Background: The optometry practice is located within a national retail store. Serves a middle market in the southeast. The practice model is to (1) offer eye exams at or below market prices (2) fit contact lenses, and (3) spend 20-30 minutes with each patient answering all questions during the exam. The niche of the practice is excellence in patient care, particularly taking the time to listen to symptoms. To accommodate the increased demand, the practice has added a sixth day. Each year, the exam boasts higher revenues.
Competitive Advantage: The competitive advantages of the practice are numerous:
o An independent physician conveniently located next to a regional retail optician.
o A loyal patient base (60-70% recovery rate, best in class1).
o A growing word-of-mouth referral business that requires low advertising costs.
o Low cost structure/overhead (800 sf rent, low medical malpractice insurance, part time receptionist, etc.).
o An environment of trust, because the doctor does not recommend any retail solution. Many eyeglass stores are owned by optometrists or have salaried optometrists on staff.
o An excellent reputation in the market with patients, competitors and ophthalmologists.
o A practice focused on core competencies: eye exams, contact lens fitting, and simple treatment of eye diseases. The practice does not perform vision therapy, offer advanced eye technology, or treat advanced eye diseases.
Objectives: The doctor has several practice objectives.
o Grow the practice.
o Work fewer hours and maintain income by becoming more efficient and seeing more patients per hour.
o Focus on the practice of optometry (with no ambition to offer an eyewear retail solution).
o Establish ongoing relationships, over several years, with their patients and their families.
o Strike a balance between seeing 2-4 patients per hour.
o Obtain credentials with additional insurance companies.
Solution: Hire a business consultant to apply Lean tools
Waste disposal:
During the initial walkthrough of the process, we discussed an unused exam room that was used as a contact lens storage room. These lenses are used during contact fittings and are dispensed to patients free of charge. We discussed the benefit of using the space for inventory (which is given away) rather than for patient care. As a result, we implemented a vendor-managed inventory system with the contact lens company and moved most contact lenses down the aisle to a secure cabinet.
Also, in the past, the optometrist or his staff would inventory the lenses and call the contact lens company when inventories were running low. We found a win-win situation by shifting the burden of inventory management to the contact lens company’s sales representative. The sales rep had better visibility into inventory and demand. The practice could focus on patient care. While there is still some additional supply in the guest room and the space cannot yet be converted into an additional exam room or pre-exam room, at least the optometrist and staff have eliminated low-value work and done better use of space. .
We made another improvement to appointment scheduling. Due to the practice’s office manager’s part-time status, the retail store next door often schedules doctor’s appointments. When the retail store scheduled appointments, they tried to accommodate the patient as quickly as possible or as convenient for the customer. This was inefficient because the rules on the retail side do not translate into an optimized eye exam schedule. Retail appointment scheduling created gaps in the doctor’s schedule that often went unfilled. The solution was to have the part-time office manager set the appointments. When the office manager is absent, the practice has established and communicated written business rules where the retail store has to schedule appointments by sequence or by day. This general rule led to stacking exams one after another instead of spreading them out. In both solutions, the doctor’s schedule is now level-loaded and works more efficiently.
Value proposal:
As with many small businesses, the practice struggled with its value proposition. The practice’s patient demographic is 40% uninsured and 60% insured. Insurance rates are non-negotiable and are set by HMOs, but the practice has control over non-insurance exam prices. The practice had maintained examination fees for several years. There was an opportunity to increase revenue with a general rate increase. Raising fees is not an act of efficiency and does not create value for the patient. However, it is important for the practice to understand its value and position its fees accordingly.
We compared the basic (dilated) eye exam rates of eight local practices, and the data showed that seven of the competing practices charged higher rates. While many uninsured patients shop around for eye exam prices, a practice that has a high rate of patient loyalty can and should compete on quality of care. Dr. Ko believes that her patients do not return year after year due to low rates; They keep coming back for the doctor, the staff, and the quality of care. The practice now institutes a rate increase each year.
Demand Generation:
The practice had identified many ways to increase revenue, such as sending withdrawal cards. A recently implemented revenue lever is the referral of patients requiring surgery to ophthalmologists. The optometrist is not paid for the referral, but is often referred for follow-up care.
The practice is also being accredited with other insurance. Although some insurance plans are not as attractive as other plans due to lower reimbursements and delayed payments, the doctor realized that getting accredited in other insurance programs is an opportunity.
More chances
Some of the opportunities we discussed do not align with the goals of the practice. Currently, offering eyeglass sales is a conflict of interest with the retail store. Getting into the sale of glasses is very complicated and would require a large investment in inventory. Offering new technology trials requires significant capital investment or long-term leases. The practice is taking a wait-and-see approach to new technology.
Other opportunities align with Dr. Ko’s goals, such as creating a practice website. This would be a low-cost solution for disseminating general patient information such as what insurances are accepted, appointment times, and frequently asked questions. Education sites can be linked to the website, as well as informational items such as an internship newsletter or staff biographies. Some of the competition websites take patient education to another level by having details on each service offering and posting pre-exam survey forms that can also save time in the waiting room.
By Heechung Ko, OD and John Damm, CPIM, CPM
1 “Drive to Efficiency” Lee, Judith, Review of Optometry, pp. 47-50, March 15, 1999.