Protect your practice from economic downturn spurred by drop in LASIK

Some practices have seen a demand for refractive IOLs offset the losses of fewer LASIK procedures.

	OSN Chief Medical Editor Richard L. Lindstrom, MD, said he believes diversified practices are best equipped to weather the economic downturn. Image: Lindstrom RL

The current economic downturn has sent ripples throughout many industries, including laser refractive surgery. Refractive surgeons have reported reductions in LASIK case volumes of up to 60% in 2008 compared with last year. Some device manufacturers have reported softening sales resulting from the slumping demand for LASIK.

However, some practices have seen steady or growing demand for refractive IOLs, which can offset LASIK losses.

And as the refractive industry weathers the current, likely protracted economic storm, there may be changes on the horizon: The growing demand for ophthalmic services among aging baby boomers may outpace the number of active surgeons available to provide those services. This could be good news for ophthalmologists in the coming decades.

Earlier in the year, rising fuel and food prices and a slumping real estate market diminished consumer confidence, a key economic indicator at the root of the LASIK downturn, John B. Pinto, OSN Practice Management Section Editor, said in a telephone interview with Ocular Surgery News.

“When consumer confidence rankings eventually turn the corner just a little bit, prospective LASIK patients will resurface,” Mr. Pinto said. “However, the progressively dark national and international economic news in recent weeks probably means that an uptick in case volumes is at least a year off, and perhaps much longer.”

David Harmon

David Harmon, president of Market Scope and an ophthalmic industry analyst, also said consumer confidence has been a significant driving force.

“Demand for laser vision correction is highly correlated to economic conditions and particularly consumer confidence,” Mr. Harmon told OSN via e-mail. “Increasing costs for gasoline and food, along with higher than normal unemployment rates, have led many prospective LASIK patients to postpone treatment. Once economic conditions improve, we expect to see volumes return to their previous levels.”

Lagging confidence is leading consumers to postpone LASIK, not reject it, Richard L. Lindstrom, MD, OSN Chief Medical Editor, said in a telephone interview.

“Patients aren’t saying that they’re not going to have LASIK,” Dr. Lindstrom said. “What they’re saying is that they’re delaying LASIK until they’re more confident in their own economic futures. … Basically, everyone has a bit of a hunker-down personality.”

Recent focus groups attributed 95% of the LASIK downturn to economics and 5% to concerns about patient satisfaction after LASIK, he said.

Shifting trends

LCA Vision recently alerted its investors that procedure volumes declined 52% during the third quarter, and Advanced Medical Optics reported that its U.S. excimer laser volumes declined 37% in the same period. Mr. Harmon has not completed his revised forecast for the year, but he expects to reduce his previous forecast significantly for the balance of the year and does not expect any material market recovery until late 2009 at the earliest.

John B. Pinto

Meanwhile, Mr. Pinto has noted wide-ranging decreases in LASIK case volumes.

“I’m seeing in clients anything from about a 4% or 5% drawback all the way up to a 60% drop in leads, consults and cases for refractive surgery,” Mr. Pinto said.

Dr. Lindstrom said a downturn in refractive surgery in his practice, Minnesota Eye Consultants, has been offset by a 27% increase in premium IOL surgery. In addition, his practice has experienced an 18% rise in cataract surgery and a 20% rise in glaucoma procedures.

Refractive surgery cases have experienced a 21% decline in his practice, but Dr. Lindstrom said there has been only a 5% drop in refractive revenues because of a transition to custom LASIK and femtosecond laser-assisted procedures.

Overall practice revenues have been up 10% because of healthy primary care volumes and demand for cataract surgery, glaucoma surgery and premium IOLs.

“On the refractive side, the revenue per case is higher, so that sort of serves as a buffer a little bit and has made it less painful in the dollars and cents situation for those centers that have upgraded their offering to IntraLase LASIK (Advanced Medical Optics), allowing in almost all cases increased fees per case,” Dr. Lindstrom said.

