managed care
Point/Counterpoint - VSP Helps VSP
Is optometry's "friend" still friendly?

BY GIL WEBER, M.B.A., Davie, Fla.

As I travel around the country I hear more discussions than ever about third-party vision programs. Many optometrists wonder, "Should I join the 'XYZ' vision plan?" "How many vision plans should I join?" "Which plans pay the most, and will any really benefit my practice?"

My response is always, "It depends." The answer is more involved than simply looking at the reimbursement rates. It depends on each practice's relative "need" to participate at any given time (i.e., the practice's maturity, available appointment slots, number of other vision plans, etc.), and on the administrative and logistical hurdles that the staff must negotiate. It's an issue of "dollars and sense."

Inevitably, discussions about vision plans narrow to Vision Service Plan (VSP). Many O.D.s seem concerned that optometry's traditional "friend" is no longer so friendly. With reimbursements squeezed and administrative burdens increasing, they're considering a previously unthinkable thought -- dropping VSP.

Sometimes the truth hurts

I was a speaker at an American Optometric Association leadership conference in 1991. Representatives of national vision plans including VSP addressed state leaders. Each described how his program was designed to help optometrists. When it was my turn I stood up and said, "It's time for optometrists to realize that the emperor isn't wearing any clothes. Third-party vision plans aren't your friends. They'll use O.D.s as a means to advance their own purpose -- to make money."

Since then, third-party vision care has grown, with VSP becoming significantly more influential. Some optometrists opine that the ways VSP "uses" O.D.s to build its profits have become increasingly annoying.

Does everyone benefit?

All vision plans strive for a competitive edge when selling to health plans and other purch-asers. This almost always involves benefit programs tailored to the needs and budgets of the client. However, attractive benefits for employees/members, affordable programs for employers/health plans and positive cash flow for the vision plan don't necessarily translate to profitability for the doctors. For example, when responding to a Request for Proposal from a health plan, the vision plan might toss in a perk for all members of this new program. But there has to be a cost somewhere to deliver that "free" discount benefit, and it's the providers who would have to take the hit.

VSP facts

VSP reports on its Web site that 2002 revenues were $1.86 billion dollars and that it provided eyecare coverage for one in eight persons living in the United States. VSP says that along with this growth, payments to doctors are increasing and systems are being implemented to raise O.D. margins.

Yet an increasing number of O.D.s claim that margins have been cut and administrative requirements made so burdensome that they're considering dropping VSP -- or already have done so. They wonder why financial and operational decisions that affect optometrists across the country (for example, the WellVision Savings Statement) are made without their input. They wonder who chooses the board of directors that "speaks" on behalf of the tens of thousands of panel members who are supposedly the "owners" of VSP.

Because VSP isn't a publicly traded company, answers are often vague and sometimes not available. But public information indicates that, financially, VSP is healthy.

It's there in black and white

The following self-reported information is for VSP California as reported to the Department of Managed Health Care, the regulatory agency that oversees all California HMO and limited-license (single service) HMO operations. These numbers apply to between eight million and nine million enrollees (out of VSP's national total, now approximately 36 million).

You can review these VSP California self-reported financials at the following URL: www.dmhc.ca.gov/library/reports.

Halfway down the page you'll see "Healthplans' self-reported financial information." In the drop-down box, select the report you'd like to view. You'll get the data on VSP and on all other vision plans operating under the authority of the DMHC.

For even more detailed VSP financials, go to http://wpso.dmhc.ca.gov/fe/search.asp. Scroll down and you'll see "HMO or Healthplan." Next, select Vision Service Plan and then click "submit." You'll be presented with seven recent financial reports. For fiscal year 2002, VSP California reported net income of $83.0 million, and cash-on-deposit of $66.8 million. Looking at numbers such as these while facing profitability squeezes such as new frame and contact lens mark-up rules makes O.D.s ask what's going on with optometry's "friend."

Why are they still there?

If O.D.s believe VSP's policies are not in their best interests, why aren't more getting out? Certainly many O.D.s are happy with VSP, and most at least tolerate VSP because it does bring in patients and revenue. Still, for all the public "belly aching," why isn't there a more active demonstration of displeasure with VSP compensation and administrative policies?

