I mentioned in my last article on marketing projects that I like to look at patient acquisition within three potential opportunities: marketing, word-of-mouth referral, and vision plan participation. In this article, I’ll focus on strategies about vision plans.
Practice owners face a tough decision about joining vision plan networks and there is no blanket right choice for all. Much depends on your marketplace and your goals for your practice. The options range from saying no to all vision plans to accepting all of them to settling in between and participating in some plans. To me, the biggest factor is how busy your practice is right now and how busy do you want it to be?
The decision really revolves around patient demand. Say what you will about vision plans, but they can dramatically and quickly change the number of patients you see. Remember, even though a vision plan may be less profitable than private pay patients, if you have empty chair time in your practice, some profit is better than no profit. And contrary to popular opinion, all vision plans are profitable. But if you can fill your schedule with patients that provide higher collected revenue per visit, there is no question that is the smarter move.
A smaller or larger practice?
To determine the right patient schedule for your practice, start by thinking if you want the characteristics of a larger practice or a smaller one. This is an oversimplification, of course, but it can be a useful tool to help you determine your goals. A larger practice is not necessarily better and we all have different values for what is important in life.
Here are a few practice traits to consider along with some thoughts about each:
Personal income. This is not as clear as one might think because smaller practices can have a very large net revenue due to lower overhead costs. But if the practice can be built into the multi-million dollar gross revenue range (with one large office or via multiple locations), personal income for the OD/owner will be higher. The practice net income as a percentage of gross revenue may actually be lower in a large practice, but a lower percentage of a much higher number can still be more in dollars.
Work factors. There are many aspects to this. How hard does the OD/owner work? How many hours per week? What types of tasks? This all depends on what you like to do, but to me, a larger practice has the advantage here. A small practice with smaller gross revenue and a smaller staff means that more work falls directly on the OD/owner. Most of the patient care will be delivered by the OD/owner. This may be a good thing for some ODs, but the desire to see patients can also change throughout one’s career. Practice income and cash flow virtually stops if the owner takes extended time off. The owner must personally handle a variety of business related tasks.
Associate ODs. This is much easier to achieve in a larger practice and it dovetails with the point above. It is hard for a single OD in a smaller practice to afford an associate doctor. With lower patient demand, the owner would basically be paying another doctor to see the patients he/she could have seen. There is not enough net income to compensate two doctors. Smaller office facilities don’t have enough room for two doctors to work at the same time. If there is a large amount of patient demand, enough to create a backlog of patients for the owner, an associate OD can come in and generate more than enough additional revenue to pay his/her salary.
Staff. Managing a staff is considered the biggest challenge for practice owners, so many ODs want to keep the number of employees small. I actually find it easier to manage a larger staff because if someone calls off work, takes a vacation or quits, the doctors and remaining staff don’t feel the pinch as much. With a larger staff, I can delegate more of the work of seeing patients and of running the business. An office manager is a must with a larger staff; so much of the staff management, hiring and training can be delegated to him or her.
Equipment. Many smaller practices have the very best diagnostic technology available, so this factor does not have a clear winner. But advanced instrumentation can be very expensive and it is often justified and financed easier with a large patient base.
Asset value. Business valuations are based on revenue, so practices with higher gross and net incomes will appraise higher.
Can you have a larger practice without vision plans?
This would be ideal. This may be what drives many ODs to avoid vision plans: the hope of becoming fairly large without having to accept the lower profit per patient and living within the rules of vision plans.
There are a few areas of the country where vision plans are not very strong, but this is rare, especially in urban settings. In my experience, patients who do not have vision plans, and therefore pay out-of-pocket, are more likely to seek eye care from low-priced providers and online vendors. This makes it harder for the independent OD to attract this group.
There are always exceptions and I am certainly generalizing, but the vast majority of large practices that I know accept vision plans. Many even accept the plans that are deemed less desirable. In many ways, vision plans simply provide access to large populations of patients, which often end up needing medical eye care or other non-covered services.
Some ODs try to work around the issue by accepting payment out-of-network or by providing discounts, but the vast majority of patients with vision plans won’t find these doctors because they only look to the network provider list.
The largest population for eye care is for routine exams, eyeglasses and simple contact lens fittings, so it is difficult to have a large practice without catering to this group. The following specialties can be very successful within a large practice or as a core component in a small practice, but they have limitations.
Ortho-K. A great specialty, but the population of good candidates who can afford it may be small.
Vision therapy. Great again, but the candidate population is still small compared to primary eye care. Some parents can’t (or won’t) afford it and if you accept medical insurance for these services, it does not pay that well.
Medical eye care. Great again, but is mostly office visits and diagnostic tests. The fees are good and we should work to build this part of the practice for diversification, but it is not as lucrative as optical.
One good way to find out how much patient demand is available without vision plans is to not accept them for a few years. If you see strong growth in revenue year-over-year, then keep going. But if growth is slow, don’t keep waiting it out for very long. If that occurs, change strategies, embrace vision plans and learn how to be profitable with them.