Laurie K. Brown

Laurie K. Brown, COMT, COE, OCS, the practice administrator at Drs. Fine, Hoffman and Packer in Eugene, Ore., said that LASIK and the use of the Visian Implantable Collamer Lens (STAAR Surgical) have increased 12% over last year in her practice, while refractive lens exchange (RLE) numbers have remained stable.

“Refractive lens exchange has always been a significant part of our practice and it remains steady, and for the last few years it has actually been the part of our refractive surgery business that was growing the most,” Ms. Brown told OSN. “Although now, over the last year or so, it’s about the same.”

Presbyopia-correcting IOLs have been a mainstay for several years, Ms. Brown said.

“We’ve been involved with presbyopia-correcting [IOLs] for so long through studies that it’s always been a pretty smooth transition for us, with our established patient education process, to incorporate new ones into our armamentarium as they’re approved,” she said.

Stephen E. Pascucci

Stephen E. Pascucci, MD, the medical director of Eye Consultants of Bonita Springs in Bonita Springs, Fla., noted that LASIK procedures in his office are down 5% to 10% in 2008 compared with 2007. He attributed this to the economy’s overall impact on typical LASIK patients, who are relatively young and generally have less discretionary income than older patients.

“Those people don’t have the bread to spend on elective surgery,” Dr. Pascucci said. “They’re trying to pay their mortgage.”

Dr. Pascucci said the stable IOL market has been a mitigating factor.

“[The one thing] I have seen year over year is that our percentage of premium intraocular lens choices for patients hasn’t declined,” he said. “The economy has not hit this group of people as much as it has hit the LASIK population, which is younger and less financially secure.”

Dr. Pascucci said his practice has experienced an 80% conversion rate for premium IOLs, which involves translating inquiring telephone calls from prospective patients into actual procedures.

“My conversion rate this year is as robust as it was last year,” he said. “If anything, we are probably running a higher conversion rate because we are more secure with these lenses and they’re becoming more well-known to the public.”

Dr. Pascucci said that RLE rates are low in his practice but may increase among presbyopic patients who do not yet need cataract surgery.

Diversity and efficiency

If success in real estate hinges on location, the key for refractive surgeons may be diversity.

“We’re not suffering, and I think the typical diversified practice is not suffering,” Dr. Lindstrom said. “The individual practice that would be suffering is the practice that offers only laser refractive surgery.”

He said diversification benefits the overall refractive industry, not just individual practices.

“The good news for most of our major companies is that they’re also well-diversified,” Dr. Lindstrom said. “By and large, the companies’ cataract, surgical and pharmaceutical offerings offset declines in refractive sales.”

Mr. Pinto also said that it is important to encourage diversity in practices.

“One of the things that I’ve always preached to clients who have thought about getting into purely elective refractive or purely elective plastics is to make sure that they’re balancing their portfolio of services so that they’re hedged during a more robust downturn, such as the one we’re in the midst of right now,” he said.

Cataract surgeons who do refractive surgery tend to perform well with RLE, Mr. Pinto said.

“Keep in mind that quite often the most aggressive and clinically vanguard doctors have a high LASIK population from which to select out RLE patients,” he said. “It all kind of works together.”

A cataract surgeon who is not doing refractive surgery will likely have a low rate of custom IOL insertions, while a cataract surgeon who also does LASIK surgery among his senior patients may have a much higher rate of IOL use, Mr. Pinto said.

“The average successful doctor needs to do more of everything that they did to achieve success in the past,” he said. “It’s more and better marketing, more and better recall, better customer service and better outreach to referral sources.”

Mr. Pinto said economic situations such as this current one can cause “creative destruction,” a winnowing process that rewards hard work and creativity.

“What happens is when the marketplace gets tough, the more creative, innovative, hard-working players in the marketplace can actually thrive while those who are less innovative or less energetic will find their fortunes slipping backward,” he said.

Ms. Brown said that her practice has traditionally embraced emerging IOL technologies such as the Visian ICL to stay ahead of the curve in offering new options for patients. She agreed that diversity in products and services is critical to long-term success.

