work smarter, not harder”.2
Come back next month as we explore the expanding universe of how light and radio frequencies are changing the landscape of eyelid hygiene management!
1. Rosa D. Walt Disney’s The Life and Times of Scrooge McDuck. Timonium: Gemstone Pub.; 2007.
2. Esckilsen R, Koonce K, Wiemers D. “Once Upon a Dime.” DuckTales, season 1, episode 61, 24 Dec. 1987.
Michael S. Cooper, OD currently practices and is the Director of Research and Technological Innovation at Solinsky EyeCare in the Greater Hartford area. He specializes in anterior segment disease, treating a variety of conditions including dry eye and external lid diseases, allergy, and uveitis. He has produced research, participated on expert ocular surface disease round tables, and lectured domestically on topics such as corneal disease states, uveitis management, Lyme disease, emerging pathogens, complex glaucoma management, sports-related eye injuries in children, and AMD pedigree relationships. Currently, he is actively involved in global clinical studies for novel anti-infective therapeutics, ocular surface diagnostic validation, and AMD genetic research.