Considering a Dispensary?

Opening an optical shop can help you withstand the vagaries of a tough economy

BY RENÉ LUTHE, SENIOR ASSOCIATE EDITOR

Optical shops, of course, are seen as the province of optometrists and opticians, and retail chains such as Pearle Vision and Lenscrafters. Ophthalmology practices are the place patients go for medical care. That division of services worked fine for many years, but in the shadow of a severe recession and in the face of patients more focused on convenience, adding an optical shop to your medical practice is increasingly looking like a sound business — and health care — decision. On the other hand, operating a private practice during that same severe recession may make the idea of a big-ticket investment seem risky right now. Here is what you need to know in order to open an optical dispensary efficiently and successfully.

It's Good Customer Service

Some ophthalmologists opened their optical shops with an eye not so much on increasing their profits as on pleasing their patients. According to Beth Williams, DPO, of Eye Centers of Tennessee, practice founder Larry Patterson, MD, started his optical because his many elderly patients found it inconvenient to go elsewhere for their glasses. With travel and getting in and out of vehicles more difficult for them, Dr. Patterson thought an optical would be a valuable patient service rather than a significant moneymaker. But it soon became another way to increase patient satisfaction.

“Sometimes when we simply clean people's eyeglasses, tighten the screws, perform a little maintenance on them, they think we have done miracles,” Ms. Williams explains. “Even that can change their perception of their whole visit.”

The desire for convenience extends to demographics beyond the elderly, of course. Dawn Cavanaugh, chief operating officer at Pepose Vision Institute of Chesterfield, Mo., reports that even though the practice specializes in refractive surgery, patients wanted one-stop shopping.

“Patients come to us to get out of their glasses,” she explains. “But some patients are not candidates for refractive surgery and a lot of patients who do have refractive surgery will invest in a nice pair of sunglasses afterward.”

… And It's in Your Interest, Too

But an optical shop is not only a courtesy to your patients. Between the specter of declining reimbursements and a tough economy, it is also “a very good, long-term commodity,” as Ms. Cavanaugh puts it.

Design firms can create a professional optical shop that complements your practice.

Richard Winig, president of Eye Designs, reports that over the last 15 years, he has observed that ophthalmologists have increasingly been putting in optical shops. “They need them in order to be full service and to qualify for managed care plans for certain programs,” he explains.

Adding to the impetus, however, is the fact of decreasing reimbursements, says Tim Fortner, manager of trade development at Transitions Optical. He reports that he is encountering more interest in optical shops when he is out speaking to ophthalmic practices. “It seems to be in direct proportion to the cutting of reimbursements the doctors keep hearing about from Medicare,” he notes.

Arthur De Gennaro, president of Arthur De Gennaro & Associates, a practice management consulting company that specializes in dispensary issues, and author of The Dispensing Ophthalmologist, agrees. He says ophthalmology practices must diversify in order to optimize their profitability. “Under any form of national health reform, the government is going to look to save money — and that means lower reimbursements,” he says. “Right now, we have increasing expenses and decreasing reimbursements.”

The most natural choice for an additional revenue stream is to add an optical shop, particularly when one considers that LASIK rates may not bounce back to their pre-recession levels once the economy recovers.

Further, Mr. De Gennaro estimates that comprehensive ophthalmology practices with opticals derive approximately 25% of their revenue from them. “If a comprehensive ophthalmologist doesn't have an optical, he is giving up about 25% of his revenue potential,” he says.

Additionally, an optical shop will bring in many people who don't currently need medical care but routine eye examinations, glasses and contact lenses, Mr. Fortner points out — but when they finally do need medical care, they are already affiliated with your practice.

How Can You Be Sure?

Mr. De Gennaro advises that any practice considering opening an optical dispensary seek out an expert in , dispensary economics to create a pro forma for them. Among other things, the consultant will ask how many examinations the practice did last year, how many patients are seen each day, the number of prescriptions that are written from a refraction, what kind of health insurance plans it accepts, etc.

“Once we understand the numbers and the patient demographics, we put them in a spreadsheet. We then use national averages and estimates of costs average unit sale and cost and profits to generate a financial snapshot of how much money this dispensary should be able to make,” he explains. Anyone who concludes that they cannot jump the hurdle shouldn't undertake the project.

Don't Do It on the Cheap

Provided you can jump the hurdle, it may be tempting, in the current economic climate, to invest as little as you think you can get away with in your new optical shop. Dispensary veterans and vendors, however, warn against being overzealous in your thrift. According to Ms. Cavanaugh, there's no way around the necessity of investing money to make money.

“I think the practices that are just looking at opening an optical in this economic climate are a little bit squeamish,” she says. “But it's definitely going to be a money-maker.”

That is, if done correctly.

Mr. Winig urges practices to remember that they are creating a retail environment; the dispensary should look like an optical boutique. “What's indispensable is creating the right environment because that puts people in a buying mood,” he says. Furthermore, contemporary optical shops are usually the first and last impression the patient and their family members have of your practice.

Robert B. Gollance, MD, of Wayne, NJ, agrees that the optical shop can make a tremendous impression on patients. “Anything that goes on in the optical reflects on the rest of the practice,” he says.

This means that turning an old closet into an optical shop is a no-no. Experts agree that setting up an optical in a too-small space without appropriate presentation almost surely will doom it to failure.

“A retail environment has to be able to accommodate all the buyer's needs,” says Mr. Winig. “You're not going to do that in a 10x10 room and be very effective.”

He points out that there are typically three kinds of patients coming into an optical: those who are browsing while waiting for their appointment, those who have just completed their eye exam and are coming to the optical with a prescription to fill, and those who are returning to pick up their new glasses. The optical must be able to accommodate all three functions comfortably.

