Patients and others may be losing their fascination with price.
Joel Nunneley Springfield, Mo.
In 1999, only two out of every100 private-practice refractive surgeons offered LASIK for less than $1,500 an eye. This year, more than 30 percent do so. What happened? Laser installations soared, as did the number of ophthalmologists offering the procedure. Corporate laser centers sprouted like mushrooms after rain, most of them following a high-volume, low-price business model. As prices fell, too many private practice surgeons followed their own instincts, instead of good business practice, and tried to match the price discounters dollar for dollar.
In this article, I'll review some of the steps that you can take if you find LASIK prices in your market tumbling. And even if they're stable, these ideas should help you improve your practice's financial performance in a highly competitive refractive surgery market.
The Downward Spiral
Even if you wanted to, the past 12 to 18 months in the refractive surgery market have shown that you can't simply ignore pricing as an issue. Most surgeons believe it's the most important factor in a patient's selection of a LASIK provider. Unfortunately, over that same time period, many have responded to the competitive challenge with an almost obsessive emphasis on lower fees to maintain volume.
Though surgical volume is important, it's only one of several measures of success. For the average ophthalmologist, cutting prices to increase or even maintain volume, without a reasoned, financial analysis of the effect on profits, is a recipe for disaster.
Happily, however, the profession seems to be moving away from a singular focus on fees.
Rather than trying to match an unprofitable price scheme, some practices are experimenting with tiered pricing. In this model, prices vary based on predetermined criteria. For example, $1,500 might be the benchmark fee for a correction of -2 D or less with less than a diopter of astigmatism. For higher myopes and/or those with a lot of cylinder, the chances that they may need an enhancement are greater, so they pay a higher fee. Some practices also offer tiered pricing based on the technology involved, with a second-generation laser calling for a higher fee than an older model.
The advocates of tiered pricing say that it allows you to compete at both ends of the market by advertising a lower price but maintaining a higher average selling price. Critics argue that it's a bait and switch, though I disagree. If you're clear about the price distinctions and the lower advertised price allows you to attract patients, get them into the practice and educate them, most surgeons would have no qualms about tiered pricing.
Tiered pricing can also be confusing for your staff. Be sure they and your refractive coordinator have a solid grasp of the various levels of service and pricing before you implement tiered pricing.
Experienced marketers know that very few consumers shop with a specific price in mind. Instead, most have a price range in which they're comfortable and shop for the best value in that range. We've learned in recent years, with the national average for LASIK settling in at about $1,500 per eye, that most practices can successfully compete if their fees are within a few hundred dollars of the competition. Once you get to $500 to $1,000 higher, you probably can't bridge that difference no matter how you distinguish your practice.
While you can't control competitors' prices, it's the very factors that distinguish you from the discounters--your training and experience, your practice's technology, patient care and marketing message--that will keep patients coming to you. And those factors are very much within your control.
A Shifting Emphasis
In the early days of LASIK, the common marketing message was, "It's fast, it's easy and a computer does it." No wonder patients chose based on price. Fortunately, thanks to the consumer press, to word of mouth and to a growing sophistication by the marketers of refractive surgery, the current generation of LASIK candidates is far more aware of issues like night vision and halos, complications and outcomes.
A consumer survey that my firm just completed shot a hole in price's role as the determining factor in choosing a LASIK provider. In it, qualified refractive surgery candidates listed the surgeon who would perform their procedure as the most important factor. Today's candidate wants to know about your outcomes, complication rates and any special training and experience.
In addition, we are now into the second or third generation of laser and diagnostic equipment. These new levels of patient sophistication and of new technology can be a real advantage to maintaining price integrity.
Patients are more interested in and knowledgeable about that new technology. But technology is a competitive advantage only if you leverage it. If you acquire a new laser but don't change any other business processes around it, you won't get any competitive marketing advantage. It's got to be in your advertising, your staff has to know about it, and you have to "sell" the new technology.
One way to do that is a practice "report card." When LASIK candidates call for pricing or other information, you follow up and send a one-page, data-driven report card (See sample, p. 43). The report lists the critical patient services, technology, surgeon experience and characteristics that distinguish you from the discounters. The report card actually educates patients about what to look for and which questions to ask when they call or visit the price discounters. Often, a strict focus on price distracts patients from other important services. This allows them to compare apples to apples.
