LASIK Time to Get Out? Too Late to Get In?
By John B. Pinto, San Diego, Calif.

I've just received my fifth call this month from a surgeon saying something like this:

"I need help getting back to cataracts. The grass is definitely greener over there."

Like this doctor, many LASIK surgeons are now having second thoughts -- wondering whether they should minimize or eliminate LASIK and shift their emphasis back toward geriatric eye care. At the same time, other surgeons who haven't yet made the move into LASIK are wondering whether they're missing out. Should they take the risk and join the LASIK marketplace?

Given the shifting economics of LASIK today, decisions like these aren't easy to make, and the consequences of these decisions can have a profound impact on the future of your practice. Here, I'd like to offer some guidelines for making a wise choice, no matter which side of the fence you're currently on.

Where's the beef?

LASIK volumes are softening around the country as the national economic slump continues. For the typical client, this has translated into a 20% (or greater) drop in marketing leads, office consultations and actual surgical cases this past summer.

In truth, except for the highest-volume LASIK surgeons, the cataract pasture has probably been greener all along, especially if you see your practice as a long-term, annuity enterprise and you measure the economic value of a patient over decades, not months. The soft national economy and the growing realization that getting started in LASIK takes significant capital and time commitment are only driving home this point.

In the current economy, LASIK doesn't even compare all that favorably to traditional contact lens and spectacle correction with its associated ongoing care. For example: Given an average per-eye fee of $1,200, and the cost of marketing, technology and general overhead today, the net profit from a bilateral LASIK case is about $600. Yes, some patients may become raving fans for the first few months and generate referrals. However, chances are good they won't become ongoing patients, and alumni referrals taper significantly after the first year.

By comparison, a myopic patient treated nonsurgically and kept in your practice for 10 years may yield as much as $3,000 in revenue and $1,000 in profit. And that's before considering the ongoing referrals he'll probably generate.

Of course, this comparison is mitigated by the one big advantage LASIK has over routine myopic care: It only takes about 90 minutes of a lower-volume surgeon's time (including time spent on direct patient care and the considerable behind-the-scenes work) to deliver a bilateral LASIK result. That comes to about $400 per hour in net profit, which is a far higher economic density than nonsurgical care.

But how does performing LASIK stack up against being a moderate- to high-volume cataract surgeon? Even though professional fees for cataract surgery have decreased, as long as facility fees are sustained, the longitudinal profit per patient -- and the near-term profit per surgeon hour -- is now higher for cataract surgery than for LASIK. What's more, geriatric eye care encompasses a long list of services besides cataract surgery. And, of course, cataract patients are famous for their subsequent tenure and fierce referral loyalty to their surgeon.

I'm not suggesting that you should abandon LASIK. But it's important to be aware that LASIK profitability has dropped off significantly as fees have eroded. The problem is compounded by increasing competition, the cost of marketing, and patients who are waiting for the economy to improve.

Should you take the plunge?

Suppose you're not yet performing LASIK routinely, but wondering whether you should be. In the current situation you may actually be better off staying where you are.

In some markets, for example, the competition for patients is so ferocious that only the top few providers are financially viable. My rule of thumb is that if there are more than 10 individual, active laser centers per one million potential patients, the stragglers in the market will be left so far behind they'd be better off getting out of refractive surgery. Even if they have few fixed costs and use an open-access laser center, doing too few cases per month means the quality of care they provide won't be enhanced much by the addition of the LASIK option.

The drawbacks of getting into LASIK are especially big if you practice in a smaller market. Suppose you work in a tertiary market with a potential patient base of less than 200,000 people. You'll find it very difficult to ramp up to anything approaching a viable LASIK volume. Even in the most vibrant, fully-penetrated markets, only about 1.5% of myopes end up having LASIK each year. This means that only about 1,000 cases per year will be done in your area.

Furthermore, if you enter the market you're not likely to be alone. At best you might achieve a 40% market share. (Many patients will go to the "big city" to get the surgery done.)

So, it's unlikely that you'll be doing more than 400 cases per year. This makes it hard to justify owning your own laser. In addition, other factors, such as the roll-on/roll-off option, the lower fees you'll need to charge to generate volume in a more rural setting, and your per-case direct costs will all contribute to scant profit margins. And, average wages are lower in most small markets, which means your potential patients will have less disposable income than those in urban markets.

If you're already committed to LASIK

If you already offer LASIK and you're feeling the economic pinch, but you still want to offer your patients this option, here are a few survival tips:

Streamline your advertising. Determine which media and creative strategies have worked best during the past 18 months. Monitor your marketing expenses and response rates to make sure you're spending based on results, not based on old habits. Once you know what's really working, narrow your budget to the winners. (In most markets, radio and print testimonials are still the core buys.) Also, trim all marketing during the November 15 to January 15 lull.

