The annual meeting of the American Academy of Ophthalmology is a great place to spot key trends in the business of eye care. Here’s what we’re thinking about now that we’ve had some time to reflect on our four days of classes and conversations at AAO 2017 in New Orleans.
Our biggest takeaway?
In ophthalmology, it’s never “business as usual.” Physician entrepreneurs and the savvy staff who run their small businesses are keeping themselves on the cutting-edge of innovation as they test and assess new approaches to running their businesses.
The industry is testing creative ways to address the shortage of ophthalmologists in the United States.
We’ve seen it coming for a while: Americans are aging and they’re living longer, which means they will need more medical care. There aren’t enough new doctors to meet this demand as the oldest generation of doctors retires.
This general shortage is particularly prevalent in ophthalmology: about 450 ophthalmology residents graduate every year, and about 550 ophthalmologists retire—even as the demand for ophthalmic surgical procedures continues to rise. Practices are responding to this shortage by adjusting their day-to-day processes so that ophthalmologists can treat more patients, but we’re also seeing the industry tackling this shortage from a broader perspective.
This year’s SO symposium, for example, was called “Non-Exit Strategy: How to Extend Your Practice and Live without Fully Retiring.” One panelist, Amir Arbisser, MD, described how he and his wife (ophthalmologist Lisa Brothers Arbisser, MD) have eased into retirement by creating a transition period that allows them both to take six months vacation a year together. They’ve managed to keep practice partners happy and staff fully allocated by teaming up with another ophthalmologist couple nearing retirement. (This recent Review of Ophthalmology article describes the Arbissers’ approach in more detail.)
Derek Preece, MBA enhanced the panel with a list of practical considerations and potential solutions to consider during a gradual exit strategy. One big downside to partners slowing down during partial exits is that they pay less overhead, so they burden their partners because they must pay more. A solution for transitioning partners is to sell their shares, become employees, and work for a percentage of collections, Preece suggested. Flexibility is crucial, he added, as well as willingness to ramp up new doctors coming into the practice.
Private equity is making a comeback.
At AAO 2016, everyone was wondering whether ophthalmology was going to see private equity rise again after its boom and bust during the 1990s. At AAO 2017, it was clear that private equity is no longer a question; it’s a fact. Numerous sessions focused on private equity—not to mention all the conversations in the hallways after class. (For an excellent summary of AAO 2017’s private equity classes, see this post from EyeSteve.
Private equity can be a great solution for senior physician owners who want to sell their shares in the practice they’ve built but can’t find new associates to buy in. However, there are reasons to be wary of private equity—especially for young ophthalmologists just now buying into practices. As the private equity boom and bust two decades ago illustrated, many private equity firms are looking for five to seven year investments—not long-term growth—so some of their business practices are detrimental to the practice’s future. While most PE firms are “flippers,” a new buy-and-hold model is emerging that could be attractive to multiple generations of physician owners in a practice, noted presenter Mark Abruzzo, an attorney with Wade Goldstein Landau & Abruzzo.
Non-insurance dependent revenue streams continue to be crucial.
Ophthalmology practices continue to build revenue streams that don’t depend on the whims of federal and private payers. As in recent years, there were classes on how to launch and market elective procedures and premium IOLs. And, while it used to be quite common for ophthalmology practices to outsource their optical shops to outside companies, more and more practices are bringing this crucial revenue stream in-house so that they don’t have to fork over their optical’s profits to outsiders. There were several sessions on how to manage your optical for optimal profitability, and we heard many tips reiterated that we previously shared in this toolkit.
Clinical trials participation is also a good non-insurance dependent revenue stream to explore, presenter Joanne Mansour told attendees at a half-day seminar about how to run a successful retina practice. In addition to being a good revenue stream, clinical trials participation has other benefits: it can improve outcomes for patients; it gives patients hope; it encourages patients to keep their follow-up appointments because often, the pharma company is footing the bill; it helps attract referrals; and it’s an excellent development opportunity for staff.
But a practice looking to get into clinical trials needs to plan carefully, added Mansour, who is practice manager at The Virginia Retina Center. You’ll need to be savvy about negotiations, for example, and you’ll need to plan for additional space and staffing needs.
We’ll be digging into Mansour’s tips for clinical trials in future blog posts, as well as sharing what AAO 2017 taught us about coding and RCM, smart staffing, risk management, savvy scheduling, succession planning, and other practice performance pointers. If you’re feeling overwhelmed or unsure of where to begin boosting your practice’s performance, just remember that in today’s ophthalmology market, creativity and innovation reign. Physicians and staff who know that “business as usual” is out and getting comfortable with change is in, will thrive.