Progressive Focus© Newsletter
|Volume 5, Number 2||Summer, 2004|
|Helping You Manage the Expectations of Managed Vision Care|
In This Issue:
Doctor-Owned / Doctor-Run Vision Plans: What's Changed Since 1996? (First of 2 parts)
After 26 years in the business very little amazes me these days when it comes to managed care. Still, I must admit to being a bit surprised when, over the past year or so and from various parts of the country, I started hearing that optometrists are again talking about doctor-owned networks as a means to pursue vision care contracts and capture patients.
Some of the factors that were in place back in the 1990s and that contributed to the creation of doctor-owned networks are still there. For example, mergers and acquisitions are constantly in the works, and they've resulted in fewer but stronger players on the payer side (and, in the case of EyeMed, also on the provider side). But that alone would not be enough to spark a response from ODs and renew interest in an idea that failed so miserably in the past.
Rather, from market to market managed care itself is changing in ways that many thought impossible just a few years ago. The traditional alphabet soup of HMO, PPO, and EPO plans has undergone a fundamental metamorphosis. For example, consumer-driven and defined-contribution plans are changing the mechanisms by which employers evaluate the benefits they'll offer, and decide how those benefits will be funded.
Perhaps circumstances have changed enough that the idea of provider-controlled networks, once relegated to the trash heap of failed managed care initiatives, is re-emerging, and this time, returning with a better chance for success. Perhaps this time those on the provider side have a more realistic appreciation for the game and how to play it successfully.
In this first of 2 parts we'll look at where things were in the mid-1990s, and see why those efforts failed so often, leaving behind disillusionment and frustration. We'll review some recent AOA data that seems to indicate the re-emergence of doctor-owned/doctor-run vision plans may be an appropriate and timely response to current socio-economic conditions.
Then, in part 2, we'll look at how today's network administrators are rethinking strategies and game plans, and I'll offer suggestions on what you should consider when looking at opportunities in your city or state.
A Brief History Lesson: Network Madness in the Mid-1990s (Money Wasted; Hopes Dashed)
Those who cannot remember the past are condemned to repeat it.
The Life of Reason, Vol 1.
Starting around 1994 there was an almost irrational rush to form ophthalmic networks. Particularly in the ophthalmology community, but also in the optometric, doctors were urged to fund and form new entities to "take back control from the HMOs and for-profit corporations." And so doctors came together, wrote some checks to cover start-up costs, and really without a hint of the many challenges confronting such a venture declared to the payers: We're a network! Who wants to sign a contract with us?
The silence was deafening.
To real experts in managed vision care it was no surprise that payers did not rush to be first in line to contract with the upstarts. After all, when one peeled back the layers of the onion it became apparent that many (most?) of the networks had little or no experienced leadership and only a rudimentary administrative structure. It was hardly the stuff to make payers and employers confident enough to hand over their insureds.
And compounding this credibility problem, some networks were premised and built on a mistaken belief that health insurance benefits purchasers could be convinced to give up long-standing contractual relationships based on little more than the new network's philosophical position. The AAO's PrimeSight was the textbook case of a 1990s provider initiative built on flawed assumptions and led by a team that simply lacked the direct, hands-on, managed vision care expertise necessary to compete in a rough and tumble marketplace. Sadly, PrimeSight's demise was predictable.
For example, it should have been clear that a managed care network formed by a professional medical society would have little credibility with payers when admission to the panel was guaranteed by society membership. Further, PrimeSight's #1 premise was totally unrealistic -- that despite an abundance of optometrists on numerous other vision plans, purchasers would pay more for a vision exam and refraction performed by a PrimeSight physician simply because of the physician's higher level of clinical training.
But the payers were unconvinced, and the contracts didn't happen. Payers were quite satisfied with other vision plans that provided good access, services at levels deemed adequate by the payers, and prices under PrimeSight's.
Ultimately, the whole idea of higher pay for a higher level of training fell apart when PrimeSight hooked up in an ill-fated venture with Cole Vision. Reimbursements offered under that program made more physicians mad at PrimeSight than were made happy.
Just One of Many Failures
But PrimeSight was not the only failure among doctor-owned networks. It just stood out as the highest profile example.
With few exceptions throughout the mid to late 90s, most of the doctor-managed networks failed or went dormant for lack of business. Many ODs also took their lumps.
Entering the 21st century many eye care professionals, optometrists in particular, still hold the belief that if all vision plans would just go away then doctors could charge full fees and all would once again be well with the world. But that's not reality; it's fantasy.
If all vision plans were to go away, and if all patients were returned to a fee-for-service world, the real winners would be the chain opticals and mass merchandisers. Absent all vision benefits programs, BOGO ("buy one, get one free") and similar promotions would become very strong influences on vision care purchasing decisions.
Could an individual optometric practice survive such a monumental change in the delivery landscape? Sure, and some practices do well now without taking any vision plans. But the demise of all third party care would not bode very well for independent optometry as a whole.
Today's Realities: Patient Preferences
Did You Know?
According to the AOA, the top two methods patients use for selecting an eye doctor are:
1) "Recommendations from friends, co-workers, and relatives" (27.4%) and,
2) "Always used this eye care doctor." (22.0%)
Caring for the Eyes of America 2004,
American Optometric Association, pgs. 2-3
Study after study confirms that most patients really do care who delivers their eye care. And if given the choice, most prefer to see a private practitioner – one they have, and would like to continue to call their family eye care doctor.