Service and Access
Most practices today feel they take very good care of their patients. The reality, particularly with regard to the refractive surgery patient, may be another story. Surgeons, for the first time in their careers, are competing for discretionary income, and not just with the practice down the street, but with the likes of Starbucks and Neiman Marcus. These world-class retailers are very attuned to their customers' needs.
In many practices I've visited and consulted with, refractive surgery patients wait too long, have to navigate too many hurdles to get in for screenings and appointments, and compete with too many other types of patients for attention.
LASIK patients also have higher expectations of their relationship with their physician, expecting more of a peer-to-peer relationship than the traditional doctor/patient relationship.
If you haven't taken a close look and measured the level of service you're providing and the level of patient satisfaction you're generating, you need to begin. Institute patient surveys (especially with the consults that don't convert), conduct anonymous visits and repeat them quarterly.
Lasting Impression
A major key to a successful refractive surgery practice, most experts agree, is word of mouth. Are your past and current patients driving new patients into your practice? Since the costs associated with turning LASIK candidates into new patients can reach hundreds of dollars per patient, the importance of dynamic word of mouth can't be overstated. The most critical time to impact word of mouth is the postop exam. Some doctors I've consulted with innocently set themselves and their patients up for disappointment here by not managing expectations. Just as important as setting realistic goals and candid expectations preoperatively is guiding the patient's expectations postoperatively.
For example, in checking postop visual acuity, if you start the patient at the 20/20 line and he struggles with it, he may walk away from the first day postop exam thinking, "I really had a hard time with what he wanted me to read." In your mind, he's had a great outcome and is right where you want him to be at one day postop.
But if you start with 20/60 and work your way down, the patient generally walks away a lot more satisfied. If you can say to him, "You're 20/40 today and that's better than I expected. Come back in a week and we'll see where you are." This way, you end the session on a positive note.
Finally, remember what our survey showed: You, the surgeon, are the most important factor in a patient's decision on where to have LASIK. Surgeon involvement, interest and interaction are slowly replacing the fascination with price.
Mr. Nunneley is vice president of Consulting Services at Medical Consulting Group LLC. Contact him at (417) 889-2040, fax: (417) 889-2041 or e-mail: Joel@medcgroup.com.
What the Year Holds
Stabilizing fees and slower growth of both private practice and corporate center LASIK providers should be the hallmark of the refractive surgery marketplace in 2001, says one well-placed industry observer.
David Harmon, president of Manchester, Mo.-based Marketscope, has been tracking the refractive surgery market for several years and reporting his findings in a number of Marketscope publications.
Based on his own quarterly surveys of refractive surgeons, Mr. Harmon says fees may have bottomed out in the fourth quarter of 2000. A big factor in that was an apparent shift in policy by the two Canadian corporate providers that had been driving the low-price, $499 to $999 per eye business model. "The very, very low-cost model has kind of proved that it doesn't work, so you're going to see that go away," says Mr. Harmon.
"LASIK Vision and ICON have been trying to raise their prices by about 20 percent to try and make their businesses work," he adds. I don't know if they can make that work, but it's certainly a different message from what they've been sending out."
With an increase in the low-end fees, he expects prices to stabilize during 2001 at about the level they achieved at the end of 2000. His surveys show the national average at the end of the third quarter of 2000 at $1,650 an eye.
Though corporate expansion has stalled, private practice providers continue to enter the LASIK market. Marketscope data shows that during the fourth quarter there were 112 new lasers sold, with approximately 80 of those representing installations at new sites; the remainder were secondary lasers at existing sites.
Despite the uncertain national economic forecast, Mr. Harmon says January appears to have been a solid month, at least based on anecdotal reports. "Historically, we have always seen the most growth in the first quarter," he explains.
For information, contact Mr. Harmon at (314) 835-0600 or visit www.mktsc.com.
| YEAR | NUMBER OF REFRACTIVE SURGEONS | AVERAGE PROCEDURES PER SURGEON |
| 1996 | 600 | 175 |
| 1997 | 1,000 | 215 |
| 1998 | 2,100 | 229 |
| 1999 | 3,400 | 279 |
| 2000 | 4,000 | 375 |