Insights From Our Editors

Rising Inflation: Action Plan to Manage Higher Costs

By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD

May 19, 2021

Inflation is rising. That means the cost of doing business also will be rising. Here are key ways to plan for this challenge.

The year is 2041, 20 years from now. Cuba just became the 54th state (after California divided into three states, and don’t forget Puerto Rico’s dramatic entry into statehood). Last year, the Nike “swoosh” replaced Abraham Lincoln on the five-dollar bill and President Alexandria Ocasio-Cortez (AOC) just changed parties.

You’re at the grocery picking up dinner for tonight. As you leave the grocery, the automatic scanner reads the digestible radio frequency identification (RFID) chips embedded in the food you’re purchasing and then transmits to the microchip implanted in your brain that the total for your two steaks, two potatoes and nice bottle of wine comes to $215.12. The thought crosses your mind that things didn’t used to be this expensive.i

The culprit is inflation. Inflation drives prices up every year. In 1974, due to inflation and world events, the price of a gallon of gas jumped from 39 cents the previous year to 59 cents.ii Look where it is today. From a practical standpoint, because of inflation, a dollar today does not have the same buying power as a dollar last year. Your buying power is reduced every year by the amount of inflation.

If your practice has maintained a steady one million dollars gross revenue collected per year for the last five years, your practice is not stable. It is actually decreasing. This is not a healthy fiscal place to be. Every year inflation is nibbling at the buying power of your gross revenue collected. Your practice should have been increasing your gross revenue collected by at least the amount of inflation each year.

What can you do? Here are six actions you can take immediately:

1) Raise your fees on products & services not covered by third parties.
Since 70 percent, or more, of the patients coming through the average practice are covered by some type of third party, if you are a provider you have signed a contract accepting the third-party fee schedule. If you have signed a contract saying that you accept a $60 comprehensive exam fee, then it doesn’t matter that you charge $200. You will only be reimbursed $60.

Identify the products and services not covered by third parties and raise those fees. Niche practices have a slightly easier time with this, so make sure you have a niche in your practice and charge appropriately.

2) Train your doctors and staff to not accept at face value the “I only want what my insurance covers” statement from patients.
In too many practices staff and doctors give up when they hear a patient say, “I only want what my plan covers.”
Doctors, when you hear a patient say, “I only want what my plan covers,” your response should be, “You told me that you were having a problem with _____ so I prescribed _____ to help reduce or resolve that problem. If you don’t get _____, then you will continue to have a problem with _____.”

Optical team members, when you hear a patient say, “I only want what my plan covers,” your response should be, “Let’s first determine what is best for you, then see what you’ll have to give up to just get what your plan covers.” People don’t like to give up things they want that will help them.

 3) Train your staff how to maximize reimbursement from third parties, especially the vision third-party plans.
It is imperative you understand how third-party vision plans work. Even though there are different formulas for different plans, once you understand how each plan reimburses, you can create an internal fee strategy to maximize your third-party reimbursement. This involves the following:
• Restructuring the frames you carry.
• Restructuring your fee schedule.
• Offering patients your “in-house discount” versus “using your third-party plan.”
• Refining your patient presentation scripts.

4) Lower your expenses by participating in an alliance or buying group.
We are always amazed by the number of practices that are a member of a buying group or alliance, but do not take complete advantage of all discounts offered. Many times this is a problem with habits – you’re used to buying X from vendor Y even though if you bought the same thing from vendor Z you would save an additional 15 percent.

5) Bundle products.
We make our patients make too many decisions. This often results in them making no decisions. A base lens with thin and light, edge polishing, scratch resistance, Transitions and anti-reflective treatment bundled together makes the decision for patients easier.

We are not fans of “Good, Better, Best” terminology. Instead, we prefer: “Standardized, Customized, Individualized” bundles. Doctors prescribe it in the exam room. When a patient pushes back, opticians can help patients understand what is lost if the patient chooses to go to a lower level.

6) “You miss 100 percent of the shots you don’t take.”
How many times have you purchased something on the internet or in a store and you see or hear this phrase, “People like you who purchased X often also purchase Y.”

Wayne Gretzky said, “You miss 100 percent of the shots you don’t take.” For the patient who comes in wanting just a new pair of dress glasses, before that patient leaves the office have you either prescribed (or offered) the patient the following:
• Sunglasses
• Work glasses
• Computer glasses
• Safety glasses
• Sports glasses
• Contacts

The hard work has already been done. The patient has already chosen your practice for care. The key is subtlety. You don’t need to utilize “hard sell” (in fact, we suggest you never use a “hard sell” approach as it is the fastest way to get a patient to dislike you). Just softly, with a smile on your face, offer the patient more and tie it into how it will improve their life.

We need to do better each year as we fight the inflation monster. Don’t leave things up to chance. Have a coordinated plan to do better this year than last.

References
i. Modified from: Combating Inflation, The Disciplined Investor, Vol 27, Issue 1, Spring 2021
ii. Average Gas Prices in the U.S. Through History | TitleMax

To Top
  
Subscribe Today Free...
And join more than 25,000 optometric colleagues who have made Review of Optometric Business their daily business advisor.
YOUR EMAIL
FIRST NAME
LAST NAME
  
Subscribe Today Free...
And join more than 25,000 optometric colleagues who have made Review of Optometric Business their daily business advisor.
YOUR EMAIL
FIRST NAME
LAST NAME
Subscribe Today for Free...
And join more than 35,000 optometric colleagues who have made Review of Optometric Business their daily business advisor.
Subscribe Today for Free...
And join more than 35,000 optometric colleagues who have made Review of Optometric Business their daily business advisor.