HAVE PROFESSIONAL FEES BOTTOMED OUT? WILL MATERIAL FEES MAKE A COMEBACK?

BY JOSEPH T. BARR, O.D. M.S., EDITOR
JULY 1997

Once again, we polled our readers to find out how they're handling the business of being contact lens practitioners. Sometimes it's tough to track trends, but our readers' responses are always thought-provoking.

More than two-thirds of the practitioners who responded to our 1997 Fee and Income Survey said they did not change their professional fees for contact lenses this past year. This marks a plateau compared to the previous three years when most respondents said they decreased professional fees. Material fees may also have plateaued. About two-thirds of this year's respondents did not change material fees. About 60 percent of this year's panel believe their contact lens net income has not changed and about 20 percent believe it has either increased or decreased.

TRACKING THE TRENDS

Despite what appears to be a plateau over the past few years in estimated fees and income, Table 1 indicates that professional fees for conventional daily wear soft contact lenses are down by about five percent while material fees are up by about 10 percent compared to last year. This may reflect recent price increases for conventional lenses as manufacturers attempt to encourage us to prescribe more frequently replaced lenses. It could also mean that we're less paranoid about mail-order and other alternative replacement sources. Remember too that this is not necessarily the same sample of people as we polled last year, and a few significant increases or decreases can have an effect.

TABLE 1: 1997 AVERAGE FEES FOR SOFT CONTACT LENSES PROFESSIONAL FEE MATERIAL FEE 1996 1997 1996 1997 Conventional Soft Daily Wear Spherical New Fit $75 $68 $65 $71 Refit 58 46 65 72 Extended Wear Spherical New Fit 88 70 81 89 Refit 62 48 79 60 Opaque Spherical Daily Wear New Fit 79 70 131 187 Refit 56 50 130 196 Toric Soft Daily Wear New Fit 97 91 149 168 Refit 68 64 149 166 Multifocal Soft Daily Wear New Fit 140 100 225 265 Refit 90 75 215 261 Monovision Soft Daily Wear New Fit 98 79 93 92 Refit 65 55 92 94 Planned Replacement Quarterly New Fit 70 70 89 108 Refit 53 53 89 106 Planned Replacement Monthly New Fit 77 70 117 131 Refit 54 53 122 132 Planned Replacement Toric Quarterly/Monthly New Fit 91/96 90 176/206 192/254 Refit - 65/68 - 196/255 Disposable for Daily Wear Weekly/ Biweekly New Fit 84 75 140/235 134/238* Refit 68 54 140/235 140/257 Daily Disposables New Fit 94 72 440 336** Refit 67 51 440 394 *$21-28 per 6 pack **$27-38 per 6 pack

Table 2 indicates a similar trend in rigid lenses. Compared to 1996, professional fees are down and material fees, on average, are up.

TABLE 2: 1997 AVERAGE FEES FOR RGP CONTACT LENSES Professional Fee Material Fee 1996 1997 1996 1997 Spherical Daily Wear New Fit $89 $82 $112 $126 Refit 68 58 109 126 Spherical Extened Wear New Fit 101 79 129 150 Refit 73 58 124 149 Toric New Fit 112 95 174 200 Refit 90 70 172 195 Multifocal New Fit 135 110 245 270 Refit 102 89 240 260

Table 3 reveals some possible trends with regard to income sources when we compare O.D.s, M.D.s and opticians. Of the three disciplines, O.D.s seem to be most successful with RGPs and planned replacement soft lenses, while M.D.s are most successful with conventional soft and two-week disposable lenses, as are opticians.

Table 3: MEAN PERCENTAGES OF ANNUAL INCOME FROM CONTACT LENSES(Q2) Optometrist Opthamologist Optician RGP Lenses 10.1 3.7 1.7 Soft Daily Wear Lenses 18.0 28.3 7.0 Opaque Daily Wear 2.7 0 4.7 Soft Extended Wear Conventional 3.1 3.3 5.7 Soft Planned Replacement 18.4 4.7 3.3 Soft Disposable 2 week Replacement 28.2 47.3 56.7 Soft Disposable 1-week Exteneded Wear 5.1 5.0 10.0 Daily Disposable 1.7 1.7 1.0 Toric Soft Daily Wear 9.2 6.0 9.0 Bifocal Daily Wear 1.5 0 1.0 Other 1.4 0 0

Overall, two-week disposable lenses accounted for 31 percent of annual income for all disciplines (Fig. 1). As we might have predicted, daily disposable lenses accounted for just under two percent of income.

FIG. 1: % OF ANNUAL INCOME FROM CONTACT LENSES BY MODALITY (ALL DISCIPLINES)

SPECTACLES VS. CONTACT LENSES

As we found in the past, about two-thirds of our respondents believe spectacles-only patients are most profitable. This is despite studies that indicate otherwise. Simply put, the contact lens patient, after purchasing contact lenses, services and spectacles and referring patients over the years, is more profitable than a spectacles-only patient with otherwise normal eye health.

ANCILLARY PRODUCTS & SERVICE AGREEMENTS

Just over half the practitioners who responded to our 1997 survey dispense contact lens ancillary products in their offices with about a 50 percent markup. About the same number offer a service agreement whereby, for a fee of about $30, patients are eligible for a 25 to 50 percent discount on lens replacement. These agreements have less appeal with increased use of frequently replaced lenses, but traditional replacement does not seem to be declining significantly. Office staff are usually the key to the success of service agreements.

BETTER LENSES EQUATE TO STABLE FEES

Our valued panel of respondents estimate stability in their fees overall, but when we compare this group's fees to those reported by our panel last year, the 1997 respondents charge more for materials and less for professional services.

Could it be that with better lens care modalities, it's not rational to charge the professional fees required in the past? After all, daily wear of frequently replaced lenses causes fewer problems and results in less need for monitoring for adverse effects and to assure compliance. Yet, I know many expert contact lens care professionals would not necessarily agree with this theory.

OUR 1997 PRACTITIONER PANEL Sixty-three contact lens practitioners across the United States responded to our 1997 Fee and Income Survey. Respondents were: 34 O.D.s in private practice; seven O.D.s employed by M.D.s; and nine O.D.s either employed by a retail chain or a lessee of a chain or independent contractor associated with a chain; also four ophthalmologists and three opticians. All of our respondents most typically had been in practice for 15 years.

I've never said these surveys were scientific, valid or repeatable, but I do believe they are thought-provoking. As always, we invite your comments and added guidance in evaluating the business of contact lens practice. CLS

Many thanks to all who responded to our 1997 Fee and Income survey. We appreciate your patience in completing our comprehensive questionnaire and your willingness to share this data with your colleagues.