CONTACT LENS PRACTICE
The
Elusive Profitable Contact Lens Practice
Here's
a look at what can make your contact lens practice successful in today's marketplace.
John M.B. Rumpakis, OD, MBA
One
of the most exciting areas of practice today is the area of contact lenses. Unfortunately,
it's also one of the most turbulent.
Innovations in contact lens technology are
making contact lenses an increasingly attractive option for patient correction.
Unfortunately, most of this innovation does little to drive patients to our practices.
Until recently, practitioners were the primary drivers of the contact lens marketplace.
The recent events surrounding the outbreaks of Fusarium keratitis and Bausch
& Lomb's removal of its ReNu with MoistureLoc product from the market have put
contact lenses and, more importantly, eye care back into the media spotlight.
With
this market turbulence, how can we ensure that our contact lens practices are poised
to offer the best care to patients and maintain profitability? Let's take a look
at the traits of a successful contact lens practice in today's marketplace.
Measuring Success
The metrics that quantify success in contact lens
practice are less developed than the retail optical part of our practices. Traditional
benchmarks such as average unit sale, inventory turnover and net margin on sales
are often monitored and give practitioners a good sense of how their optical dispensary
is doing, but we have very few commonly accepted or widely used metrics when it
comes to analyzing our contact lens practice. What we can use in their place is
knowledge of the traits, attitudes and behaviors that characterize successful practices.
The degree to which a practice employs the strategies discussed here is the best
measure we have to know whether it has optimized the opportunities inherent in lens
practice.
As a consultant, when practitioners approach
me to evaluate their practices, more specifically their contact lens operations,
I don't begin by asking for benchmarking statistics, which they rarely keep. Instead,
I look for those practices and behaviors that are elements of successful contact
lens operations.
In my evaluation, I start with the
basics: In its accounting, does the practice make use of cost based accounting applied
to a profit center structure, and are contact lenses one of them? If a practice
doesn't use profit centers, or management centers, as they're sometimes called,
it's difficult to isolate and evaluate this one aspect of the practice. Indeed,
if specific services related to contact lenses and their corresponding products
aren't broken out in the practice's accounting, it will be difficult to determine
whether the practice is making or losing money from providing contact lens-related
services and products.
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Figure 1. Total Contact Lens Revenues As A
Percentage Of Optometric Gross Income, 1998 – 2004
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Profit From Your Expertise
Pricing strategy is a key element of success in
contact lens dispensing. Before disposable lenses engulfed the market, it was possible
to gain adequate compensation by charging a modest amount for the practitioners'
service and a considerable amount for lenses. Alternatively, both materials and
service were often bundled into a global or package fee. In either case, the overall
profitability of a contact lens patient has traditionally come from the sale of
contact lenses.
Over time, the switch to disposable lenses
and the lowering of prices because of competition from non-practitioner channels
(big box stores, Internet and 800-number retailers) has changed the playing field.
Powerful nonprofessional competition has made it virtually impossible to significantly
mark up the materials portion of the fee.
Indeed,
the period from 1998-2004 saw a seismic shift in patients' buying habits from practitioners
to retailers — primarily online retailers. This was just economic rationality
combined with the power of the Internet, as educated, price-conscious patients saw
that they had a convenient lower cost alternative for obtaining replacement lenses.
The result has been a drop in contact lens-related income for practitioners from
nearly 30 percent of gross income to less than 20 percent (American Optometric Association,
Caring For The Eyes Of America, 2004).
This loss of materials revenue
is not an insoluble problem. The alternative is to charge appropriately for fitting
services and to sell materials at a market competitive rate. In the long run, this
is a more successful strategy than hiding your profit in material fees. A pricing
strategy that charges appropriately for services and maintains a competitive markup
on materials is a trait of a good contact lens practice.
Service fees cannot be a loss leader.
Service fees for contact lens fitting must accurately reflect the costs of the time
and resources involved in fitting, not the subsidized service fees we now see in
the market. Additionally, you should also price and charge clinically appropriate
follow-up care based on the time, complexity and individual patient characteristics
that exist separately from that of the contact lens fit.
Patient Satisfaction
Albeit a soft benchmark, patient satisfaction
is an important indicator of success. While it's difficult to accurately measure
patient satisfaction directly, in the contact lens world we have a good surrogate
measure: the dropout rate.
Each year approximately 3.8 million people
begin contact lens wear but close to 3 million others drop out, for a net increase
of roughly 800,000 wearers a year. What's true for the industry should be roughly
true for the practice — a successful practice should have a dropout rate lower
than the national norm, and certainly the number of new fits should exceed the number
of dropouts.
How does a practice reduce its dropout
rate? The contact lens industry has long understood that significant growth requires
reducing the dropout rate. A key element that causes dropout appears to be discomfort,
particularly discomfort from perceived dryness. As a result, the last four or five
years have seen a profusion of lens and lens care products that directly address
the issues of dryness and discomfort, as well as appropriate compatible disinfection.
For example, the major solution manufacturers
in the last few years have come out with products that aim to reduce dryness and
increase comfort. Because we now have lenses with different polymers and surface
treatments on the market, solutions are formulated with specific lens types in mind.
To take advantage of this, practitioners need to think in terms of prescribing a
lens/solution system rather than two separate items, as lens and solution compatibility
is a significant issue. Lenses and solutions have to work together, and you must
counsel patients to purchase the best, not the cheapest, system for their lenses.
