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Progressive Focus© Newsletter

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Volume 5, Number 3 Fall, 2004
Helping You Manage the Expectations of Managed Vision Care

In This Issue:

Doctor-Owned/ Doctor-Run Vision Plans: What's Changed Since 1996? (Second of 2 parts)

In part 1 we looked back at some mistakes that doctor-owned/ doctor-run vision plans made during a few, frantic years of network-building madness in the mid-1990s. And I included some thoughts on why many of the efforts to put "doctors back in control" were hopelessly doomed from their inceptions.

In addition, I provided recent AOA survey data showing patient preferences seem to indicate that now could be the right time for optometrists to have another look at doctor-owned/ doctor-run vision plans – assuming, of course, that past mistakes can be avoided.

In this second part we'll see how today's leaders in a revived movement to empower private practice ODs are rethinking the tactics of the past. Here, I'll provide areas of inquiry you'll want to investigate if asked to join a network initiative by local or state leaders.

And I'll offer some resources where you can learn more about joining, or building, a local provider network to capture and/or preserve access to the significant number of patients who currently have limited or no vision benefits, and who represent a significant slice of the eye care pie.

Playing To Private Practice Optometry's Strengths

Quotables

We confide in our strength, without boasting of it; we respect that of others, without fearing it.

Thomas Jefferson,
Letter to William Carmichael and William Short (1793)

You may wonder why or if you need to be in a network. In some cases the local market conditions may be such that a network would not offer much help building your practice. For example, you may be in a rural area, with the nearest chain retailer or mass-merchandiser far enough away that you're not affected (at least until one of them comes to town).

But in most parts of the country the dynamics are such that private practitioners are being out-fought by sophisticated marketing and the sheer economic power of chains and mass-merchandisers. This is not news, of course.

However, the magnitude of the imbalance has reached the point that many, if not most ODs simply can't stand alone any longer and hope to fight these battles successfully, certainly not on a long term basis. Yet a surprising number of optometrists just seem to have a bewildering case of "Mural Dyslexia" – the inability to read the writing on the wall.

Numerous surveys indicate that most patients would prefer to get their eye care services from a private practitioner, yet too few ODs make a focused effort to capitalize on that preference. On the other hand, such preference has in no way slowed down marketing efforts by the chains and mass-merchandisers to get those patients to bypass your front door, or to leave with the Rx in hand.

Counteract this! Optometrists must play to their strong suit!

For years, a private practitioner rather than a "doc in a box" has been the regular family eye doctor. And most patients still feel that way about their ODs.

But for an increasing number it's no longer business as usual when multi-national corporations with revenue streams in the hundreds of millions, or even billions of dollars are trying to entice them away with who-knows-what sort of promotions. If private practice ODs fail to take advantage of their core strengths, and don't actively promote their services in creative new ways, they stand to lose a significant portion of that here-to-fore loyal patient base. Thus, the need to rethink the question -- Do I need to participate in a local or statewide network run and/or managed by the doctors?

So let's look at how a new generation of network builders is tackling this important issue.

Re-Evaluating Network Philosophies: Questions You'll Want Answered

Quotables

Ignorance never settles a question.

Benjamin Disraeli
Speech in the House of Commons (1865)

Even if the idea of doctor-owned networks is something you swore you'd never consider again, I recommend that you at least take another look. See what, if anything, is happening in your marketplace.

You may decide nothing's new, or what is new is not worth your time and, possibly, investment. And that's fine. But at least look. And as you do, include these seven critical points in your evaluation.

While adoption of most or all these points is no guarantee that a network is sailing a sure course to contract success and profitability, at least inclusion of them as part of the corporate philosophy would indicate some fresh air is in the sails.

1) Are the network leaders tilting at windmills?

If these new efforts are to succeed then the battlefield must change. Critical thinkers understand that it's simply counter-productive to start out of the gate by banging heads with the power players (e.g., VSP, Davis Vision, EyeMed, Cole Vision, etc.) and competing for big HMO contracts. It makes no sense to fight the old, costly battles when you're first learning the ropes.

Of course, if a big opportunity presented itself the opportunity should not be ignored, but chasing that quick "home run" business can no longer be a dominating mantra in early stage business development. This refocus of efforts is crucial to any business plan going forward.

Current efforts should be concentrated on other, more realistic targets of opportunity. For example, emerging networks are focusing more now than in the past on small employers and organizations – 50 or fewer employees – since this is a book of business that many of the bigger players don't pursue. And there are many small contracts that could be captured with the right approach.

2) What is the status of vision care capitation in your area?

Whereas in the past some networks formed to pursue and even to encourage the development of capitated carve-out contracts (a disastrous tactic more often than not), today capitation is not the same driving force it was in the mid 90s. Yes, it's still out there, but fee-for-service vision care is strong, and that means new networks should not be forced to deal with the financial uncertainties of risk contracting if they're to land any business.

This means the capitalization requirements for participation in the contracting game today are different than they were back then. And for all but the exceptional new network, capitation should not be part of the game plan – certainly not in the short term.

3) How will the network be marketed to benefits purchasers?

Many leaders who believe that doctor-owned networks still can work seem to have a better appreciation for sales and marketing than their past counterparts, particularly in the effective use of brokers and agents. They espouse establishing tighter relationships with those who understand how to sell ancillary benefits, and who have contacts with the purchasers (especially, again, in those companies and organizations traditionally not pursued by the power players).

