Is Ophthalmology's Golden Age Just Ahead?
Current less-than-ideal conditions may be misleading. A number of factors could make the next few years ophthalmology's strongest.
By Michael J. Parshall, Plymouth Meeting, Pa.

During the mid 1980s it looked as though the U.S. economy had lost its position as the world leader to Japan. The stock market plummeted in 1987, while major U.S. companies like RCA Corporation were acquired by foreign corporations. Articles and books predicted the fall of the American economy and the globalization of American businesses under the control of foreign interests. Doom and gloom abounded.

Amid all this pessimism a Harvard-educated economist, Harry S. Dent, wrote a book, "The Great Boom To Come," which proclaimed that the U.S. economy was on the verge of a huge expansion and that the Japanese economy was headed for bankruptcy. He predicted the Dow would exceed 10,000 and that new innovations in computers and technology were just around the corner.

Almost all of his predictions have come true.

Today, the pessimism of many ophthalmologists is similar to that of American businessmen in the mid 80s. Reductions in reimbursements, predatory competition, below-cost pricing in refractive surgery and capitated contracts have caused many ophthalmologists to view the future as bleak.

Like Mr. Dent, I disagree. I believe the true "golden age of ophthalmology" lies just ahead of us.

Waves of change

Ophthalmology is a remarkably complicated area of medicine caught up in tremendous change and innovation. Given its complexity, ophthalmologists and industry observers are often confused about how its future will unfold.

To make an educated guess about what lies ahead, I believe it makes sense to apply the same kind of reasoning used by Harry Dent. Mr. Dent based all of his predictions on the most fundamental of economic laws: supply and demand. He linked this basic economic rule to demographic analysis and a model of how new technologies develop.

Most economists (and people in general) tend to explain changes in sales, production, and profits by looking at very recent events and assuming a direct, linear, cause-and-effect relationship. Dent's view, in contrast, is that change comes in waves over a long period of time. By studying these waves of change, Mr. Dent believes that future consequences can be predicted.

He argues, for example, that the economic boom that occurred after World War II was primarily the result of the increase in the birth rate between 1917 and 1930. This factor, coupled with government-sponsored, low-cost financing, caused the huge boom in home ownership that fueled America's economic prosperity from 1947 to the early 1960s. (The demand for houses caused a population shift from the city to the suburbs, resulting in the development of the two-car family and the growth of the automobile industry, fast food restaurants, home entertainment, electronics and other industries.)

Change and ophthalmology

What long-term waves of change impact ophthalmology? It seems to me that the driving force behind ophthalmology is patient demand -- and patient demand is primarily a function of the patient's age. With the exception of pediatric ophthalmology, most nonelective ophthalmic surgery is performed on adults past the age of 55.

Let's look at the U.S. population's birth rate "waves" and consider their effect on ophthalmology:

• The first surge in birth rate began around 1900, increasing from 2.5 million births per year to a peak of slightly more than 3 million in 1921.
• From the early 20s the birth rate gradually retreated to 2.4 million annually in the early 1930s.
• Starting in the mid 1940s, the birth rate grew from about 3 million births a year to upwards of 4.5 million births a year in the early 1960s.
• As in previous generations, a 30-year cycle of lowered birth rates followed the boom, between the mid 60s and 1990, with a low point of 4 million births a year around 1977.

The population expansion caused by the baby boom of the 40s, 50s and early 60s was later enhanced by another phenomenon: increased immigration. Immigration into the United States grew during the 1970s, peaking in the early 1990s. Because the average immigrant entering the United States in 1992 was 30 years old -- the same age as the 1960s Baby Boomers -- the practical result was that immigrants added another half million people to the "Baby Boom" group. This made the effective birth rate in the early 1960s roughly 5 million births a year.

How does this affect ophthalmology? If the early 1980s period was a "peak" for ophthalmology -- the so-called "golden age" -- it was because it was 60 years after the peak of the roaring 20s birth boom. The timing caused a dramatic increase in the pool of potential patients. Add 60 years to the mid-1930s birth rate trough, and you can explain the mid-1990s worries about cataract surgery rates and the "glut" of ophthalmologists. The situation wasn't caused by managed care so much as the drop in the number of elderly people.

The Baby Boom factor

Now: Add 60 years to the beginning of the baby boom in 1946. You can see that a huge surge in the older population segments is right around the corner. (In 2005, 5.5 million more Americans will be between the ages of 55 and 64 than in the year 2000.) Also, Baby Boomers will consume tremendous amounts of eye care, in part because of their lifestyles and habits. Baby Boomers love to play in the sun; they spend a lot of time at the beach exposed to ultraviolet light. They've skied, sailed, ridden their bikes, jogged and played sports outside. In short, they're going to need a lot of cataract surgery.

I estimate that the number of cataract surgeries performed annually will increase about 33% over the next 5 years, to more than 2.2 million procedures per year. Retina procedures should climb even faster, partly because of the increase in older patients, but mostly because of the increase in adult diabetes among those born during the birth surge of the early 60s.

