Management Methods for Contact Lens Success
CONTACT LENS FEES
Management Methods for Contact Lens Success
Four successful practitioners share their advice for setting fees and building contact lens profitability.
By Lisa Starcher
Ms. Starcher is the managing editor of Contact Lens Spectrum.
You may be familiar with the study that published in our March 2006 issue, "Which Patients Are More Profitable?" by Mark Ritson, PhD, then of the London Business School. This study determined that contact lens patients are demonstrably more profitable than spectacle patients. If you’re saying, "Not in my practice," then it may be time to reassess your contact lens fees and how you present contact lenses to patients.
I asked four practitioners who have successful contact lens businesses to describe how they charge for contact lenses and how they manage contact lens patients. While similarities exist among their methods, it’s important to recognize that there’s no one formula for insuring revenue with contact lenses.
Evolution of Fee Philosophy
Before disposable lenses arrived in the market, most practitioners charged a global fee for contact lenses that combined the service and material fees. At that time contact lenses were available only through practitioners, and the lens materials themselves provided a significant source of profit.
But today’s disposable lenses are readily available from numerous alternate distribution channels, enticing many lens wearers to shop these sources for the lowest price when purchasing their contact lenses. This in turn has driven down the profit that practitioners can make from selling contact lens materials. As a result, many practitioners, including all four interviewed here, now present their service and material fees separately. What’s more, the interviewed practitioners focus less on making profits from selling contact lenses and more on emphasizing the value of the services they provide to lens wearers.
Charging for Your Services For reasons already mentioned, reassessing your service fees might be the most important step you take in achieving a profitable contact lens portion of your practice. But where do you start? What should you place the most value on? The time you spend with each patient? The type of lens? The uniqueness of the service? You must carefully weigh these considerations in determining what to charge for your services. In many ways they are interrelated because the type of lens will impact the difficulty of the fit and how much time you spend with a particular patient.
Brad Giedd, OD, practices with three other optometrists in Winter Park, Fla., an Orlando suburb with a population of approximately 2 million in the surrounding area. About 60 percent of his practice is dedicated to contact lenses. "We base fees somewhat on the amount of time we spend with patients, but the type of lens is probably the most indicative for how we set our fees," Dr. Giedd says. "We have a fee schedule for GP lenses, toric soft lenses, soft multifocals, GP multifocals, etc." Dr. Giedd also considers the uniqueness of the service for specialty fits such as post-surgical cases, keratoconus and orthokeratology.
Laurie Sorrenson, OD, of northwest Austin, Texas (population of about 800,000, with 1.5 million in the surrounding area), shares many aspects of Dr. Giedd’s service fee philosophy. In her practice, which she shares with two other practitioners, they base service fees somewhat on time spent with patients and somewhat on lens type. "We of course charge more for toric lenses and for GP lenses, and we charge a lot more for specialty lenses," she says. "We also definitely consider the uniqueness of the service when appropriate in determining what to charge," she adds. About 55 percent of Dr. Sorrenson’s practice is dedicated to contact lenses.
Craig Norman, FCLSA, takes a slightly different approach to determining contact lens service fees. He practices with two ophthalmologists, one optometrist and numerous technical support staff as part of a large multidisciplinary medical clinic in South Bend, Ind., which has a population of about 110,000 with a 275,000 draw area. All of his practice is dedicated to contact lenses, which are fit primarily by Kirstin Rhinehart, OD, and himself. "We attempt to calculate the fee based on the projected amount of time spent with each patient," he says. However, this is also related to the lens type and the difficulty of the fit. "For instance, a spherical soft lens fit may necessitate only two or three office visits. For a presbyopic, keratoconic or corneal reshaping fit, we project that it would take many more visits to complete the fitting process," he says.
Some practitioners, including Bobby Christensen, OD, of Midwest City, Okla., try to equally weigh all three considerations of time, lens type and uniqueness of service. His soft lens examination and fitting/follow up fee schedule is broken down by lens category as well as by whether the patient is a new fit or an established contact lens patient/refit. Dr. Christensen practices in a four-practitioner office that serves a community of about 70,000 people. Contact lenses represent about 25 percent of his practice.
Setting Material Fees With so much emphasis for contact lens profitability placed on service fees, how should you charge for the materials themselves? Should you take into consideration what your competitors advertise? Should you charge by lens modality or lens brand? In talking with our four contact lens practitioners, I found that although most of them are aware of what competitors charge for contact lenses, they don’t set their material fees based on the competition.
