Create opportunity to rise up against macroeconomic headwinds.

It feels as if the late ‘70s and early ‘80s are back in full force. A cold war with Russia, ripped high-waisted acid-washed jeans, and inflation so high economists are looking into Reaganomics. At least so far, parachute pants, big hair and blazers with shoulder pads have stayed in the time capsule. Inflation is getting a lot of attention, though, because of increasing costs and eroding profits.

Many ophthalmology practices have shifted from cottage industries to large group practices or private equity-backed platforms, so it is not just individual providers looking in the mirror to figure this out. It is now the board rooms of these large groups or the industry supplying and supporting our specialty that are also strategizing to deal with the uncertainty of the US and world economy. Let’s explore some solutions.

ECONOMIC REALITIES

In economics, inflation is defined as the loss in purchasing power of a currency usually expressed as a general rise in the price of goods and services. So, if inflation is 8%, then the cost of punctal plugs will increase from $100 to $108. In a normal economy, one would just increase the cost to patients. But, in health care, the math is different. The reimbursement with health insurance companies is fixed and often declining. For example, Medicare reimbursement in one region to a provider for cataract surgery in the 1980s was more than $1,500; in 2019 was $654; and now is $524.

Another piece of the puzzle is the impact of employees who ask for cost of living raises so their wages keep up with inflation. When you add the rise in cost of supplies and staff with fixed or declining fee structures, the financial impact is not linear but rather exponential in computing profit. Simply put: The additional costs will come directly out of your pocket as a provider, the profit distributions of a large provider group or the EBITDA of a platform.

So, what to do? One option is to reminisce about the good old days in the ‘80s when you could get a new 1982 Honda accord for $8,845, fill it up with gas for $1.12 per gallon, drive to the movie theater where a ticket was $3.55 — and you put real butter on the popcorn.

George Gobel, a comedian popular in the 1950’s, said, “If inflation continues to soar, you’re going to have to work like a dog just to live like one.” Instead, let’s examine factors that may motivate change.

THE PATIENT EDUCATION FACTOR

In health care, it is education that will impact patient behavior. In a doctor’s office, concerns about inflation tend to focus on patient behavior and decision making. Ophthalmology practices in particular rely heavily on discretionary spending by patients for services such as premium IOLs, femtosecond laser-assisted cataract surgery, LASIK and many dry eye treatments. Fortunately, in health care, fundamental economics of supply and demand do not always apply.

A study by the RAND corporation (tinyurl.com/yajpmc96 ) showed that health care has its own rules impacting patient behavior with out-of-pocket decisions. If patients understand the value of a product or treatment, research shows they are more likely to tolerate price elasticity.

During the 2008 “Great Recession,” I found this to hold true in my practice. We increased cataract consult appointments by 5 minutes to allow for more detailed education about the benefits of a femtosecond laser. In fact, my conversion increased from 65% to 70% during this financial crisis. Working on ways to improve communication via providers, staff or videos lead to novel connections in educating patients.

Take a hard look how you are communicating with patients about the value of these non-covered services to their individual health. This will positively impact their decision making.

DOCTORS ARE PATIENTS TOO

A physician’s motivation at work has a direct impact on revenue. Keep in mind that even employee doctors have lives outside of work and are facing the same macro-economic headwinds as patients and employees in the practice. They feel the crunch just like everyone else when they need to buy gas to fill up the car, pay tuitions and tackle the credit card bill. If inflation is 8%, then the $100 they spent a year ago now only is worth $92 of buying power.

With these realities in mind, consider creating a plan that will tap into their motivation to avoid the penalties of inflation. It is likely physicians will be open to ideas they may have resisted in the past. For instance, a provider may now consider adding on two more patients a day, adding services such as dry eye treatment or working with a mentor to increase conversion rates to premium lens in cataract surgery.

In addition, your provider may work with the team to figure out how to get an OCT, CCT and visual field on a patient with IOPs of 22 or cupping of 0.6 when in the past they were just too busy to ask staff to do more. Or consider finally integrating a scribe or flow coordinator to maximize efficiency in the clinic and avoid a provider having to go into the same room twice (a one-pass system).

Management teams have a choice how they will approach providers to manage inflation’s impacts on the entity. One option is for management to engage in discussions with providers about personal concerns regarding income and inflation, then create a partnership to help beat down the threat of erosion of income by increasing revenue. Ultimately, this synergy will create growth that is patient centric but comfortable for a provider and will benefit patients in a platform.

OPPORTUNITY IN DOWNTURNS

Inflation can impact the core of your practice. How you approach this risk will either crush profits — or become an impetus for change and transform a practice with growth. The economic concerns of a provider can be leveraged to harness new motivation to work harder or smarter. Nurturing and supporting this effort creates opportunity for growth.

Despite all the economic stress of the early 1980s, many great innovations occurred: the boxy Macintosh computer, brick-sized cell phones and even MTV launched, forever changing television. Let’s look forward to seeing what we can innovate this economic cycle. OM

Scott LaBorwit, MD, is founder of Select Eye Care in Maryland, Clinical Advisory Chair at Vision Innovation Partners and assistant professor, part-time faculty, at Wilmer Eye Clinic of Johns Hopkins Hospital, Baltimore. His e-mail is Sel104@me.com.