fix this practice

Tomorrow's Optical Department

Take a preventive management approach to your competition.

Richard S. Kattouf, O.D., D.O.S.

Q What is your prediction of the future of the optical departments in the independent practice? The information I receive is all over the map.

Dr. V. Fredo
via e-mail

A: To preface my answer, consider the growth and change that has occurred in optometry. For example, optometry was a drugless profession. Now, all 50 states have passed OPA and TPA legislation. Some states expanded their drug laws to include orals, injectables and lasers.

Vision care was not covered by insurance until the first major plan for the United Steel Workers in the mid-1970s. These indemnity policies paid the doctor his usual customary and reasonable (UCR) fee.

In the mid 1980s most of the indemnity policies changed to managed care plans that no longer honored the doctor's UCR fee and reimbursed only a portion of the actual retail cost of materials. While these plans drive patients into independent practices, their net-to-gross income (profit) is low.

Contact lens material profits were very high in the 1970s but ended with the onset of Internet and commercial opticals, which developed price points that the private practice could not match.

A missing management skill

Throughout this trip down memory lane, I observed that O.D.s did not practice preventive management — that is, developing a strategy to manage an emerging challenge before that challenge becomes a major problem. For example, dentistry practiced preventive management when it resisted managed care contracts. Today, many dentists still receive their UCR fee.

The latest trend threatening independent practice is the Internet optical. Many feel this channel will not succeed due to its limitations in providing the measurements needed for spectacles. However, Internet companies are solving this problem and have a liberal return policy.

I interviewed a North American contact lens distributor who hired a CEO who has expertise in the Internet shoe market. He decided the company would enter the spectacle Internet business. The company sent e-mails to thousands of customers offering them prescription spectacles at unbelievably low fees, resulting in a significant number of orders. Allow me to share some of their successful marketing strategy:

► The fee for a prescription with progressive lenses, A/R coating and frame totals roughly $70.
► The company encourages consumers to order five pairs at one time (5 x $70 = $350 per order).
► The company's guarantee is that any or all of the spectacles can be returned for complete credit.

Based on such business models, my prediction is that within five years many independent practices will have no optical department or significantly down-sized departments.

Meeting the challenge

How should you address this possible loss?

► Maximize your medical license.
► Add optometric specialties, such as orthokeratology, orthoptic, developmental vision, computer vision syndrome and low vision.
► Add new profit centers, such as wellness services and/or vitamins. Consider acquiring an in-office lab to offer glasses in as little as several hours… or less. (If you can't compete on price, compete on speed.)

The bottom line: Address the Internet optical now before it threatens your practice. OM