4) What are the short and long term growth strategies?

Those heading current efforts seem to have a better understanding for starting small and growing in planned steps. In the 90s it was not at all unusual for a network to form and presumptuously proclaim itself ready to contract for multi-state or even national contracts.

Today a network is more likely to be successful if it starts with voluntary plans at smaller employers, and with experience, gradually ramps-up to funded fee-for-service products that may cross county or state boundaries. But the key change is an appreciation for the idea that, early on, big is not automatically better.

In today's marketplace most managed care contacting is done at the local level – between local payers/purchasers and local providers. It's not realistic for a fledgling group of optometrists to expect that they're going to convince CIGNA or Humana or General Electric corporate to award them large-scale contracts. Those have been and likely remain the prize for competition among the power-players who can deliver multiple thousands of provider locations.

But local contracts, even on some sizeable populations such as unions, municipalities, or state employees certainly could be up for grabs to local or linked networks. The opportunities are there.

(Note: the need to obtain an insurance license to sell certain products in some states remains a significant, unavoidable obstacle. In the past a few networks ignored insurance licensure requirements, and unwisely tried to fly "under the radar" of state regulators.

If a network has an insurance license, such as Knox-Keene in California, then it's able to pursue larger blocks of risk-based business. And that may open some doors.

But it's important to understand that insurance licensure is not a magic bullet. And it's not a requirement for most doctor-owned /doctor-managed networks to be in business.)

5) Are there opportunities to link the network with others to achieve critical mass and to enjoy cost savings?

A few local or regional networks are linking with networks in other states to create joint efforts. These cross-state alliances can capitalize on each network's strengths and positioning in local markets. Thus networks can ally to bid on contracts that might involve employees in two or more states.

6) What are the leaders doing to minimize costs and maximize funds flowing to patient care?

More than ever, success will be predicated on cutting administrative costs razor thin. Whereas in the past it was almost a given that networks expected to profit on administrative services, today it's clear that this realistically isn't the profit center for network operations.

And so to cut costs and allocate a greater percentage of the health care dollar to patient care, administrative functions will have to be handled in a more sophisticated manner, with greater reliance on electronic resources. In some cases networks are sharing or sub-contracting claims processing and related support services to experienced third party administrators.

7) Does the network have sources of income or support other than its own membership's wallets?

Some networks are looking to form alliances with industry. This could take a number of forms including, for example, preferred vendor programs where business is driven to suppliers in exchange for highly attractive pricing to network members, and for direct vendor support to the network

This is totally different from programs where panel doctors must use a contracted lab – with all cost savings accruing to the vision plan but with nothing going to the doctors.

In a preferred vendor program the doctor would be free to use any vendor, but the prices offered in the program would be so attractive that there would be a clear incentive to use the preferred vendor. And those savings would accrue directly to the doctor's bottom line as an added participation benefit.

Getting Involved? Choose Your Partners Wisely

So, should you be thinking about new or revived local efforts as they might announce in your area? I suggest the answer is yes -- you should keep your eyes and ears open to the local "buzz." But you should proceed with caution, and only after satisfying yourself that this time the opportunity is built on assumptions and practices more realistic than those in the past.

Today optometrists understand that yesterday's advice to join every panel and every carve-out opportunity was ludicrous. It was built on fear, and only resulted in a lot of money being poured down a bunch of rat holes.

Today your battle should not be with the power players and the HMOs that offer pre-paid vision benefits. If you wish to participate you can access those patients through vision plans administered by VSP and others.

Rather, your energies should be directed toward figuring the best way to capture and keep the large number of patients who don't have any vision benefits, or who have only limited benefits. Those are the patients who are walking out your door after the exam, or who are bypassing your door entirely on their way to the chain or mass-merchandizing optical.

Today it all comes down to local network leadership. If local (perhaps dormant?) networks in your community have started to stir, are influential ODs behind the efforts to re-ignite fresh initiatives? Or are those trying to resurrect the movement simply dusting off old war bugles and rallying the troops to another, ultimately hopeless battle?

Are there entirely new efforts under development in your area? Have your community's guiding lights gotten on board, particularly in leadership positions? Are they showing with actions rather than words that they believe the time and concept are right?

Whatever the case, do you have faith in that leadership, and can they demonstrate a firm grasp of today's business realities combined with marketing and administrative savvy? It will be tough to get answers, but you must dig and discriminate.

To join every network and vision panel is counter-productive. Doing so only means that the panels will once again become clones of each other. And that ultimately leads to a death-spiral of suicidal contracting rates and low reimbursements.

Want To Know More?

Quotables

You're either part of the solution or part of the problem.

(Leroy) Eldridge Cleaver
(Attributed -- 1968)

I interviewed leaders from doctor-owned, doctor-managed networks around the country. Their comments plus other research were melded to form the content of this issue and the previous one.

If you'd like to learn more about existing doctor-owned networks in your area, or learn how you might start a local group, or link with other groups, here are a few resources. Progressive Focus© and Essilor Laboratories provide these contacts for informational purposes only, and no endorsement of any specific effort is made or implied.

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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.

These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.

The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice. Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.

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