Most optometrists would admit it's because they're held captive by a four-letter word: fear. While some O.D.s are trapped by circumstances -- practicing in towns dominated by one or two employers who have VSP -- many other optometric practices have become so dependent on VSP that they feel they can't afford to drop the contract.

The practices didn't have to pursue these patients; they didn't have to market or promote or advertise or do anything else. The patients came in based on a listing in the VSP provider directory. If that VSP business goes away, who's going to fill the empty appointment slots?

There really is life after VSP

O.D.s who've cut the ties to VSP report that though revenue drops initially, finances typically turn around -- they discover that the net starts to rise despite a lower gross. Over time, with effective marketing and promotion to attract private pays and others, and by devoting more attention to each patient, those who leave find that the gross also starts climbing. Some O.D.s discover that they can reduce their staff expenses when they drop one or more third-party plans.

It won't be easy

Please don't misunderstand. You can't reduce any of this to a simple process. Dropping any vision plan, but particularly VSP, is a huge decision that you can't make without a complete analysis of the "dollars and sense."

If your analysis says that staying the course is the right thing, then more power to you. But if you decide not to be economically tied to one vision plan, then take encouragement from others who've traveled this path and who've found that there's life after VSP. However, remember that life without VSP means you'll have to pursue patients and satisfy them as never before to retain their business.

Can things change?

As for VSP, can member O.D.s encourage it to change? Many large HMOs have undergone significant changes vis-a-vis their providers recently. Those changes were brought about, in part, by providers willing to walk away from contracts.

And if you're a VSP panel doctor, you have the right to query VSP management and your "leaders" on the VSP Board. Who will look out for your interests if you don't?

Mr. Weber is a nationally recognized author, lecturer and practice management consultant to the managed care and ophthalmic industries and has served as managed care director for the American Academy of Ophthalmology. Contact him at (954) 915-6771 or at gil@gilweber.com.

VSP is Good for Private Practice

BY F. MASON SMITH, O.D., Mt. Pleasant, S.C.

We all know that the eye care and optical marketplace is in transition. Doctors have to provide superior patient care while facing many challenges in running a successful business -- some of the more obvious include keeping up inventories and navigating managed care, hiring and retaining good staff and attracting loyal patients. And we all want to provide great care, receive reasonable reimbursements and have access to marketing support and tools that help us manage our practices more effectively.

An American Optometric Association statistic shows that between 1998 and 2000, self-employed optometrists saw net income rise by 18%. Yet if often feels as if business is more challenging today than even just a decade ago. I think the factor that contributes to this feeling, and that perhaps isn't so obvious to everyone, is the evolving national landscape that centers on the consumer and competition.

From patient to consumer

Patients are consumers, and they're better educated than ever. People today make a transition when they leave the exam chair, moving from a "patient" to a "consumer" who is shopping for the best buy on contact lenses or fashionable frames. Because of the Internet, our society has instant access to information and near instant fulfillment of goods and services, so if the consumer can't find that best buy in your office, she'll look elsewhere.

Look at the market

Though private practice is holding its own in the marketplace (capturing approximately 57% of all optical sales in 2001), it lost 3% market share between 1998 and 2001. Meanwhile, the nation's top optical retailers have seen their collective revenues double to more than $4 billion since 1993.

Other healthcare and regulatory trends also have definite impacts. Benefit managers are more price sensitive, companies face double-digit healthcare premium increases and retail chains are merging private practice and retail networks to persuade companies to buy their plans. Factor in government regulations such as the Health Insurance Portability and Accountability Act of 1996 and you have a picture of the market pressures affecting both VSP and its optometrists. VSP takes action to address those issues and so that patients remain in our offices.

Working together

VSP and private practice eyecare providers offer significant advantages over corporate retail eye care. In company surveys, VSP patients indicate that they appreciate the focus on eye health, thoroughness of care, and long-term relationships they enjoy with their doctors.

