Article Date: 12/1/2003

CONTACT LENS FEES
Building a Profitable Contact Lens Practice
Learn how to set up a contact lens fee structure that will bring profit to your practice -- even if your patients obtain their lenses elsewhere.
By Jeffrey C. Krohn, OD, FAAO

I find myself fascinated by economics. The basic principles of economics that attempt to explain why consumers do what they do intrigues me. My fascination with this subject relates to this attempt at bringing some valuable insight into what I call "contact lens economics." While I'm no expert in this field, I'll tell you my ideas on this topic and how they've helped me create a profitable contact lens practice.

Fee Structure History

In a not-so-long-ago past, contact lens practitioners received compensation for what they did rather than for what they supplied. In the early days of contact lens provision, practitioners took part in all phases of the process: taking measurements, interpreting those measurements, designing a device and "fitting" that device to the eye (with some likely modification and fine-tuning). For this all-encompassing service, patients usually paid a fee that accounted for the services involved as well as for the device itself, both often bundled into one fee.

Other healthcare industries use similar fee systems. For example, my daughter wears orthotic devices on her feet. Her orthotist takes measurements, crafts devices and then "fits" them to my daughter's feet. He provides follow-up care and ongoing fine-tuning and modifications to the orthotics as she wears them. We pay a fee that, according to the insurance company, is only for the devices, but I'm quite aware that the devices are useful only because of the orthotist's service.

My son wears braces on his teeth. His orthodontist takes measurements, determines a treatment plan and then pursues a course of action for a determined global fee. During the process, the orthodontist never tells me what the appliance costs or asks me to pay for extra wires or brackets. I pay a total fee for the services of establishing a proper bite and smile.

Although the basic scenarios are similar, in one instance I pay for a device and the fee includes the services, and in the other instance I pay for services and the fee includes the materials.

In contact lens care, patients ask us to provide them with a device to accomplish a goal. We gather measurements, make judgments and prescribe a course of action that will accomplish the patients' goals (clear, comfortable vision) as well as our own goals (unaffected ocular tissue). Should we follow the model of the orthotist or of the orthodontist?

As I said earlier, in a not-so-distant past, practitioners could consider either example as a model for establishing contact lens fees. Most practitioners in the past selected a model similar to that of the orthotist: They charged a set fee for the "device" and provided all the necessary care to ensure the success of that device.

Changing Times Demand New Methods

However, once contact lens provision moved from individual contact lenses to packaged lenses, the principles behind contact lens economics changed. Patients could now economically evaluate contact lens prices. Packaged contact lenses took contact lens care away from the orthotist model it had previously resembled.

Many within the contact lens community predicted that this shift would occur. A multitude of practitioners came forward with different ideas and mechanisms for creating fair and profitable fee structures for disposable lenses (I use the term disposable to include planned/frequent replacement modalities).

The global fee structure gathered many supporters as practitioners levied an annual "management fee" that included an annual supply of contact lenses and sometimes even solutions. This technique approached the orthodontic model. Our office employed this method in the early years of disposable lenses with moderate success.

But as patients returned for year after year of continued care, they began to ask more questions about what their fees covered. They wanted us to itemize the fee so they could see what "just the contact lenses" would cost. While patients, in general, were understanding and appreciative of our efforts to establish an appropriate lens for their needs, they wondered why we needed to repeat the process year after year. Patients didn't perceive the services of eyecare practitioners in the same way as they might perceive the services of an orthodontist -- they instead focused on the device.

The popularity of "per box" pricing in so many segments of the contact lens arena has resulted in an emerging standard to separate contact lens fitting services from material considerations. Here's how we developed and implemented such a contact lens fee policy and how it has helped us build a profitable contact lens practice.

Setting Evaluation Fees

The non-negotiable attribute of a modern day contact lens fee structure is the contact lens "evaluation fee." Because novice wearers can interpret "fitting" to mean only their initiation into contact lenses, I prefer to use the term "evaluation." In my opinion, the economics of modern day contact lens care require that practitioners charge this separate fee above and beyond the standard examination fee. Practitioners shouldn't think of this fee as a reimbursement for doing more. Although practitioners spend more time with contact lens patients and may perform certain extra tests, it's the extra responsibility of caring for a contact lens patient that justifies an additional service fee.

Some practitioners have advocated using a single fee for all contact lens wearers that they charge at any and all contact lens visits. I've chosen to implement a "tiered" fee structure that has four different levels of evaluation fees.