Practices can take active steps to improve lens patient satisfaction, which will,
in turn, diminish dropout rate and grow the practice. Succeeding at this requires
a high level of product knowledge and willingness to apply that knowledge to provide
the best possible lens wearing experience for patients.
Successful contact lens practitioners
must be up-to-date on all technologies to be valued as a specialist in patients'
eyes.
Inventory
Today there are competing theories about contact
lens inventory: small, just-in-time inventory; no inventory (direct delivery to
patients); or a large, extensive inventory. My personal belief is that inventory
should be large enough so that if you fit a new patient, you can offer him a full
prescription cycle of lenses on the spot when he returns after his diagnostic lens
evaluation, capturing the revenue for the entire cycle.
While a practice could ask patients to order
lenses through its Web site (which would allow just-in-time delivery), I think it
better to satisfy the patient (close the sale) immediately. The difference is being
proactive. When you leave patients on their own, anything can happen. They become
susceptible to any competitive sources. Thus, my preference is to close the sale
at a patient's point of maximum interest.
Additional Products
Approximately 94 percent of first-time contact
lens patients buy a pair of plano sunglasses within 48 hours of being fit, even
if it's with a diagnostic lens. This is an enormous opportunity for practices that's
often untapped because we don't often look at things from the patient's perspective.
For patients who have never been able to wear
high-fashion plano sunglasses, the opportunity to get new, cool sunglasses is almost
palpable. They often want the best, which can be a significant piece of revenue
for a contact lens practice that positions itself to capture the business. A successful
strategy I use is offering a small discount on sunwear if it's purchased as part
of the contact lens sale. Additionally, contact lens patients must have backup spectacles
— something we've always recommended but patients have rarely followed. Educate
patients with scenarios such as the recent Fusarium incidents on why backup
spectacles are a health-related recommendation, not just a boost for your bottom
line. We need to stop concerning ourselves with patients' pocketbooks and instead
take the position of being their eyecare provider and making a strong recommendation.
Make Strong Recommendations
Life today is filled with complex visual demands.
It's rare that one vision correction solution meets every need optimally. Why not
offer a patient the solution that best meets each identified need? For example,
a patient who says, "I fish, I golf, and during the week I work at a computer from
8 until 5. After work I play pick-up hoops, and on winter weekends I like to ski.
I also tie flies for when I go fishing in the spring." An astute contact lens practitioner
will look at this situation and identify the number of different, disparate optical
needs demonstrated by the patient. It's all but certain that no single contact lens
product will fulfill all of those needs, so look to make the best recommendations
based upon your expertise and experience; after all, isn't this what the patient
is seeking?
Good medicine can also be good business as
reflected in this case. Because he stares at the computer all day, depending on
his age, a multifocal contact lens might be a good way to help him see both intermediate
and distant objects clearly. Prolonged computer use also means that you'll need
to take care in selecting the contact lens material and the appropriate care system.
For evening basketball games, skiing, golfing and fishing, distance vision is paramount.
A daily disposable might be a good choice.
For the intense near work of tying
flies, glasses will likely provide the best possible vision. And for the fishing
itself, polarized (plano) sunglasses are ideal. And of course, the patient should
wear protective goggles over his contact lenses when playing basketball. Obviously,
these recommendations would yield a different economic outcome than if we failed
to recognize the patient's lifestyle demands.
Although some focus solely on price,
most patients want to know their options and what your recommendations are. Our
job is to find out the patient's specific needs and make sure that we match the
existing technology to those needs in a way that maximizes success. At the very
least, the practice should recommend the best and explain the recommendation. If
nothing else, this allows the patient to make an informed decision. The last thing
we would want is the patient finding out other options from friends, neighbors or
other practitioners because you failed to educate and recommend. Probing to make
sure that you identify the patient's needs without pre-judging a patient's ability
to pay is another characteristic of a successful contact lens practice.
Keeping Things Simple
Often times, the most successful things are also
the simplest. Implementing these key points are most certain to revive your contact
lens practice — both from a medical and business perspective.
• Use cost based accounting.
• Use a profit or management center
approach to isolate income/costs to the contact lens portion of your practice.
• Price your services appropriately
and separately from contact lens materials.
• Measure the ratio of professional
service revenues to material sales and the impact on profitability.
• Measure the ratio of dropouts
vs. new fits and refits.
• Prescribe for lifestyle without
financial predetermination or bias.
• Capture plano sunglass and back-up
spectacle sales by recommending appropriate choices and creating an incentive for
patients.
• Measure patient return rate
— successful contact lens patients return more frequently for services than
do spectacle only patients.
The Bottom Line
While eyecare practitioners' role has been challenged
in recent years by alternative purchase channels, market-savvy consumers and complacency
of practitioner and patient, there's no time like the present to reassert our place
as experts in this segment. Make sure that you and your practice are poised to be
the best alternative for your patients by keeping current, making recommendations
based on needs/wants without financial bias and incorporating the best our industry
has to offer. The elusive profitable lens practice is easier to achieve than you
may think. Just remember one key pearl: the difference between those who think about
it and those who achieve it is one simple thing — action.
Dr. Rumpakis is currently President & CEO
of Practice Resource Management, Inc., a firm that specializes in providing
a fully array of consulting, appraisal and management services for healthcare
professionals and industry.
Contact Lens Spectrum, Issue: September 2006