Finances

Growth Opportunities of Independent ODs

SPONSORED BY VISION SOURCE

By Thomas F. Steiner

Director of Market Research,
Review of Optometric Business

Vision Source is the leading alliance of independent ODs, with 2,700+ member practices and 5,500+ member doctors in the US and Canada. The organization is actively engaged in advancing the competitive position of independent ODs. Earlier this year, Vision Source commissioned the editors of Review of Optometric Business to develop an objective analysis of the current state of independent optometry and to identify strategic priorities for bolstering competitiveness. This article distils one section of the full report, identifying the growth opportunities of independent ODs.

>>>Click HERE for a COMPLIMENTARY download of the full report “Challenges and Opportunities in the Future of Independent Optometry<<<

Most independent ODs make a comfortable living and are satisfied with the financial performance of their practice. But in many practices there remain many unattended opportunities to increase revenue and profitability, the largest of which are discussed in this article.

Expand Medical Eyecare Services
Expanding the scope of optometric practice is an effective way to increase revenue and deepen patient loyalty. It is also a way to differentiate a practice from optical chains, which are less engaged in medical eyecare.

Although interest in expanding medical eyecare services is high among independent ODs, today only a minority of ODs are fully engaged in medical eyecare. Currently in typical practices, medical eyecare accounts for 15 percent to 20 percent of patient visits and practice revenue.

Increase Revenue-Per-Patient
At some level, independent ODs compete with every other merchant in town for a share of consumer spending. Most patients have discretionary income; few have inflexible budgets. People use discretionary funds to buy what they value most. They can choose to buy the latest iPad or a great pair of designer eyeglasses. Eyecare is a small part of household budgets. Per capita spending for primary eyecare is just $88 annually, compared to $1,014 for entertainment, $596 for household furnishings and $684 for apparel.

Eyecare spending is expandable when patients understand the value of the products ODs recommend. Production benchmarks for independent ODs indicate median gross revenue-per-exam of $306 and median revenue-per-eyewear sale of $227. At the 75th performance percentile, gross revenue-per-exam is $371 and revenue-per-eyewear sale is $288. It’s feasible for any OD to achieve the 75th percentile production level and enjoy large revenue increases.

Increase Frequency of Patient Eye Exams
Despite ECP recommendations of yearly eye exams, typical patients have eye exams half as often as recommendedevery two years, not every year. Compliance with exam frequency recommendations is low because many ECPs make only token efforts to encourage patients to come back after twelve months. In some offices recall is not emphasized because the appointment calendar is booked weeks in advance and there appears to be no capacity to increase the number of exams performed.

Typical independent ODs perform just one eye exam per working hour. That ratio hasn’t changed over the past twenty years. A great majority of OD offices have excess capacity that could be filled by increasing the exam frequency among existing patients.

Many practices do not devote enough attention to recall. Management & Business Academy surveys show that in typical practices, performing 45 eye exams a week, staff spends just two hours a week on recall activities.

Increase Contact Lens Penetration
Most independent ODs adopt a passive approach to contact lens discussion with eyeglass wearers. Unless a patient initiates a conversation about contact lenses, there is no discussion. The financial rationale for increasing contact lens penetration is that contact lens patients, on average, generate higher revenue annually. Most independent ODs think they make more money from selling eyeglasses. And they do if the frame of reference is an individual transaction. But over the long term, contact lens patients generate more because they have more frequent eye exams, pay higher exam fees, purchase more frequently and also purchase eyeglasses.

Network With Other Independent ODs
It’s difficult for isolated, small entrepreneurs to achieve a global perspective of their business or to learn from the trial-and-error experience of peers. Historically, independent ODs had difficulty assembling peer groups to share best practices. Today the situation has changed. Alliances such as Vision Source greatly remove the isolation of independent ODs, providing ongoing opportunities to interact with peers and share growth ideas. This networking opportunity greatly reduces the advantage in management sophistication of the corporate eyecare providers.

Strategy Implications
To realize the growth opportunities most independent ODs have, the following strategies should be pursued:

• Increase marketing of medical eyecare services
Medical eyecare revenue remains undeveloped in many practices because patients aren’t aware these services are available. Every practice needs a standard process to identify candidates for medical eyecare services and to engage staff to explain medical eyecare benefits to patients.

• Establish revenue-per-patient goals
Because patient demand for eyecare products is expandable through education and personalized recommendations, nearly every practice has an opportunity to increase revenue-per-patient.

• Upgrade recall process
There are few marketing activities that yield as large a return-per-dollar invested as patient recall. To improve recall success it’s effective to appoint a staff member to be responsible for recall, to make personal contact with each patient after a year has elapsed to confirm an appointment and to measure recall performance. Pre-appointment is proven to be a more effective method than recall mailings.

• Offer free contact lens trial to all teen and young adult glasses wearers

The next and final article in the series will outline the major threats in the business environment that independent ODs face.

Thomas F. Steiner, Director of Market Research for ROB, has spent more than 25 years helping eyecare practices succeed, including pioneering the introduction of color contact lenses into optometry. To contact him: tom.steiner@cibavision.com

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