Paying for "perfection"

Actually, the "Boomer effect" may have even more of an impact than these numbers would suggest. Boomers are a very self-indulgent generation. When they want fancy cars, they buy Mercedes or BMWs. When they buy a "big house," it's a 5,000-square-foot house with a three- or four-car garage. So when it comes to health care, they'll want the best surgeon, the best procedure, and an excellent result -- for which they'll pay handsomely. I don't believe many Boomers will tolerate slightly blurred vision, a loss in their color perception or saggy eyelids the way their parents did.

Consider the effect that the Boomers have had on plastic surgery. According to the American Society of Plastic Surgeons, the number of plastic surgery procedures performed by member physicians has nearly tripled since 1992. Of the 7.4 million Americans who had plastic surgery in the year 2000, 68% were patients between the ages of 35 and 64 (born between 1936 and 1963).

This particular trend can affect ophthalmologists as well because many are trained to perform this type of surgery. Eyelid surgery, for example, is the third most popular plastic surgery procedure, behind liposuction and rhinoplasty. Since 1992, the number of eyelid surgeries performed by plastic surgeons has nearly tripled, from 59,461 procedures to 172,244. This growth trend will certainly continue as the largest segments of the Boomer population move into these age brackets.

The spread of new technology

The aging of the Baby Boomers isn't the only reason to be optimistic; refractive surgery is likely to experience a huge boom as well. To appreciate how this might work, let's examine what Harry Dent has to say about the spread of new technology.

Mr. Dent has observed a definite pattern to the rate at which new technology is accepted into the economy. Simply stated, the time it takes for a new technology to achieve 10% market penetration is equal to the time it will take to grow from 10% to 90% penetration, and equal to the time it will take to grow from 90% to 99%. In other words, growth starts slowly, then becomes very rapid, and finally slows again as complete market penetration approaches. Graphing the growth curve of a new technology's market penetration typically produces what Mr. Dent dubs the "S" curve.

What predictions can be made if we apply the "S" curve to refractive surgery? To answer that question we need to make certain assumptions:

• A Refractive surgery entered the mainstream around 1996 when the FDA approved PRK with an excimer laser.
• A The myopia market is approximately 70 million people, of which about 40 million are candidates for refractive surgery. Ten percent of this market, or 4 million people, translates to 8 million procedures.
• A Market estimates of procedures performed coupled with market projections estimate that 8 million procedures -- 10% penetration of the myopia market -- will be achieved by 2003.

Using Harry Dent's observations, we can conclude that if it takes 8 years to achieve 10% market penetration, it will take another 8 years to achieve 90% penetration, which should occur in 2011. This will mean 7.5 million procedures being performed annually by very busy surgeons. (And these calculations don't take into account the impact of new procedures for hyperopia and presbyopia.)

The impact of short-term thinking

Other factors, such as the "cause-and-effect" thinking that ignores long-term trends, are also likely to make refractive surgery a "booming" market in the years ahead. For example:

In the mid 90s ophthalmology experienced a "retina glut." In response, many training programs reduced the number of fellows they trained. Today the demand for retina specialists exceeds the supply.

In the mid 1990s anesthesiologists were struggling to find work. As a result, by 1997, the number of anesthesiologists in training fell about 50%. Today, we have a serious shortage of anesthesiologists.

During the past 2 years, the refractive surgery market has been in chaos. Below-cost pricing, consolidation and questionable marketing tactics have made offering refractive surgery more complicated. To many ophthalmologists, refractive surgery appears to be a low-margin, high-cost service that requires a huge initial investment for which there is little return. Add to that the well-publicized fact that some surgeons are paid $75.00 per LASIK procedure by some of the "discounters," and refractive surgery loses much of its appeal.

Because of these perceptions, the number of cornea/refractive fellows in training during the next few years will almost certainly decline. Residents will hear about the chaotic refractive surgery market and observe that there are few good jobs for cornea/refractive surgeons. They'll elect other subspecialties to pursue. As a result, I believe we'll see a refractive surgeon shortage within 5 years. (The number of fellows matched has already begun to decline.)

Other factors that will boost the upcoming refractive surgery market include:

• We're seeing the beginnings of consolidation and a more rational approach to refractive surgery. The emphasis now is on "price realization" as the discounters fall by the wayside, leaving the market to the stronger, better-managed operators.
• The negative press about the risks and bad outcomes may be ending, partly because the more skillful surgeons and better technology are emerging as the survivors of the price wars.
• Fewer "corporate" players will remain in the field. The public market that financed many discounters has learned its lesson and isn't likely to fund similar companies in the near future. Private practices (and a few corporate players) will emerge as the dominant forces in refractive surgery.

Outlook: excellent

Pessimism may be fashionable, but a host of factors that will strengthen ophthalmology are now coming together. So take heart and prepare. These factors herald a real "golden age of ophthalmology" -- the greatest boom the profession has ever seen.

Michael J. Parshall is vice president of The Health Care Group, Inc., a consulting firm offering management advice to ophthalmology groups across the country. (Legal advice is available through its affiliated law practice, Health Care Law Associates P.C.) You can reach him at (610) 828-3888, or by e-mailing mparshall@healthcaregroup.com.