Mr. De Gennaro agrees that in this case, small is not beautiful. “Think of yourself as a consumer,” he advises. “Any retail space that is too small is not attractive to walk into. A small retail space can only handle so many customers before it can't handle any more, and that makes people walk away.”

Similarly, display is extremely important, according to Dr. Gollance. He advises working with a design firm.

“What you get is not tremendous savings on what they charge, but tremendous advice on how to set up the optical, what it should look like, what kind of display pieces,” Dr. Gollance explains. “They've done this before. I had a very tight budget for the optical I just opened, but I spent the money with the design firm and what I got out of it is a good integrated design, a good flow.”

Mr. Winig says that his company will come on site, measure the space and prepare floor plans at no charge. Once engaged, they also provide lighting plans and the complete interior design to create an attractive selling environment that complements the particular practice.

Mr. Winig adds that attractive, smart presentation of frames not only draws in patients, but it also saves you money by eliminating patient confusion. “You don't need a frame in every spot,” he says. “You can integrate signage and shelving, so that although you are showing fewer frames, you can identify by brand, by lifestyle, by season.”

While many opticals have a frame in every slot, the visual tends to confuse patients by hitting them with a mass of frames. With proper signage, they can find what product they are interested in, Mr. Winig says. “So if you walk in and you want to see the men's Calvin Klein, you know exactly where to look.”

Dr. Gollance advises not skimping on finding a good optician. This won't necessarily cost you much more money but it will involve more time. Again, he says, it is a matter of making a good impression, because a bad experience in the optical shop reflects on your practice.

Mr. De Gennaro agrees that a good optician can help you build your business — but cautions that the ophthalmologist not have unrealistic expectations. “Opticians are generally employees of other people. They are trained how to take care of customers, but they have never been asked to build a dispensary, create a price list, do the marketing, create an inventory,” he says. Instead, get advice from someone who has experience in these matters.

Where You Can Save Money

Negotiate, negotiate, negotiate, to make your optical cost-effective, say these optical shop experts. Ms. Cavanaugh notes that a down economy usually means vendors are more willing to wheel and deal.

“We've been noticing that the more we ask for a discount, the more discount we're given,” she says.

Frames are a good place to start. A large inventory is not necessary, Ms. Cavanaugh claims; instead, carefully assess who your patients are and choose the vendors who make the products that will appeal to them.

“A vendor will come out with neat glasses that are great for patients in their 20s through mid-30s, but that's a niche market,” says Ms. Williams. “Is that who your patient base is?”

Once you have identified that base, keep a close eye on what frames are moving so that you can buy in bulk to get a discount, and avoid tying your money up in a large inventory, advises Ms. Cavanaugh.

Some frame vendors, such as Altair, will offer their frames on a consignment basis, says Ms. Williams, resulting in significant savings for the practice.

Lab fees are another area where practices should actively negotiate, according to Ms. Cavanaugh. She says the Pepose Vision Institute has renegotiated its lab agreement twice since opening an optical in 2008.

“Keep on renegotiating your contracts every six months,” Ms. Cavanaugh advises. “If the economy doesn't start ticking up, keep going back to your vendors. And I think that vendors are more than happy to negotiate. But if you don't ask — they're not going to give it to you.”

She advises networking, perhaps with optical shops outside your market to learn their average cost to get lenses made, to find out if you're getting a good deal from your lab.

And while some optical equipment, such as high-tech electronic items, cannot be skimped on, Dr. Gollance says that even here there are places to cut corners. He obtained a slit-lamp microscope secondhand. “It's the best one made, it hasn't been changed in 50 years,” he points out. He was also able to find some high-quality chairs for the optical on eBay, which he reupholstered to match his décor.

A new optical doesn't even have to require adding a lot of new salaries to your payroll. At Dr. Patterson's and Dr. Pepose's practices, existing staff members were cross-trained to work in the dispensary.

Making Sure It's Successful

A good design, a smart selection of frames and a good optician are not enough to ensure a profitable optical shop, however. Dr. Gollance says that requires more involvement from the ophthalmologists than just money and planning. Doctors need to learn enough about optical matters to be able to discuss them with their spectacle-wearing patients.

“They should be able to talk eyeglasses as well as an optometrist if they are going to have an optical of their own,” he maintains. “After all, why should patients go to an ophthalmologist if they just want to go change their glasses?”

To educate himself, he attended a Vision Expo meeting, and recommends others do the same. And Dr. Gollance says that a good “bedside manner” should not end when the patient leaves the exam room. Whenever he has time, Dr. Gollance will walk a patient for whom he has just prescribed eyeglasses over to the optical while discussing with her what the patient needs.

“You talk about her problem and what solutions, lenses might be best for her,” he explains. “Then you include the optician and say, ‘I'll leave you with Linda and she'll take care of what you need.’”

Dr. Gollance says that this routine has helped his own office achieve a capture rate of approximately 90% for the spectacle prescriptions they write. Chalk it up to the personal touch. “Because we do spend time talking with the patient and then saying, ‘I'm going to discuss this with the optician.’ They're not going to get that service elsewhere.”

He also believes that the optical should guarantee patients' satisfaction with their eyeglasses. An unwillingness to back up your product when other optical shops such as Lenscrafters guarantee theirs can mean that your medical practice loses a patient.

To make it as easy as possible for patients to buy their glasses from you, Ms. Cavanaugh advises offering financing. “If patients have 12 months to pay their eyeglasses off, they are probably more apt to get an $800 pair versus a $300 pair,” she points out. “A lot of practices still don't offer financing, but I think it's something they should look into.”

With these guidelines, adding an optical shop to your ophthalmic practice may involve a lot less stress — and more profit — than you thought. OM