Understanding and Adjusting to the Destiny of Ophthalmic America

A review of the major challenges of the future — and strategies you can use to overcome them.

By John B. Pinto

Aside from the occasional eye surgeon who wanders into the halls of U.S. Congress, and the admirable efforts of our professional societies, your personal influence on the macroeconomic or political issues of the day is nil.

However, your action — and just as important, your attitude — will have a profound impact on how you, your practice and your professional life make a strong transition during the next couple of decades.

So let's get to work. Here are six reasonably certain challenges, followed by six mitigation strategies you can launch this week.

Challenge #1: Demand for our services will rise much faster than our capacity.

During the past decade, the U.S. population has grown by about 11%, while the number of residency slots has dropped by a similar percentage. Absent an unanticipated crash program to open residency training slots, the total number of eye surgeons is expected to be roughly static over the next decade. Meanwhile, the demand for ophthalmic services is growing at something like 3% to 5% per year due to the aging of the baby boomers.

U.S. healthcare costs will be abruptly or gently ratcheted down from a giddy 18% or more of gross domestic product (GDP) to something closer to the plus-or-minus 12% of GDP seen in most other industrial nations. That would be roughly a one-third drop from today's spending levels. Healthcare reform — now or later, faster or slower, greater or lesser — is inevitable.

Challenge #2: A slow shift to value-based healthcare purchasing will continue.

Based on government and private payer planning now under way, fee-for-service may be replaced or at least materially supplanted in ways that could reward highly efficient and high-quality providers, and punish others. The concept of value-based healthcare purchasing is that buyers should hold providers of health care accountable not just for units of service, but for the quality and outcome of care. Federal incentives for adoption of electronic medical records/electronic health records are just the leading edge of this trend.

Challenge #3: Small practices will need to outsmart the big practices.

The death of the solo practice has been coming for more than 30 years. It probably will still be coming 30 years from now. Nimble one-man bands will continue to do just fine. Indeed, with hard work and careful cost controls, solo surgeons can earn more per hour than is possible in a large practice in which there can be a well-recognized diseconomy of scale.

Challenge #4: The demand for custom surgical care will surge.

My typical client is now implanting somewhat more than 10% of cataract cases with custom intraocular lenses. And 50% rates are not unheard of. Although the transition from common to custom will not move at the same pace as we saw with the shift from extracapsular surgery to phacoemulsification, if you're not implanting custom lenses today, you're now officially behind the curve.

Challenge #5: Profit margins will inexorably soften.

At a pace determined by the triple threat of the Great Recession, sputtering health reform and Medicare fee adjustments, surgeons will continue to adjust to higher cost margins and lower profits. Unfortunately, the best possible news is merely "less bad" than the worst news. This is the new norm. Chin up. Shoulders back. Realize that even if the direst predictions come to pass, your income will continue to be within the top few percent in the nation.

Challenge #6: High volume-low fee imbalance will erode the value of ophthalmic care.

Many economists believe that the only way the U.S. can mitigate rising debt and soaring entitlement costs in a politically acceptable manner will be to simply run the printing presses at full throttle and depreciate the currency. So even if we dodge the bullet and Medicare payments remain flat, the inflation adjusted reimbursement per unit of service will continue to decline. The survivors ("winners" being too strong a term under the circumstances) will be those ophthalmologists who can learn to see many more patients with the same resources. If forced, you can do this. I've witnessed 80-patient clinics managed by one doctor, two techs, a couple of lanes and an espresso machine. It can be done. It will have to be done.

Meeting the challenges: What can you do?

Strategy #1: Understand and prepare for the cash flow consequences of the emerging trends. Lock in access to capital you may need transiently to work through a durably turbulent environment. Make sure you have ready access to cash equivalent to at least 3 months of operating expenses, either through your personal resources or through credit lines. Remember that the time to go to your banker to negotiate a line of credit is before you need the money. In addition, you should briefly but formally write down the tactics you would resort to in the event of a severe drop in fees: closing offices, terminating staff, cutting hours and wages, and all the rest of it.

Strategy #2: You can materially influence your personal output. A 10% decrease in Medicare fees results in a roughly 15% to 20% net cut in income for the typical general ophthalmologist. This cut could be erased by seeing about 400 additional patients per year or about two or three more patients per day. This is obviously quite easy to do, and more realistic than cutting staff. And if you could do it today, why in the world would you delay doing this until Medicare fees are reduced? Change your template this week, give yourself as much as a six-figure pay raise for the time being, and restore a sense of control over your business destiny.

Strategy #3: Provide missing care. An informed review of your practice's CPT report will almost always reveal missed opportunities. Here's an example: refraction fees. Some practices charge for a refraction for 10% of visits, or less, collecting a fee of below $30. These figures can be 25% or more and $45 or more, respectively.

Strategy #4: Right-size your practice's staffing levels. Apply widely available industry benchmarks to assure that you have just the right number. If you have too many staff members, you are bleeding profits. If you do not have enough staff members, your collections, patient care and special testing will lag. Trim staff hours that aren't being efficiently used.

Strategy #5: Close operational gaps. Eye care, done well, is a massively complex enterprise. Something is always falling between the cracks. Now is the time to audit to make sure these operational gaps (especially in recall systems, appointment reminders, billing protocols, and so on) are all closed.

Strategy #6: Scour your market for alliance, merger and acquisition opportunities. For the largest and best-led practices operating in America today, the next 10 years will represent a splendid opening to gain market share. For the weakest practices, now may be your last/best opportunity to find shelter with a more successful organization. OM

© 2010 J. Pinto & Associates, Inc. All Rights Reserved

John Pinto is president of J. Pinto & Associates, Inc., an ophthalmic practice management consulting firm established in 1979. John is the country's most-published author on ophthalmology management topics. He is the author of John Pinto's Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist: How to See More Patients, Provide Better Care and Prosper in an Era of Falling Fees, The Women of Ophthalmology and Legal Issues in Ophthalmology: A Review for Surgeons and Administrators. He can be reached at 619-223-2233, via e-mail at pintoinc@aol.com or found on the web at www.pintoinc.com.