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Is It Worth It?

Is It Worth It? August 31, 2022

A couple of months ago I rang the bell that inflation was seriously affecting your practice’s financial performance, and soon your own income. I shared that the government’s inflation numbers are woefully understated compared to what’s really happening on Main Street.

This week, I want to provide an assessment of the long-term impact of inflation on your practice.

In August of last year, the AOA published an article entitled “Plan’s Stagnant Fee Schedules Undervalue Primary Care.” The title is one of the bigger understatements of the decade. Here’s why.

In that article, the authors tell us that eye exam reimbursements for vision plans were between $30 and $55 twenty-five years ago. Let’s use a conservative average of $40 as your reimbursement for an eye exam in the year 2000. Seems reasonable. The article tells us that that number is about the same today. My own limited research pegs VSP’s current reimbursement at $61 including co-pays. It stands to reason that other plans are less. Further, reports support the AOA article in that reimbursements haven’t generally changed in well over 20 years.

Let’s study the impact of inflation on this data.

When you apply inflation to the $40 figure, your effective reimbursement today for that year 2000 exam is $24.76. Yes, you’re receiving less than $25 in year 2000 purchasing power for your professional services.

In the words of Dana Carvey’s Church Lady character from Saturday Night Live, “isn’t that special!”

Now let’s take a more global view of that number…let’s look at it on an annualized basis. Say that you provide 3000 comprehensive exams annually and 33% of your business is Vision Plans. That means that for 1/3rd of your personal effort, you’re paid the purchasing equivalent of a whopping $25,000! 33% of your time for $25k. Sure, you make a couple of bucks on eyewear but consider the cost of labor, stress and the impact on patient service necessary to secure these reimbursements.

The impact of this $25 reimbursement number is driven home when you calculate what it would take to keep up with inflation. That average $40 reimbursement that you received in the year 2000 has to be $62.53 in order to simply break even on the impact of inflation. As a result, in real terms, on average it appears that you’re down almost $50 from where you were at the turn of the century!

In recent communications with ten clients about their VSP reimbursements, I received a few notable comments.

One client reported “at my last contract renewal, I asked for an increase but was told “we don’t negotiate.”

Another reported that they’d already dropped VSP in 2014 and yet another said, “We were emancipated from VSP on May 5th and it’s going really well!”

Your acceptance of Vision Plans woefully low reimbursements provides them with their product…and their profits. Without you, they have nothing to sell. And with you, the likes of VSP have earned billions, enough to build one of the nation’s largest lab networks, acquire Marchon, OfficeMate and Eye Designs, build a robust on-line optical retailer and, eighteen months ago, acquire VisionWorks, the nation’s 6th largest eyecare retailer with 700 locations in 41 states. In simple terms, as a provider, you’re fueling the profits of vision plans, only to have them compete with you directly.

As motivational speaker Susan Powter says…”Stop the Insanity!”

When I speak to optometry students around the country, I often ask them “what’s your most important professional responsibility?” I get all kinds of answers and then a bit of a gasp when I explain that the number one most important professional responsibility is to be profitable. Without profits, one cannot make the capital investments required to add technology and train staff. This then leads to a degradation in professional services as one cannot keep up with standards of care without investment…and investment dollars must come out of profit. It’s really a pretty simple equation.

Further, in my last week’s video, I discussed growth. One of my comments was that we all seem to chase revenue, without clearly understanding that revenue’s impact on profitability.

Today, I’ve provided some analysis that clearly indicates that you’re simply a pawn in vision plan’s dominance of the consumer. I challenge you to really do your homework to better understand the impact of vision plan acceptance on your bottom line, both short and long-term.

Is it worth it?

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