Increasing ‘capture rate’ key to successful optical shop

Reasonable adjustments to even the smallest private practice optical shop will likely improve patient satisfaction. First in a 3-part series.

Part 2 [ Managing inventory important for a successful optical shop ]
Part 3 [ Managing controllable expenses can stabilize your bottom line, ensure profit ]

Whether it is time to increase services by adding an optical shop or tweaking an existing shop to improve your bottom line, there are measures than can be taken to evaluate current operations and find room for improvement, experts say.

Adding a dispensary “is far and above one of the best things we ever did to our practice,” said Robert S. Gold, MD, whose practice started dispensing 7 years ago. “Those who are not dispensing are missing out.”

Big-name retail shops have successfully marketed their business by offering quick service and accessibility to quality products, but Dr. Gold said private optical shops can offer the same products while also creating a complete experience for the patients.

“It makes your office complete. You do the examination, you complete your examination and when the patient needs glasses, there’s the convenience factor as well as the confidence factor of having your glasses made by the person who takes care of you medically,” said Dr. Gold, who is OSN Pediatrics/Strabismus Section Editor. “The No. 1 way we look at this is as a service to your patients. The more patients you get to come to your optical, the more your profits will be. But I think if you look at this as a money maker, then you’ve lost the major reason to do it.”

Meeting the capture rate

Optician Ron Catterson (left) fits a young patient with eye glasses in the dispensary at Robert S. Gold, MD’s (right) office. Images: Gold RS

“In private practice opticals there is very little marketing, and the reason is because it is very hard and expensive to try to compete with the Lens Crafters and Pearle Visions of the world. They spend a lot of time marketing,” said Carolyn Salvato, director of optical consulting at BSM Consulting Group. “What you need to do is focus on capturing your own patients. We have found in the majority of cases that [external] marketing is not a good investment for most practices.”

Ms. Salvato, an optician for 26 years, has been consulting for optical shops for 11 years.

“The goal is capturing your own patients, and anything you get above that is gravy,” she said. “There are other consultants that disagree with me, but in all the years I’ve been doing this in ophthalmology I have not found that you can get a lot of walk-in business from marketing because it’s just easier to go to the mall.”

When a practice is interested in opening an optical shop business for the first time, Ms. Salvato suggests taking a look at what they might expect.

“The first thing we do is track the number of prescriptions that they actually write,” she said.

Typically the practice tracks those numbers over 2 months and then Ms. Salvato annualizes those numbers and develops projections based on the capture rate.

“You’re not going to capture 100% of the prescriptions written,” she said. “The benchmark for an ophthalmology practice for the percentage of prescriptions captured is 60%.”

Time for change

“Our optical wasn’t that profitable, and we decided we either had to increase it or look at shutting it down,” said Candace S. Simerson, president and chief operating officer of Minnesota Eye Consultants, which operates 10 optical shops.

In 2003 the practice took a look at the optical shop’s bottom line and decided that something had to be done.

“We saw our operating expenses should be about 35% to 40% of our budget, and we were at 44%,” Ms. Simerson said. “Our net income range should have been at 20% to 25%, and we were at 6%.”

It was a large undertaking for the optical shops, but Ms. Simerson said they were able to increase their bottom line and meet industry benchmarks within a year of making some adjustments to their overall operations.

They enlisted Ms. Salvato’s services to help transform their operations.

“The first thing we did was implement an inventory control system that was linked to our practice management software,” Ms. Simerson said. “It gave us real-time inventory rather than manual inventory.”

Minnesota Eye Consultants also made changes to its discounts, vendors, optician incentives, insurance contracts and staffing.

“We did get back to 20% net income by adjusting our operating expenses and cost of goods,” Ms. Simerson said.

Evaluating operations

“A doctor calls me and they have an optical shop that is not performing as expected,” Ms. Salvato said. “The first thing I do is look at the financials and see what their cost of goods are and how they are in line with the benchmarks and look at their payroll and inventory.”

Ms. Salvato investigates why an optical shop is not meeting its capture rate.

“Often I go into practices and the patient base is 65 and older, but the inventory selection is geared more toward the 25- to 40-year-olds,” she said. “I look at all the reasons why business is down or flat.”

There are a number of factors that might drag a shop down, she said. Perhaps costs may be too high, the practice is using the wrong labs, they are not taking advantages of discounts or their frame prices are not what they should be.

“Sometimes we try too hard to compete with the Wal-Marts and Costcos of the world and we can’t do it,” she said. “We don’t buy in their volume. We don’t buy the products they buy. I find frequently that we’re trying to undercut pricing to meet the low-end retailers and we’re not making any money.”

Ms. Salvato said doctors are often upset that they are not meeting industry benchmarks.

“When I do an assessment on your optical, obviously I’m going to look at your numbers and compare them to the benchmarks, but there are variables in every single practice that may or may not allow you to hit a specific benchmark.”

For instance, if an optical shop does not accept insurance plans for some reason, the insured patients are going to go elsewhere, she said.

“That’s a decision they have to make within the practice, and if they make that decision they have to consider that variable.”

Improving referral techniques

Too often doctors will examine a patient, write a prescription and send them on their way, Ms. Salvato said.

“I do a workshop with the technicians, and hopefully the physicians if we can get them there, on the retail environment,” she said. “I educate them on what is out there if the patient leaves the office with their prescription.”

Ms. Salvato said she then gives everyone a lesson in getting the patient to the optical shop following his or her examination.

“Once you get them in the optical, it’s the optician’s responsibility to capture that patient and sell them glasses,” she said. “But you should at least be sending them over there for educational information. Normally the percentage is much higher that if they go into the optical, they are going to buy.”

Dispensing not for everyone

Having an optical shop is not necessary for all practices, said H. Dwight Cavanagh, MD, PhD.

“It depends on your location and what kind of clientele you have in your practice,” Dr. Cavanagh said. “It’s not a novel idea anymore for ophthalmologists to have an optical arm. But what’s novel is whether or not any of them are profitable and do they justify themselves.”

In his experience, Dr. Cavanagh said he has seen a tremendous difference between optical shops at large metropolitan ophthalmology practices and ones in smaller communities.

“The impact of the chains is enormous in the cities and many patients, even the most complicated ones we have, try to go to the chains simply for price,” he said.

However, not all patients should go to larger retailers for their glasses, he said.

“The chains make things up to an accuracy of about 3%. For an ordinary prescription, it doesn’t matter and your brain won’t know the difference, but for a corneal transplant patient that could be up to four lines of vision on the chart,” he said. “It’s like running any storefront business. If you’re going to sell paperclips, you need to know what the market is.”

In our May 15 issue, Part 2 will focus on matching the patients’ needs with the appropriate products while keeping inventory under control.

For Your Information:

• Robert S. Gold, MD, can be reached at 225 W. State Road 434, Suite 111, Longwood, FL 32750; 407-767-6411; fax: 407-767-8160.
• Carolyn Salvato can be reached at BSM Consulting Group, 916 Southwood Blvd., Suite 2C, Incline Village, NV 89451; 775-832-0600; fax: 775-832-0664. Web site: www.bsmconsulting.com.
• Candace Simerson can be reached at Minnesota Eye Consultants, P.A., Park Avenue Medical Building, Suite 106, 710 East 24th St., Minneapolis, MN 55404; 612-813-3619; fax: 612-813-3663.
• H. Dwight Cavanagh, MD, PhD, can be reached at 5323 Harry Hines Blvd., Dallas, TX 75390; 214-648-8074; fax: 214-648-9061.

• Daniele Cruz is an OSN Staff Writer who covers all aspects of ophthalmology.