At the same time, be ready to turn up the heat when the general market economy shows signs of strength again. Based on consensus opinion from conservative economists, this could happen by the middle of next year. [Editor's note: This time frame could be pushed back -- or advanced -- as a result of recent national events.]

• Route interested callers immediately to one or more trained staff members working from a rehearsed script, who can encourage patients to attend a free screening appointment.
• If you only have one patient educator and she's already on the phone with a prospective patient, don't let other interested callers be forwarded to a voicemail message. Route these callers to the front desk and have someone else talk to them and offer to schedule a consultation.
• Have the staff member who talks to prospects offer to set up a consultation before going into detail about the procedure. Many practices don't make an immediate screening or consultation appointment with callers. They seem to think the caller needs a long explanation first. In reality, many (perhaps most) callers are happy to simply make an appointment.

If the person on your end keeps explaining details unnecessarily, she's using up valuable time that could be spent helping less-informed or more hesitant individuals and increasing the odds that the caller will find something not to his liking. She could end up talking the prospect out of the consultation.

Avoid overly conservative "acceptable patient" criteria. In my experience, successful practices (with good outcomes) seldom screen out more than 25% of patients for clinical reasons. Yet I visit practices where the drop-out rate is closer to 50% because of a highly conservative provider or counselor.

This raises two separate issues:

• Obviously, every surgeon must set his own operative criteria, but being excessively conservative may not benefit your patients or your practice. In my experience, in a mature practice about 60% or more of callers should be scheduling for a consultation, and half or more of those who attend a consultation should be scheduling for surgery.
• Make sure your counselor's "acceptable patient" criteria aren't more conservative than yours. You may be losing patients to another practice unnecessarily.

Track your leads, consults and cases graphically every week or month. Creating a three-line graph that shows these numbers will ensure that surgeons and staff are well aware of practice performance -- and you'll be able to spot a problem before it does too much damage. For example, the graph might indicate that the number of leads you're receiving (calls from interested prospects) is rising, but the number of consultations you're conducting is remaining constant (or worse, falling). This means that your conversion rate is low or falling and you need to take corrective action now.

You can also graph your lead-to-consult ratio and consult-to-case ratio. Twelve months or more of this data can help establish internal benchmarks to match or beat.

Use past statistics to react to upcoming conditions. If your case volume has topped out or gotten spotty, track your 60-day bookings each week. After a year or two these numbers will help you to see monthly trends and averages. This will make it possible to react to booking variations in the present.

For example, suppose that past data show that in November you usually have 150 cases on the books for the next 60 days. However, this November you only have 100 patients scheduled. Knowing this, you can respond before the smaller case load produces economic consequences by ramping up promotional activities or decreasing expenses (or both). This is far better than simply reacting to past performance. It's hard steering the car looking out the back window.

 If your LASIK practice is faltering, minimize cash expenditures. Within the limits of good patient care, postpone making capital equipment purchases and upgrades as long as possible. If you really need an upgrade, it may be safer to lease your laser at a somewhat higher per-case rate than to negotiate a flat purchase price or lease rate. Doing so will shift the business risk away from your practice.

Making the right choice

Of course, the advice in this article notwithstanding, what you should actually do with your LASIK practice is entirely subject to local conditions and your professional desires. The points I've been making here aren't meant to drive you away from providing LASIK for your patients. The fact that the current market is wobbling is no reason to hold a laser fire sale.

Before you decide to make a change in your practice that involves LASIK, ask yourself three questions:

• Do you (or would you) enjoy this sector of practice?
• Will offering LASIK in the next few years truly serve your patients well?
• Will your practice profit more over the next several years if you offer LASIK, or if you don't?

If the answer to the first two questions is yes, even if you're losing money now, chances are excellent that you'll be profitable eventually. Then the third question becomes key: Even if you're profitable, how will your economic welfare compare to the position you'd be in if you'd made a different choice?

No one knows what will happen to the market for LASIK in the next few years. But if you're deciding whether to take the plunge -- or whether to hang in there in the face of economic obstacles -- making the decision with your eyes open will help to ensure that you create the best possible outcome for you and your practice. OM

John Pinto is president of J. Pinto & Associates, Inc., an ophthalmic practice management consulting firm established in 1979, with offices at 376 San Antonio Avenue, Suite C4, San Diego, Calif. 92016. Mr. Pinto is the country's most-published author on ophthalmology management topics. Recent books include "John Pinto's Little Green Book of Ophthalmology" and "Turnaround: 21 Weeks to Practice Survival and Permanent Improvement." You can call him at (800) 886-1235, e-mail him at pintoinc@aol.com, or find him on the web at www.pintoinc.com.