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How to Prosper During Today's Contact Lens Price Wars

BY STEVEN J. RETO, OD, FAAO
April 1999

Newspaper advertisements. Television and radio commercials. Direct mail promotions. When they all started touting "hot" prices on the disposable contact lenses they offered, two things happened -- contact lenses became a commodity and the great price war began.

It has happened before and it's happening again. History, however, holds the answer of not only how to survive, but also how to prosper during such price wars.

At the beginning of the decade, mail-order distribution of disposable lenses forced practitioners to lower their prices or lose patient purchases. That's when our practice carefully examined and redesigned our fee structure. As a result, we've been able to withstand the lower profit margin on materials.

Before mail-order, we charged patients one fee for a routine eye exam. If they wanted spectacles, fine. If they wanted contact lenses, there was plenty of profit built into the price of the materials. At that time, conventional daily wear contact lenses were routinely marked up to two or three times our price. In other words, there was no reason to distinguish between contact lens exams and spectacle exams.

When disposable contact lenses were introduced in 1987, the equation began to change. As more disposable contact lenses began appearing from more and more sources, consumers began to think of them as commodities. While mail-order places could be satisfied with a $3 profit on a pack of disposable lenses, that price was too lean for practitioners. The staff's time spent on inventory and dispensing nibbles away even more from that slim margin.

Unbundling Charges

In our practice, we decided that we simply couldn't compete on price and be able to maintain profitability. The answer seemed crystal clear: patients are paying us for our professional services, so let them pay equitably.

As a result, we now have a separate fee structure for contact lens evaluations and fittings. Specifically, we charge all of our patients the same amount for a comprehensive eye exam. Those who want contact lenses then undergo a separate evaluation or check-up. The fee is based on the complexity of the evaluation. Our fees range from $45 for a simple evaluation to $125 for a complex monovision or bifocal contact lens. These fees do not reflect our cost to fit new patients into contact lenses. We base the fees on the amount of time we spend with each patient.

In addition, we charge $15 for a corneal topography mapping. Although not always required at the time of a contact lens fitting, our technicians emphasize that the practitioner recommends the test because it helps provide the best information for an ideal fit.

As a result of unbundling our charges, we have recouped in professional fees what we had previously lost in contact lens profit margins.

Doctor's Involvement Needed

It sounds simple, and indeed it is. Patients want communication, and it's the doctor's responsibility to educate their patients about fees. Some practitioners are uncomfortable talking to their patients about fees for service. Our practice feels that when this information comes from the doctor, the patient gets a better understanding of our services.

To simplify the process, we provide information in every exam room about our various contact lens programs. The information is given to the patient at the time of dilation or at the conclusion of the exam. In many cases, the staff needs to be educated enough to discuss services with patients prior to them coming in for an exam. Our receptionist and technician are also knowledgeable about our fees and are capable of informing patients prior to their coming in to our office.

For new lens patients, it's generally better for most of this information to come from the doctor. When the patient is in the exam chair and expresses an interest in contact lenses, the discussion of fees falls on the practitioner. Consider this an opportunity. When you take the time to educate these patients clearly from the start, they'll learn to appreciate your services in the years to come.

Don't Downplay Complexity

Since patients are paying separately for lens evaluations, we want them to understand that they're actually getting their money's worth. Too many doctors fit patients with disposable contact lenses and within five minutes have them on their way home.

Even with simple fits, I say to the patient, "This looks really easy, doesn't it? But there's a lot involved. I have to evaluate your vision and I need to look at the topography map. I have to see if the lens is moving on your eye and I need to make sure that enough oxygen is getting to your eye." If practitioners don't take pride in letting patients know about the work involved, patients walk away with the impression that the fit was no big deal.

That's precisely what has helped drive down the cost of disposable lenses. Patients see little value in buying their lenses from the practitioner, especially if it means that they have to pay more. According to data collected by the Contact Lens Institute, the average price practitioners paid for clear disposable lenses declined five percent over the past year. Larger accounts are getting even bigger breaks.

Specialty Lens Insulation

Not all contact lenses have become commodities. Premium, specialty lenses are available in every modality. Color contact lenses, UV-absorbing lenses and premium value lenses are examples. So are nearly any of the toric contact lenses and RGPs. Because mass merchandisers don't buy these in bulk, their prices are frequently no lower than ours.

Not only do these specialty contact lenses provide greater profits, but they also help differentiate practices. Highest quality service means little to patients who are unhappy with their lenses, either because of compromised clarity or comfort. Therefore, prescribing the highest quality products goes hand-in-hand with providing excellent service. Patients want what's best for them. When they pay top dollar for your professional expertise, they also want your recommendation for the best lens.

Keep Patients From Wandering

Finally, we've devised a few other strategies that keep patients within our practice. We believe that if we can keep them from shopping around for contact lenses elsewhere, we'll be able to retain their loyalty to our practice.

Maintain a deep inventory -- There's nothing more discouraging than not receiving your contact lenses when you want them. That's a key reason why patients take their prescriptions and go somewhere else.

Show that your prices are competitive -- We maintain a list of mass merchandisers' lens prices to show patients that our prices are similar.

Encourage your patients to buy a year's worth of disposable contact lenses. We found that patients who buy a six-month supply frequently shop for their next six-month supply at a more convenient location. Since our prescription is only good for one year, we've closed the loop by having them buy a year's worth of contact lenses at our practice.

Taking advantage of manufacturer's rebates makes patients view you as the hero for saving them money.These rebates are often directly aimed at patients, so they don't affect a practitioner's margin at all.

Don't let history repeat itself in this era of increasing competition. Remind patients that they're paying for your expertise, which includes your referral to the best lens for their needs. Implementing these strategies will insulate your practice from competitive price wars on products.

Dr. Reto is a member of the 1999 Wesley Jessen Professional Advisory Council and in private practice in West Chester, PA.