"For soft contact lenses, we do consider what on-line sources charge and we try to be competitive, but we don’t necessarily try to match prices," says Dr. Giedd. His practice sometimes considers what the local competition advertises, but he says they probably pay more attention to local pricing for spectacles.
Dr. Christensen also says that he sometimes considers what on-line sources charge, but his practice doesn’t match prices. He also doesn’t check local prices for contact lenses. His practice sets material fees relative to the age of the technology and to the replacement schedule. "We charge more for monthly replacement lenses, and newer technology lenses are more expensive to purchase compared to older materials," he says.
Craig Norman and Dr. Sorrenson both aim to make a certain amount of profit from material fees, although they each have their own formula. "We generally base our material fees on a 60 percent to 80 percent markup over acquisition costs, depending on the product category," says Craig Norman. "We’re aware of alternative distribution channel pricing along with the pricing of our local competitors, but we base our fees on our material cost formula."
"We consider what our on-line and local competitors charge," says Dr. Sorrenson. "But we aim for a profit of $80 to $100 for a year’s supply when determining our material fees."
In answer to our inquiry about whether to set material fees based on lens modality or lens brand, our participants were evenly divided. Dr. Sorrenson reported that they charge mostly the same price depending on the lens type, with some exceptions.
Dr. Giedd concurs with this philosophy, saying, "We tend to charge the same material fees in categories where replacement patterns are similar, assuming our cost is somewhat comparable among the products."
Craig Norman’s practice applies its markup formula to each lens brand to set material fees. Similarly, Dr. Christensen says, "We have different fees for most lenses due to varying replacement schedules and costs."
Presenting Fees to Patients
Once you determine both your lens service and material fees, you need a clear and concise way to communicate them to patients and you need to decide whether to delegate fee presentation to your staff.
For Craig Norman’s practice, the decision regarding who will present fees to patients depends on each patient’s situation. "A patient who is new to contact lenses usually is inquisitive about potential costs. In these situations I address fees in the exam room," he says. "Staff members usually handle the fee presentation for previous wearers, fitting updates and replacement lenses."
Craig Norman doesn’t usually present fees to patients in writing. "We quote the patient a fee, then provide them a final bill that breaks down the different costs," he says.
Dr. Giedd also doesn’t usually present fees in writing. In his practice, the doctors initiate the fee discussions and the staff follow up if necessary. "We don’t often provide patients with a fee schedule in writing for standard lenses," he says. "But for specialty cases such as orthokeratology, we use a general form with spaces to write specific fee information for each patient."
Dr. Christensen and Dr. Sorrenson both delegate fee presentation to their staff and use a written form to do so. "Our contact lens technician quotes fees to patients," says Dr. Christensen. "We provide patients with a preprinted form on which we write the exam cost, fitting cost and contact lens cost, as well as any necessary follow-up costs. We price each fitting based on whether a patient is a new or current contact lens wearer, and we price each lens based on either a six-month or one-year supply (if disposable)." A sample of Dr. Christensen’s soft lens fee schedule is available in the on-line version of this article at www.clspectrum.com. His practice has a separate form for GP lenses.
Dr. Sorrenson’s office uses a similar preprinted form to present fees. "Our contact lens technicians use a checklist form in the dispensing area to review the fees with patients and to show how much they can save from ordering a year’s supply of disposable lenses," she says. "Our technicians also review in writing what the patient’s insurance will cover."
Charge for All of Your Services All of the interviewed practitioners agreed that when a lens patient also comes in for an annual exam, you should charge both an annual exam fee and a contact lens exam fee. Many practitioners feel that this is standard and they don’t even mention it to patients. Craig Norman explains that some patients may complain, but over time they’ve become accustomed to it.
Dr. Christensen’s practice prepares new contact lens patients for the contact lens exam fee before they come in for their appointment. "The staff member who schedules the appointment will ask the patient if he is new to contact lenses. If so, the staff member will give him the cost of the annual exam and the starting cost for a contact lens exam and fitting, as well as an estimated cost on lenses," he says. "We also explain to the patient that the cost of the lenses and fitting may increase depending on the his prescription once we perform the exam."
Dr. Giedd tells his returning contact lens patients that he must perform a contact lens update along with the annual exam. "We educate patients that no matter where they go, contact lens annual examinations will cost more because practitioners need to perform more tests than for an annual exam of a spectacle wearer. We simply break it down for them, mostly because we have so many third party plans that require us to do so," he says.
Our practitioners also unanimously agreed that, at least for most cases, you should bill using a 99XXX code if a patient arrives to a pre-paid follow-up visit with conjunctivitis, giant papillary conjunctivitis, red eye or some other medical condition.
