Renewed Optimism About Contact Lens Profitability

Despite downward pressures on contact lens fees, more practitioners than ever before tell us that contact lens patients are more profitable than spectacle-only patients.

BY Joseph T. Barr, OD, MS, Editor
JULY 1998

Everyone knows that the best way to determine your fees is to understand your costs, then factor in your profit objectives as well as your niche in your community. But managed vision care, mail-order pressures and the numerous providers of contact lenses continue to drive fees down for many practices. As our consulting editor, Craig Norman, C.O.T., F.C.L.S.A., said at a recent forum on contact lens profitability, most practitioners calculate their fees based on fees in the community and on comparisons made with other practitioners. Yet the elite practices often give a lot more thought to assessing their fees, and they do quite nicely.

This article is our fifth consecutive report on contact lens fees. We surveyed 1,000 randomly selected, non-student Contact Lens Spectrum subscribers, and 102 responded, including 89 optometrists, seven opticians and six ophthalmologists.

Results in Perspective

The fee averages and modes of these respondents are similar to those we reported in previous surveys, although there is some downward trend in material fees. Tables 1 through 4 display the average professional and material fees for contact lenses dating back to 1996, according to our surveys.

Our respondents estimate that about 40 percent of their income is derived from contact lens fees. This is higher than the average for optometrists reported by the AOA News, which is about 26 percent. As in recent years, about one-third of our respondents think that their net income from contact lenses has increased.

On average, professional fees appear to have remained stable over the past three years, despite 44 percent of our respondents (10 to 17% more than in the past) saying they increased their professional fees. With 26 percent of the respondents decreasing material fees and 53 percent keeping them constant, we may be seeing a bottoming of material charges. Certainly material charges cannot get much lower and still be able to cover costs in most practices. However, heavy advertising and increased use of one-day lenses could put more pressure on material charges in the future.

As expected, an increase from 1997 in the estimated income from the planned replacement and disposable contact lens categories combined was offset by a drop in the income from conventional lenses. Interestingly, the material fees reported for disposable and planned replacement lenses imply some breakdown in replacement schedule compliance. In other words, converting the per-box charges to per-year charges (assuming 100 percent replacement compliance) yields a higher annual fee than what practitioners report on average. For the third year in a row, our respondents estimate that toric soft contact lenses account for only about 10 percent of their contact lens income. We still can't rule out the fact that some practices use low-priced contact lenses and low fees as a loss leader, planning on high spectacle fees to cover the costs of failed contact lens wearers. Our data for average total fees (professional plus material) over the past year are similar to the results of a fee survey published in the April 1998 issue of Optometric Management.

Offsetting the Downward Spiral

Among the factors that drive fees down, respondents list: pressures from managed care and vision insurance, mail-order lens advertising and prescription requests, fewer patients, disposable lenses, competition (especially from Walmart and Lens Crafters) and profits on spectacles. Among the factors that provide upward pressure on fees, respondents name: higher overhead costs, increased patient numbers, higher fees for designer spectacles, better practice management and corneal topography.

To counteract the factors that drive fees down, many respondents recommend instituting a contact lens consultation fee, especially for the satisfied disposable or planned replacement patients beyond their first year of care. This would be a nominal fee for assessing the lens fit, compliance, safety and effectiveness of the contact lenses outside of the comprehensive examination fee. Regretfully, most patients do not intuitively understand such a fee for service, so you'll often have to explain the concept. Other practitioners try to incorporate these services into markups on lenses, but this is increasingly difficult due to broad advertising of replacement lens fees and savvy patients.

One optometrist who does not provide the contact lenses himself charges $29 for a comprehensive eye exam, and if the patient wants contact lenses, the charge is an additional $20 for all lens types. Another optometrist commented that although the average overall practice gross is down by over $20,000, gross income from contact lenses has remained about the same (up about 0.02 percent).

Certainly, comparisons to previous years such as these are fraught with questions due to the variability in who comprises the sample of respondents. However this comparison is a shocker -- in the past four years, about two-thirds of the respondents to our surveys thought spectacle-only patients were more profitable, and this year only 45 percent held this belief. This is a shift of nearly 20 percent! It's hard to believe that what studies have shown all along may be becoming conventional wisdom -- that contact lens patients are more valuable to the practice than spectacle-only patients.

Are Contact Lenses Profitable?

At the 1998 Vision Expo East trade show in New York City this March, a standing room-only crowd heard about this controversial topic from five points of view. I moderated the profitability forum panel, which included: Dwight Akerman, O.D., Bobby Christensen, O.D., Mark Bertolin, Peter Donshik, M.D., and Craig Norman, C.O.T., F.C.L.S.A. Below are a few key thoughts from each panel member.

Dwight Akerman (director of professional affairs at Wesley Jessen): Some practitioners report that things are great; others report that all the profit in contact lenses is gone. Patients ask only one thing -- "How much do they cost?" The specialty lens category, including bifocals, premium spheres, cosmetic lenses and torics, is growing very nicely. Soft torics are the largest segment, accounting for 14 percent of total soft contact lens sales.

Mark Bertolin (president of CooperCare, a managed care division of CooperVision): The impact of managed care on contact lens profitability depends on certain variables, including covered lives, benefits and provider margins. Sixty-six percent of the U.S. population is covered by managed care, and this number is expected to rise to 80 percent by the year 2000. Thirty-four percent of plans offer contact lens coverage, and that number may grow too. Resellers will lower prices to motivate new patients to try contact lenses, resulting in lower profits per patient. The specialty contact lens category will grow an estimated 20 to 25 percent.

Bobby Christensen (Midwest City, Okla.): Baldwin, Christensen and Laverty (1993) found that total revenue and profits were greater for disposable soft contact lenses than for conventional lenses, RGPs or spectacles. We also can't forget what the contact lens patient returns to the practice in terms of ancillary sales (i.e., solutions, eyeglasses, sunglasses, etc.) In addition, we must think about customizing our contact lens care for each patient, and this entails providing a wide variety of products and services such as myopia progression, cosmetic lenses, prosthetic lenses, sports vision, eye disease management and more. Contact lens care is a vital profit center within a thriving optometric practice.

Peter Donshik (past president of CLAO and editor-in-chief of The CLAO Journal) Potential sources of income from contact lenses for an ophthalmology practice include: new patient exams, annual exams, new fits and refits, service agreements and industry-sponsored research studies. The bottom line is that providing contact lens services benefits the ophthalmologic practice with medical or refractive surgery referrals and through the ability to provide complete ocular care.

Craig Norman (South Bend, Ind.): There's a breakdown among the three O's in terms of contact lens services. Contact lenses remain an integral part of the optometric practice, but the amount of instruction in the schools is decreasing. There's a renewed interest among ophthalmologists in contact lenses as a profit center, and training programs are increasing. Contact lens services provided by opticians can often vary, depending upon the level of licensing.

When determining fees for contact lens materials and services, most practitioners use the "Heineken method," whereby they crack open a bottle of Heineken after a long day at an optometric conference and ask another practitioner, "What do you charge for fitting contact lenses?" If the answer is higher, they say, "That's what I'll charge." The problem is that most practitioners are too concerned with competition, so they don't look internally to see what their own costs are.