This quality eye care combined with the benefit VSP provides, creates a competitive edge for both VSP and its doctors. Consider that in a market where private practice holds 57% of the market:

• Fifty-one percent of VSP patients stay with the same doctor for five or more years compared to 19% for private pay patients.
• VSP members see their eyecare providers more frequently than any other group: 3.6 times over a five-year period compared to the market average of 2.5 and that of private pay at 2.1.

So while an optometrist may have to discount services to participate in the plan, the long-term value to the practice is greater with VSP involved. In the box below, you'll find that instead of a $40 loss in revenue per patient per visit, the doctor realizes a $156 gain over a five-year period with the VSP patient.

Of course, if a doctor could fill his appointments with private pay patients, he wouldn't need third-party plans. But given current trends, those patients are diminishing. Discounts vary by state and the fees of each practice. However, even if the discount were double that shown in the example, doctors still generate more revenue in the long run.

Keeping our edge

A variety of recent changes illustrate VSP's efforts to address customer demands and remain competitive, from creating a paperless benefit system for patients in the 1990s, to launching a savings statement in 2002 that demonstrates the value of an eyecare visit to VSP patients at the time of their visit. Over the past year, additional consumer-oriented programs, such as a new member contact lens program and a retail frame allowance, make the benefit easy to understand and reinforce the doctor/patient relationship.

These efforts are paying dividends. Company research shows that patient satisfaction with the level of coverage has increased 6.5% since 2000.

VSP helps private practice

VSP is one of a few companies that support private practice exclusively -- an important point to consider when evaluating plans. Many plans have parent companies that are interested in optometry as a channel for selling and distributing eye wear. But VSP is a non-profit organization with a board of directors composed primarily of doctors.

In 2002 alone, the company paid $1.5 billion to private practice doctors and offered an additional $22 million in payments through the Partnership Plus program. Additionally, VSP provides legislative assistance and continuing education sponsorships. Other examples include:

• The VSP family of companies, including Eyefinity, Altair Eyewear and the VSP Labs, were formed to assist in the long-term success of private practices, with capabilities ranging from e-commerce and practice management technologies to programs that connect private practice with the industry's most respected brands and lab-finishing capabilities.
• VSP's optional FrameConnect program provides competitive pricing and access to collections from the top frame makers in the industry. Doctors can order online via Eyefinity.
• A pilot program, launched by VSP and Vision One Credit Union, provides loans to doctors who are first-time buyers of either all or part of an existing optometry practice. Initially, loans will be available to practices in California, but may be expanded to other states.
• VSP supports association programs and scope of practice legislative activities, and continues to educate the public about the importance of regular eye care through programs.

Private practice helps VSP

Private practice doctors are key to VSP's ability to connect them with patients. They make VSP desirable by discounting services, administering the VSP benefit, and following the guidelines the company must have to meet client expectations for quality and service.

Private practice doctors also support VSP by serving on its Board of Directors, which has a majority membership of private practice optometrists. Doctors can also serve as VSP State Professional Representatives to help keep an open communication channel between panel doctors and the VSP Board. The board chooses doctors to serve in these positions from recommendations of the optometric community.

Far more pros than cons

While VSP certainly isn't perfect and sometimes admittedly affects our practices negatively in its efforts to stay competitive, it continues to deliver on its promise to help private practice optometry -- consider that it paid more than 11.5 million claims in 2002 alone. It also provides the support we need to run our businesses efficiently, offering online, phone and in-office training.

All plans take administrative time, but with Eyefinity's online services, doctors and staffs can significantly reduce the time it takes to receive authorization and payment, ensure accuracy of orders and streamline operations. Plans that don't offer online processing and customer support end up costing doctors more time and money.

Working with the nation's largest eyecare benefits provider, one that's dedicated to private practice and that offers tremendous access to patients, isn't only good for business, it's also good for optometry.

Dr. Smith is in private practice. He's also a member of the Board of Trustees for the Southern College of Optometry and serves as vice president for the Professional Development with Eyefinity. You can contact him at (843) 881-2492 or Mason@vsp.com.