“We’re in a practice that’s working hard to be diversified and not have all our eggs in one basket,” she said. “I think that we have good systems in place, and we’re always looking at how we can improve and add value, offer what’s best for the patient.”

Ms. Brown advised practices to incorporate new technology and use it to their advantage.

“You can’t be asleep at the wheel out there,” she said. “Keep trying to do the things you’ve always done to maintain a high standard and educate the patients as to what’s available and offer the most advantageous technology. … You have to look at the different options available to you to make it most cost-effective for you to be able to offer new technology.”

Prospects for recovery

Mr. Pinto predicted that the economy will rebound somewhat more slowly and gradually than in past recessions.

“The return from this contraction is going to be longer standing because we have kind of a perfect storm effect. This is decidedly not a recession along the lines of recent dips in the business cycle, nor is it the beginning of a second Great Depression,” he said.

A national economic recovery discernable to the typical practice as a rise in elective services will hopefully begin within the next 18 months, Mr. Pinto said.

“This current contraction may end up being shorter than that and more of a V-shaped bounce. But the consensus of leading economists is that this one is going to be a little more U-shaped and hopefully not L-shaped,” he said.

On the upside, Mr. Pinto said that the demand for ophthalmic services is rising about 5% annually due to the rising senior population while the provider base is expanding by only about 1%, creating a shortage of available surgeons. That trend may yield a windfall for practicing ophthalmologists in the coming decades.

“That obviously is the lovely silver lining in all of this,” he said. “This is not a new car. This is not the addition of a family room or a restaurant meal out. With the aging population, the demand for our services is going up faster than the ophthalmologic capacity to serve them.”

Dr. Pascucci said the difficulty is foretelling when an economic recovery will begin.

“We all know that one day things will be better again, but you just don’t know if that’s going to be a month, a year or 2 years from now,” he said. “So it’s very hard to plan, to hire new people, to acquire capital equipment. … I think practices are in a day-to-day type of situation, particularly the elective ones.”

An economic recovery will likely depend on a rebound in the real estate market.

“I don’t think we’re going to see a change until real estate rebounds because I think a lot of things that drove our economy were real estate-based,” Dr. Pascucci said.

“People were richer on paper, and it made them feel richer and they did a lot of things, whether it was the equity that had built up in their home to buy a car, to have surgery, to do this, do that,” he added.

Economic recovery in ophthalmology will also hinge on procedures typically geared toward baby boomers, such as cosmetic surgery and lenses. LASIK will take longer to recover, Dr. Pascucci said.

“There’s going to be a lag on the LASIK side of the equation because that group isn’t as financially secure and that group is going to take longer to rebound,” he said. – by Matt Hasson

Can ophthalmic practices improve efficiency and boost revenues through co-management or diversification?

• Laurie K. Brown, COMT, COE, OCS, can be reached at Drs. Fine, Hoffman & Packer, 1550 Oak St., Suite 5, Eugene, OR 96401; 541-687-2110; fax: 541-484-3883; e-mail: lkbrown@finemd.com.
• David Harmon can be reached at Market Scope, 13610 Barrett Drive, Suite 111, Manchester, MO 63021; 314-835-0600, ext. 112; fax: 314-835-0606; e-mail: daveharmon@market-scope.com.
• Richard L. Lindstrom, MD, can be reached at Minnesota Eye Consultants, 9801 DuPont Ave. S, Suite 200, Bloomington, MN 55431; 952-888-5800; fax: 952-567-6182; e-mail: rllindstrom@mneye.com.
• Stephen E. Pascucci, MD, can be reached at Eye Consultants of Bonita Springs, 23451 Walden Center Drive, Bonita Springs, FL 34135; 239-949-2021; e-mail: sep@bonitaeye.com.
• John B. Pinto can be reached at 619-223-2233; e-mail: pintoinc@aol.com; Web site: www.pintoinc.com.