"We consider each case, but typically if reasons are appropriate we would bill insurance," says Dr. Giedd. "Within the first few weeks (trial period), if a new patient experiences a red eye I tend to see them through without adding additional charges."
Dr. Christensen agrees with this thinking, stating, "We most often charge a medical office visit, but it really depends on the timing and circumstances. You have to be flexible on this."
Craig Norman and Dr. Sorrenson both agreed that you should definitely charge for such visits. "Our contact lens fees are separated between fitting fees and material costs," says Craig Norman. "They don’t cover medically necessary visits, which we would charge as any other medically related events."
Become More Proactive
You can generate much of your own success with contact lenses by simply discussing them with potential candidates or by discussing new lenses available with current wearers. Current wearers may not know that there are newer lenses available that may make lens wear more comfortable for them, and keeping patients comfortable during lens wear is a great way to prevent future dropout. All of our practitioners proactively recommend contact lens upgrades to appropriate patients.
"During the annual visits we describe to patients what new lenses and lens care systems are available since their last visit," says Craig Norman. "We mention how trying a new product might benefit them and we often provide sample lenses for trial or a new lens care kit." He does note that if there are no indications that the new technology will provide definite improvement to a patient’s lens wear, they don’t automatic upgrade the patient.
How should you charge for a refit of this type? "If it’s one of our established patients, we may simply charge them the contact lens office visit fees as they return for follow up with a new lens material/design," says Craig Norman. "If the patient is new to the practice, we generally charge a refitting fee."
Dr. Christensen also generally charges a refitting fee when upgrading patients into a newer material. Practitioners in his office actively inform patients that there are newer lenses available that allow more oxygen to reach the cornea.
Dr. Sorrenson also allows patients to try newer lenses to see if they have beneficial effects. "We offer a free trial lens to see if the patient experiences less redness or less fatigue at the end of the day," she says. Her practice charges a service fee for some, but not all refits of this nature.
Dr. Giedd has found that most patients appreciate it when you point out to them that better lenses may be available. "Most patients seem interested in knowing what’s new and/or better, and few complain about the slightly higher fees for these products if they perceive a quality difference," he says. He also charges a minimal service fee for such refits, but he says, "Patients rarely even notice it."
Keeping Lens Sales in the Office
Although the practitioners interviewed here have structured their fees so that they make their most profit through their services, it obviously still adds to the bottom line to sell as many boxes of disposable lenses as possible. How do our practitioners encourage patients to purchase lenses through them?
"Rebates, rebates, rebates," says Dr. Giedd. "Year’s supplies are key to reducing patient visits and wasted staff time. They also encourage patient compliance and reduce their need to shop around."
Dr. Giedd also educates patients that his office can’t help patients with emergency lens replacements or with returns if they don’t purchase the lenses from the practice. "Educating patients that the diagnostic lenses we receive are based on our sales is truthful and effective," he says.
Dr. Sorrenson and Dr. Christensen both offer patients discounts on a one-year supply. "Our contact lens staff presents the savings on purchasing a year’s supply to patients in writing," says Dr. Sorrenson. Dr. Christensen’s practice offers a $16 instant savings for patient who purchase a one-year supply and also uses manufacturer rebates as incentive.
Craig Norman emphasizes the overall value of purchasing disposable lenses directly through the practice. "We mention the convenience, competitive pricing and the ability to make exchanges if necessary," he says. "We also whenever possible suggest annual supplies and the use of rebates to offset patient costs."
In conclusion, we asked our participating practitioners about any other tips they may have on establishing or implementing contact lens fees. Following are their thoughts.
"Routine, periodic review of your fee structure is important, even if the result is no change in the fee structure," says Craig Norman. "Material costs should be fair, but surely don’t need to be extremely low to remain competitive. Because professional fees are split for the material costs, make sure patients receive ‘fair value’ for the fees you charge. We also let patients know that if they desire to purchase their lenses elsewhere, it’s not a problem — we simply want to take care of their lens fit and their eyes regardless of where they purchase their lenses."
Dr. Sorrenson advises, "Don’t mandate follow ups that aren’t necessary. Don’t be afraid to charge higher fees for specialty fits. For instance, $1,000 for a keratoconus fit and materials can be reasonable if you specialize in this area."
"With today’s competitive market and minimal profitability for soft contact lenses in particular, I frequently shop my professional fees to make sure I’m not undercharging for my time," says Dr. Giedd. "Patients are more willing to pay more for service and expertise that they feel is excellent compared to what they might receive elsewhere." CLS
Contact Lens Spectrum, Issue: April 2007