Do you get fired up just thinking about vision plans? If so, you’re not alone. Vision plans are a hot topic for providers—one often filled with emotion, controversy, and misconceptions. Providers wish vision plans paid better, weren’t so powerful, and didn’t seem ‘out to get them’ with vertical integration. They tend to view their relationship with vision plans as adversarial, a necessary evil of practicing in today’s market.
But how well do you really understand your profitability with vision plans?
Not very, according to Neil Gailmard, OD, MBA, FAAO, who presented on the topic at 2016’s Vision Expo East. Most physicians are only looking at one thing—the exam fee, he says. Decisions about vision plans are very difficult if you only look at the fee schedule, and even more difficult when emotions get in the way. As a result, providers are missing the big picture—and missing out on revenue. “Vision plans do many things that annoy us—but most of those things don’t really hurt us,” Gailmard said. He lists the following top complaints from providers, but also urges them to look at the bright side:
ECPs Top 5 Complaints about Vision Plans
- Plan X means very low payments.
- The new contract is even more terrible than the old one.
- Plan X pays so much worse than Plan Y.
- Plan Z steals patients and sends them to corporate stores.
- “I lose money with Plan Y. I have to write them a check!”
The Flip Side: Vision Plans….
- Keep patients coming in, especially during economic downturns.
- Drive patients to physical offices instead of online retailers.
- Promote patient loyalty to individual ODs.
- Provide access to large numbers of patients who also need medical eye care.
- Limit patients’ price sensitivity.
Forget your chair cost. Instead, analyze your profit margin.
Most optometrists have no idea how much profit they make with vision plans. “We have all become so skeptical and cynical that we jump to conclusions. We believe what someone says on an internet chat forum—someone we don’t even know who many not even have a real practice,” laments Gailmard.
Instead of relying on emotion and hearsay, conduct a self-audit for each vision plan you accept to figure your average gross profit per patient. Gailmard details the following five-step process:
Step 1: Pull at least 20 patient records for a particular plan, but if you want more accuracy, use more. Be sure you select the right mix of patients, Gailmard cautions. Some patients are exam only, some buy glasses, some get contacts, and some pay out-of-pocket. Figure out what the normal ratio of case types is in your practice and duplicate that ratio in your analysis, he says.
Step 2: Add up all the fees you collected from each sample patient. “We often just look at the vision plan payments and the chargebacks – and it appears that we get killed, but that’s not the full picture,” Gailmard warns.
- DO include: Everything the patients buy during their visits, even out-of-pocket items like multiple pairs or a retinal screening. Why? Without the plan, you’d likely not have seen that patient at all.
- DON’T include: Services billed to medical insurance. It’s an additional value, Gailmard notes, since the vision plan gave you access to the patient in the first place, but don’t count it towards the vision plan profit.
Step 3: Calculate the gross profit for each patient. Take the total fees collected and deduct any cost of goods (COG) for products supplied by your practice. COG might include:
- Chargebacks from the vision plan (unless already deducted)
- Frame cost if you supplied it (what you actually paid—not the Frames Data price)
- Contact lens product cost if you supplied them
- The lab bill—only if you sent the job to your lab, not the vision plan’s lab.
Step 4: To get the average profit per patient, add all of the gross profits and divide by the number of patients in your sample.
Step 5: Repeat steps one through four for each vision plan you accept.
In most cases, the total and average profits are better than the doctor anticipates, Gailmard notes. If it turns out that those numbers aren’t acceptable, you can always drop out of the plan. Before you make that move, figure out how many patients you might lose, how you plan to gain that market share back, and how much you’ll have to spend on marketing to do so. Even if a particular plan’s reimbursement is not ideal, consider if this amount is better than nothing—that’s what you’ll get with empty exam slots.
Eyes Open: The best and most accurate way to determine the profitability of a vision plan is to sign up as a provider and see patients for about three months, advises Gailmard. That will allow you to take an aggregate look at all the patients seen with the plan and to assess the true profit you retain after chargebacks.
And if you’re thinking about adding a new vision plan, you may have more say-so than you think. Some plans may need you more than you need them, especially if you’re a busy practice, says Mark Johnson, LDO, ABO, NCLE, director of optical services at Virginia Eye Institute. If your appointment schedule is booked out more than two weeks, “do you need to add another vision plan that will book you out to three weeks?” he asks. That could frustrate patients, who could leave for another practice with shorter wait times.
Up Next….Got profits? How to get more out of those vision plans you do decide to keep.