"Eye on Managed Care: Third Party Plans and M.D.s"

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"Eye on Managed Care: Third Party Plans and M.D.s"

Reimbursement for routine vision exams is slowly rising. But will it be enough to entice you to join?

by Gil Weber, MBA
Consulting Editor

Adapted with permission from Ophthalmology Management
© Copyright, 2002. All rights reserved.
January 2002


This year EyeMed, the managed vision care arm of Luxottica/LensCrafters, acquired Eye Care Plan of America (ECPA).

Then, EyeMed announced that effective October 1 it was raising exam fees an average of 25% across the nation, pushing typical exam reimbursements into the $50 to $60 range.

Why make this change? To compete with its chief rival -- Vision Service Plan (VSP) -- EyeMed needs to differentiate itself, and one way to do that is by attracting more ophthalmologist providers. The question is: Will these higher exam fees be sufficient?

From O.D.s to M.D.s

Ever since my first experience with managed vision care in 1979 (as an HMO employee), I've observed that most third party plan routine vision exams with refraction are provided by optometrists. O.D.s -- not M.D.s -- have dominated the provider rolls, whether the managed care panels were formed and managed by the HMOs or by third party administrators such as VSP, Davis Vision or VBA.

Back in the 1980s this was understandable. Managed care hadn't yet come to dominate the economics of most people's health care and Medicare fees were still high. General ophthalmologists were able to charge surgical and office fees that made it unnecessary to provide primary vision exams, and most of them didn't have optical dispensaries in their practices. They weren't concerned when vision panels didn't invite them to join.

Then, starting in the early '90s, medical eye care fees began to fall precipitously, particularly for core services such as cataract surgery. Most general ophthalmologists quickly realized that vision care (especially optical) could drive significant revenue and net profit to the bottom line. So, more and more M.D.s began offering vision care to supplement lost income -- and many became interested in joining third party vision plans.

Reducing costs to gain patients

At this point, only some panels were open to physicians, and many created (and still maintain) significant participation obstacles for M.D.s. (For example, VSP doesn't allow a physician to provide both routine exam/eyewear services and surgical services to plan beneficiaries; physicians must choose one or the other.)

But obstacles like these have paled in comparison to the dishearteningly low fees paid for routine exam services. Physicians realized from the start that third party exam compensation (sometimes as low as $25) simply wasn't financially workable. If a physician puts in 20 minutes per patient -- even with a qualified tech doing much of the work -- a $38 or $40 exam fee won't cover practice costs, let alone allow for a reasonable profit.

Nevertheless, when given the opportunity to participate, some general ophthalmologists did sign up. But because exam fees were so low, they had to find a less expensive way to deliver the service.

The alternative that most of them adopted was hiring an O.D. to provide the exam. The lower per-patient cost structure that resulted made it possible for ophthalmology practices to participate in select managed vision care plans and thereby gain access to more patients.

Plans begin to compromise

As time passed, some health plans, under pressure to provide more choice for their members, made it clear to their third party administrators that simply adding provider locations was not enough. They wanted to see more physicians actively participating in patient care. However, low exam fees were still keeping most M.D.s away.

Then, in 1999, ECPA made a year-long effort to recruit ophthalmologists. The plan completely revised its fee schedules and made direct overtures to M.D.s, including approaching various state societies.

However, the results of this recruiting effort were very disappointing. Why? The new fees were still too low to make sense for most ophthalmologists. A few doctors joined the plan, but, again, most of the care was provided by employed O.D.s.

Will the twain ever meet?

While EyeMed's new exam fees may be attractive compared to most other vision plans', I don't think the differential is enough that we'll see a significant jump in participation. Also, EyeMed has announced that the fee increases will only apply to new contracts -- they won't be retroactive to managed vision contracts currently in place. So the patient populations to whom the higher fee schedules apply will be very small compared to EyeMed's entire book of third party business.

I suspect that $70 is the lowest exam fee that would tempt most general ophthalmologists to participate in a managed care vision plan. Raise the fee to $75 or $80 and you'd probably get much more interest. But if payers aren't willing to spend at least $75 for 20 or more minutes of a physician's time, simple economics dictate that the time must be used for something that generates more RVUs

Unfortunately, after years of low exam reimbursements health plans have become convinced that the value of a routine exam is nowhere near $70. Even private practice O.D.s are starting to bail out. They're tired of having their professional services sacrificed as a loss-leader in the managed care voodoo mantra of "making it up on volume."

No, I don't think EyeMed's October fee increase is going to set the managed vision care world on fire. A few new ophthalmologist signings? Sure. A quantum leap in the number of ophthalmologists providing routine vision exams? Probably not.


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.

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