"Blending LASIK With Traditional Vision Plans"
Is this a healthy match for your practice?
by Gil Weber, MBA
Adapted with permission from Optometric Management
© Copyright, 2000. All rights reserved.
Not 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 core business?
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 plans.
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 medical/surgical plan.
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 core business.
A big change
Then starting in the late 1990s, something happened that ultimately could exert profound, negative change on the "friend- ly" 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 influence upon:
- 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 mirrors
- 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 for optometry.
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 happening.
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 co-management.
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 worst.
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 responses:
Question: "Where do you see these alliances going in the short term, in the next year and in the next 5 years?"
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 refractive surgery.
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 recent trend?"
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 States.
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 Market
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 eyewear.
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.