I evaluate each contact lens patient with regard to his prescription needs, fitting complexity and contact lens familiarity to determine what intensity of service might be necessary. For example, if a patient is new to our office and is pursuing contact lenses to correct astigmatism and presbyopia, then I would assess him at the highest level of evaluation fee. If a patient with the same prescription needs is already wearing toric lenses from us and now requires a modification to correct for presbyopia, then I would use an evaluation fee one level lower. I would assess a low maintenance patient who is continuing in the same lens type and design at the lowest fee. This system is similar to the current Evaluation and Management (E/M) codes that we use on a daily basis to determine the proper level of coding according to CPT classifications.

Don't Forget Follow Up

When I first abandoned mandatory global fees for this evaluation-based fee structure, I didn't include any follow-up visits after the initial evaluation. Based on my own experience and the feedback of numerous patients, I have modified my original system to now include one follow-up visit within the first 30 days after evaluation.

You'll also have situations in which either you or your patient desires to include extended care beyond the 30-day period. For example, I automatically place all patients who are new to contact lenses or who are moving into a lens design or wearing schedule that could cause more physiological stress into the extended service package.

Our global management extended service fees also have four tiers to allow for increasing complexity and challenge inherent in using certain lens designs, correcting certain prescriptions and managing unique personalities. These packages specifically allow patients to return for an unlimited number of routine or problem-solving evaluation visits for a period of one year.

It's important to note that we have specifically excluded managing contact lens complications from both the evaluation and service package fees. Webster's Dictionary defines complication as "an unexpected occurrence requiring a change in plans, methods or attitudes." When managing complications that relate to tissue, we handle them outside of any contact lens fees and bill them appropriately as a medical visit using established criteria.

Presenting Fees to Patients

When a patient presents to our office for the first time for a contact lens examination, we first complete the proper testing for an ocular tissue and function examination. After that is complete, we present our philosophy and fee structure for contact lens evaluation services to him completely (see sidebar at left). If he elects for us to provide the contact lens care, we then evaluate his present contact lenses and/or evaluate diagnostic lenses and form a new treatment plan.

However, if the patient isn't comfortable with our philosophy and/or fee structure and doesn't wish to participate (he wants only the exam that his insurance covers), we hand back his current contact lenses and make it clear to him that we can't ascertain whether or not those lenses are appropriate, nor can we provide a contact lens prescription without performing a contact lens evaluation.

Profiting from Your Fee Structure

If your practice is inundated with patients who want to obtain their contact lens supply elsewhere, then a fee system like ours that emphasizes contact lens evaluation will allow you to modify your fee amounts appropriately to maintain the appropriate level of profit (yes, I did say profit).

Michael Douglas' character in the movie "Wall Street" famously stated that "greed is good." While I disagree, I do believe that profit is good. I can recall a specific phone conversation with a patient who felt that some of our office fees were too high. I simply told him that I wanted to be his eyecare provider for many years to come. I continued, "The profitability of the practice is what allows us to continue to operate many years into the future. Without profit we wouldn't be here in the future to provide the services you need."

This brings me to consider the provision of contact lens materials and what level of profit is essential, desirable or even possible with contact lens products themselves.

In his book The Armchair Economist, Stephen Lundberg discusses why popcorn is so expensive at the movies. He discusses the various possible reasons why it costs so much more to enjoy popcorn at the movies when we all know that the same popcorn is available for a much lower cost outside the theater. I saw a few correlations between the pricing of popcorn by movie owners and the setting of fees for contact lenses by eyecare practitioners. Allow me to explain.

Many who consider the high price of movie popcorn proclaim that because the movie theater has a monopoly on popcorn inside the doors, it can charge whatever it wants for popcorn -- so the theater "gouges" us for as much as it can. However, the theater also has a monopoly on the restrooms, so why doesn't it charge us to use them while we are there? And why haven't any theaters attempted to upset the system and bring on a wave of "popcorn price wars," reducing their price for popcorn or even pricing it at or below cost to entice movie-goers to their theaters? Furthermore, if a theater gave away free popcorn, couldn't it charge more for admission to the theater to make up the difference?

Lundberg suggests that theater owners understand that those individuals who purchase popcorn to enjoy with the movie are willing to pay a higher price for that experience than the person who is content to watch the movie without it.

To apply this lesson to contact lenses, consider the following. If we, as contact lens practitioners, are going to provide contact lens products to our patients, then we must do so at a profit. If the time, trouble and inconvenience involved in ordering, stocking, calling and mailing lenses aren't offset by gains in income and patient satisfaction, we'll stop doing it. However, many contact lens wearers perceive our attempt to profit from contact lenses as an attempt to take advantage of them through an apparent monopoly and control of the product. What they (and we) should realize is that patients don't typically come to us for "just the movie" (the services) or "just the popcorn" (the lenses), but for the whole experience. Practitioners who choose to provide lenses to their patients must be comfortable with the notion that those patients who want you to provide lenses to them will, within reason, be willing to pay more for the total experience.