The AOA report (pg. 10) states that as of 2001, 29.7% of Americans had no third party vision coverage, and an additional 14% were in fee-for-service Medicare that does not provide routine exam and eyewear benefits. Those numbers are very likely similar in 2004, so about 44% of the populous should be obvious targets for doctor-owned/ doctor-run vision plans. You can be certain that these patients who have total choice over where they'll go for eye care are being targeted by the chain opticals.
Did You Know?
In 2003, optometrists performed 59.6% of all eye exams. Of those exams, 70.3% were by a family eye care O.D. while only 29.7% were from a non-family O.D.
Caring for the Eyes of America 2004,
American Optometric Association, pg. 3
When patients think about a family eye care doctor, more often than not they tend to think private practitioner rather than chain-optical or mass-merchandisers "doc-in-a-box." These patients tend to think of the eye doctor they saw growing up, or the one who's taken care of their families or co-workers for years. Like low-hanging fruit, they're ripe for picking. It's simply crazy to let those patients get gobbled-up by the chains.
But ODs have limited resources to fight that battle on their own. And, so, there's clearly a need for most private practice ODs to align with others to flex collective strength and deliver added value to those not already locked into vision plans controlled by the power players.
Doctor-Owned/ Doctor-Run Vision Plans: Opportunity or Illusion?
So if third party care does offer some positives to independent optometry as a whole, what if anything is different today? After such miserable past history, what might cause an OD to consider another look at doctor-run vision plans?
My recent discussions with network leaders indicate a number of critical differences in philosophy and overall tactics have been incorporated into their game plans. And that's what I'll tell you about in the next issue of Progressive Focus©. And I'll point you to some resources for information on joining or building local provider networks that should be able to compete more effectively than in the past for significant slices of the eye care market.
It is time for a new generation of leadership, to cope with new problems and new opportunities. For there is a new world to be won.
John Fitzgerald Kennedy
Television address (July 4, 1960)
Guest Commentary – Scott A. Edmonds, O.D.
Ophthalmic Networks in the New Millennium
Ophthalmic networks were all the rage in the early 1990s. There were small, exclusive networks, large statewide networks, corporate- based networks, university-based networks, optometry only, ophthalmology only, and integrated networks.
Control of the network structure was also a defining feature. There were optometry-driven, ophthalmology- driven, and balanced networks. So, where are all these networks today?
The answer lies not in the type of network but, rather, the product that the network sponsored. Networks that developed, sponsored, marketed, and sold viable vision or eye care products are still here today. Those that did not are gone.
The cost of owning and operating an ophthalmic network over the long term is quite expensive. Initially, most network organization participants were more than willing to fund the start-up and first several years of operation. There was a lot of initial excitement, many meetings, and a lot of, "sure thing" contracts. But for most groups, securing significant business was not easy.
To maintain the network required staff, product development expertise, and a sales force or other sales strategy. These fixed costs remained even without the additional cost of managing a contract. It was these ongoing expenses that often lead to the demise of many of the 1990s efforts. If a network did not secure enough business to maintain the ongoing cost, that network often folded.
Some networks were initially able to secure contracts with managed care organizations. However, the award of a contract was not necessarily the key to success for a network. In many cases, it was the "kiss of death."
The problem was that most managed care contracts were risk- based. These risk-based contracts required a certain level of expertise that most networks lacked. They also required some type of risk management program.
For some, these contracts supported the first several years of operations. But as managed care faltered most of these contracts were lost, and the network organization dissolved shortly thereafter.
One Pennsylvania-based organization, Summit Eyecare Alliance, stands out today as an example of how to maintain long term viability. This is a balanced OD/MD organization that continues to manage contracts in Pennsylvania and many other states. The network was able to secure several managed care contracts in the early years, and used a creative "provider risk" strategy that kept the contracts profitable.
The key to this organization's long term success was the development of a pre-paid discount vision program that was marketed to small to medium based companies on a voluntary, employee-paid basis. This program paid the highest reimbursement of any third party vision plan in Pennsylvania, and still maintained enough profit to keep the organization afloat.
Another key to the success of Summit Eyecare Alliance was low overhead. The organization set up the initial principals of their products and then outsourced the day-to-day operations to a third party. The organization now meets rarely, but maintains control of its vision and eye care products.
Now, in 2004, there has been a resurgence of ophthalmic networks. Many private practice optometrists and ophthalmologists have come to the realization that third party vision plans are the "life's blood" of private practice. Vision plan members seek routine vision care much more frequently, and purchase more eye correction options.
Private practice providers have also come to the grim realization that several third party vision plans are moving away from their roots in the private practice sector and are developing commercial provider networks. Meanwhile, employers continue to look for new options in employee benefits, and vision is a very popular option.
Another issue fueling the network resurgence is the return of managed care. Although the concept certainly stumbled in the commercial market managed care continues to enjoy market growth in the Medicaid and Medicare arena. With this growth comes a maturity that requires cost containment.
There is no question that the ophthalmic carve-out is the most cost-effective way to manage comprehensive eye care services, and ophthalmic networks are a critical component to these programs.
Ophthalmic networks that study errors of the past and combine to service managed care and self- directed vision programs will enjoy long-term viability in the new millennium.
Dr. Edmonds is the founder of The Edmonds Group and REDS Administration, providers of managed eye care consulting and administration. He maintains a hospital-based private practice in Philadelphia, PA.
Education is what you get when you read the fine print.
Experience is what you get when you don't.
Copyright © 2003-2007, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author’s prior written authorization.
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