Returning from Vacation to News about VSP

I'm writing from San Jose, Costa Rica.  I've been on a bit of a "walk-about" for the past week, recharging the battaries and enjoying the wilds of this wonderful country.  While I was gone, news arrived that VSP's Non-Profit Tax Exemption case will not be heard before the Supreme Court.  The case is now DOA.

What are the implications?  Given that this case has dragged on for the past several years, my guess is that VSP's leadership long-ago reconciled themselves to this eventuality and have modified their operating and financial plans accordingly.  VSP is now what they have been for many, many years…a "for-profit" enterprise that, as it's core business, buys eye exams and materials at deep-deep discount from providers and resells those services and materials at a profit to employer groups and now, to individual consumers at large. 

Given that VSP has garnered one out of every six vision care patients, the question remains as to whether VSP providers, long under-compensated for their services, will continue to take it in the proverbial profit margin. 

With the economy in the toilet, odds are pretty strong that few providers will have the moxie to make a change.  Further, perhaps VSP and managed care is actually saving a few provider's bacon in the short-term?  Our clients report significant increases in December business (some as much as 40%), the result of consumers using up end-of-year flex spending accounts.  Further, business into the first quarter appears brisk, as consumers who are concerned about their job use up the VSP benefits that are available to them in anticipation of a potential lay-off.

For the long term, this observer canonly surmise that the managed care market will heat up, as the big four vie for market share.  In the absence of everything else, price prevails and it will be interesting to watch what happens to reimbursments over the next few years.  Odds are that reimbursements will continue to fall behind inflation and the profit margins of private providers will continue to erode.  What's your margin management strategy?

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