Setting Lens Material Fees

In setting fees for actual lens materials, consider these three basic principles:

1. Practitioners should make a profit. An office has significant personnel, utility, phone, space and supply costs. If you provide lenses to patients, either out of inventory or by direct-to-patient programs, then your practice will spend time, effort and energy on providing that service. When patients order a smaller amount of lenses and then call to order more during the year, your effort is greater and so the profit should be greater. When you order lenses and the manufacturer ships them directly to the patient, the lenses usually cost less and your office spends less time and energy, so your profit should be less.

2. Office fees for contact lens products need to be in the ballpark. While we all accept that movie popcorn will be more expensive than popcorn obtained from other places, few of us would pay $15 or $20 for a bag at the movies. In the same way, you should set material fees with a careful eye toward what is available in the marketplace.

3. You should always quote contact lenses that are delivered in a package with a cost per box. While global fees were successful in the early days of contact lens care, patient perspective now focuses on the "box," and your fees should include that dollar amount at some point. Also, a solid contact lens economic strategy provides a discount for purchasing an increased number of lenses. That is, patients pay less for two boxes of the same lens type purchased at one time than for one box purchased two different times. This multiple box discount becomes progressively deeper as you approach an annual supply for a given lens, with an annual supply as a patient's best value.

Know When to Let Go

Lastly, you'll have to let some patients go. Some patients like to fulfill their need for evaluation services under your care but prefer to obtain their lenses from outside sources. Let them. If you reduce your fees only a small amount to retain every patient, then your profitability erodes quickly. It's better to maintain a competitive yet higher fee and let some patients take a prescription elsewhere.

Of course you shouldn't accommodate patients who forego evaluation at proper intervals or who obtain lenses without a proper examination. Although this has occurred to each of us, it appears that the trend is shifting, and obtaining proper care at appropriate intervals is becoming a priority to the industry at large.

I encourage practitioners to be complete and specific in their documentation, both for writing prescriptions and for patient records. When you write a prescription, make it clear exactly what lenses you are prescribing. If a lens has more than one name, specify the most readily available design (this is actually written into the law in California). I also encourage practitioners to specify the exact number of lenses (or boxes) that the patient can obtain between the writing of the prescription and its expiration date. Also, specifying "no substitutions" and calling the expiration date the "next examination" date can educate the patient. Trying to thwart a patient's attempts to obtain lenses elsewhere after you have provided the necessary care and evaluation can break down the trust between you and that patient.

Within the patient record, practitioners should specify the prescribed replacement interval of the lenses, the wearing schedule and the lens care routine clearly and legibly. It may also help to have patients agree to and sign a lens wearing agreement.

Both Practices and Patients Benefit

My father's uncle was an optometrist in Los Angeles from the 1920s to the 1960s. Before he passed away he told me that during the depression he had provided eye care and eyeglasses to a patient in exchange for a chicken. Today's economics don't involve such a straightforward exchange of goods for services, but the underlying principle remains -- we all have to survive. By establishing a fair and profitable contact lens fee policy that addresses patient health, convenience and value, practices can help fortify their own long-term viability and success.

Dr. Krohn is in a partnership practice in Fresno, CA. He is a diplomate of the Cornea and Contact Lens Section of the American Academy of Optometry and has served as a consultant and conducted clinical research for both the pharmaceutical and contact lens industries.

 

 

Presenting Evaluation Fees

 

T he following shows the document that we present to all contact lens patients before we
fit them with contact lenses.

CONTACT LENS FEES
Comprehensive Eye and Vision Examination
$XX
Contact Lens Evaluation

This service includes special evaluation, assessment and prescription services related to contact lenses (not a part of the standard exam). One additional visit within the first 30 days is included. If you return for additional visits there will be a fee.

$E1 $E2 $E3 $E4**

Contact Lens Annual Service Package
This service includes a contact lens evaluation as described above, but ALSO includes UNLIMITED contact lens "recheck" visits with the doctor for one year from the time of the evaluation.

NOTE: Visits related to medical conditions are not included.

$P1 $P2 $P3 $P4**

** Medically necessary, prescription reducing, bifocal and other special use contact lenses may have a higher service fee.

Exam: Insurance:
CL Service: Patient:
Lenses:
TOTAL:

AGREEMENT: Patients agree to abide by the replacement/disposal schedule as prescribed by Drs. Cole and Krohn. Patients also agree to return to the office for a complete eye examination and contact lens evaluation every year. The doctors reserve the right to refuse prescription refills if this is not taking place.

Philosophy: The contact lenses you receive from us are not the important factor in successful contact lens wear. What is critical is the professional judgement, time and expertise of your doctor.

 


Contact Lens Spectrum, Issue: December 2003