Management Essentials

Keeping Abreast of the Frame Game

By Farrell “Toby” Tyson, MD, FACS

How many ophthalmologists have turned over their optical dispensaries to an optician or optometrist to run? This is a common scenario, as very few ophthalmologists have retail management training in their background. While this arrangement may be a quick solution to a managerial problem, most optometrists and opticians lack the needed retail management training to excel in this role. Without proper oversight and appropriate frame and lens purchasing, financial stagnation may be on the horizon. Optical is a highly complex retail business, with both a medical and a fashion component.

Avoid Conflict of Interest

Most ophthalmologists are unaware that the ethical medical business practices that we were taught to abide by are not the norm in the retail world of optical. It is quite common, and also legal, for frame and lens vendors to “incentivize” your employees — especially your optical manager and opticians. This is done by way of offering incentives to foster their purchasing preferences. These incentives are frequently in the form of specific gifts or gift cards mailed to the optician's home or PO Box. Gift cards can range from $20 to thousands of dollars and are redeemable as cash. This is lost revenue that could be going to discounting your optical goods costs.

You should have a section in your personnel handbook that prohibits the staff from accepting gifts from vendors. This puts an end to favoritism. You might also be surprised to know how frequently the person in charge of your office supply purchasing is being tempted with inducements to purchase products at a higher price from certain vendors. Having specific policies in place helps limit your exposure and lays the ground rules for the office. If someone is willing to take a small gift, just where do they draw the line and what else might tempt them?

Know the Facts

Frames are assigned a wholesale price by the vendor and are listed in the Frame Facts guide. This should simply be the starting point of your frame negotiations. Most vision plans will pay your optical Frame Facts price plus a $15 dispensing fee. At this rate, you will lose money if you are purchasing your frames at the wholesale price. You must negotiate a price on your frames that is lower than the Frame Facts price and will allow for an adequate profit margin.

Limit your vendor list to a few good companies with diverse product offerings. This allows you to build sufficient sales to obtain volume discounting. Buying a couple of frames from one vendor and a couple from another will not leave enough margin in a Medicare-based ophthalmology practice. Don't be afraid to buy overstock or discontinued frames from respectable vendors. These frames provide great value to your dispensary, which can be passed on to your patients.

Spectacle lenses are another significant cost of goods sold in your optical. Spectacle lenses are usually surfaced and sometimes finished at offsite lens labs. These labs can be a great resource, as they have affiliated training programs for your staff. It is advisable to work with a few different labs to minimize your exposure to production delays that may occur at an individual lab. In addition, different labs may be better at high-end progressives and coatings where others may be better at drill mounts. Lens production delays can be devastating to your optical dispensary. All your laboratory and vendor relationships should be put out to bid yearly to ensure that you are getting the most competitive prices and services. Remember — sometimes the cheapest contract is not the least expensive.

As your optical sales grow, you might want to consider stepping up to an in-house finishing lab. The initial startup cost is not much more than a high-end autorefractor. This allows for a better profit margin on your optical jobs, as offsite finishing usually has a high markup. Finishing in house also allows for the use of stock lens, which can be bought in bulk at significant cost savings.

Proper supervision and management coupled with smart frame purchasing and competitive lens lab pricing can put you on the road to financial success with your optical dispensary. This won't be accomplished overnight, but through a series of methodical changes and steps. Once instituted, you will gain the capital to upgrade your dispensary and step up internal marketing. OM

Farrell C. Tyson, MD, FACS, is a refractive cataract/glaucoma eye surgeon at the Cape Coral Eye Center in Florida. He may be reached at tysonfc@hotmail.com.