Refractive surgeons debate making ‘cents’ of LASIK

Economic recession, dwindling surgery volume, greater scrutiny of advertising and comanagement relationships — can refractive surgeons thrive in these troubled times?

NEW ORLEANS — The health of the refractive surgery market was on the minds of many at the American Academy of Ophthalmology (AAO) meeting here. Many practices invested heavily in refractive surgery in recent years as an answer to declining Medicare payments. As the effects of the current economic recession, the dip in refractive surgical volume and the rise in consumer caution after Sept. 11 converge, many surgeons are wondering if that excimer laser is going to pay for itself.

A symposium at the AAO meeting addressed some of these issues. “Making cents of LASIK in a new century of change,” a combined meeting with the International Society of Refractive Surgery, presented a series of debates on the economic issues of refractive surgery.

Co-chairing the symposium, Ronald Krueger, MD, introduced it with a brief statement.

“As we step up to the new century, we will face economic, management, marketing and technological changes in ophthalmology and especially refractive surgery,” Dr. Krueger said. “Refractive surgery has grown almost overnight into a major subspecialty area in ophthalmology, and as we begin the next century LASIK is a dominant procedure not only in refractive surgery but in all of ophthalmology.”

Dr. Krueger introduced the format for the symposium, in which presenters would discuss the merits and pitfalls of LASIK pricing strategies, marketing and comanagement arrangements.

The case for premium pricing

Daniel S. Durrie, MD, spoke in favor of premium pricing for LASIK. He referred to a Goldman Sachs survey, released in October 2001, which polled nearly 2,000 refractive surgeons.

He said the results showed higher volume surgeons generally charged a higher price for LASIK, usually between $1,500 and $2,000 per eye.

When the survey asked what surgeons expected regarding pricing in the future, there was less expectation that the procedure price would go down and more expectation for the price to go up, especially among higher volume surgeons.

“So I think, with today’s economics, we need to ask how much should we charge, what really are your expenses, what is my return on investment? Because we need to stay in business to help our patients,” Dr. Durrie said.

He then ran through an exercise comparing the costs of cataract surgery to LASIK, assuming an $1,800 fee for LASIK and a $1,700 fee for cataract surgery. (See table below.)

“At first you’d say, ‘Well, I don’t get $1,700 for a cataract because you’ve got to take the facility fee out.’ So basically, the surgeon is left with more after the surgery center takes its cut. But if you co-manage LASIK patients, you’ve got to include the discount you’re taking on that basis. You have to market to bring LASIK patients in, which you don’t have to do for cataract surgery. And also, do you give your staff discounts and your optometrists discounts for cataract surgery? You have to take those costs into consideration when you do these types of surgeries.

“Also, you have enhancements that aren’t reimbursed being included. At this point, you could say, ‘Well, $500, that’s still pretty good compared to my cataract surgery.’ The problem is, for the cataract surgeon, after 3 months, they’re charging the patients for follow-ups. I’d say the LASIK postop period is 12 months, but I certainly follow a lot of my patients even longer than that. And then you have to consider enhancements. If you do a YAG capsulotomy, even exchanging an IOL or a wound revision, you’re charging for that in cataract surgery, but with refractive surgery all subsequent surgical revision comes out of the initial fee. And you don’t have to spend an awful lot of time going to meetings and night seminars and training your staff for cataract surgery, but you do for LASIK and other new refractive procedures,” Dr. Durrie continued.

He pointed out that the $500 left after all these considerations is gross income, not net. The average cataract surgeon has a 60% overhead in ophthalmology, he said, which brings the revenue for cataract surgery down to $200. “But the average refractive surgeon has a 75% overhead, according to the surveys. And so with LASIK, that’s $125, even with an $1,800 charge,” Dr. Durrie said.

He went further and showed how the $125 net from a LASIK surgery translates into take-home pay.

“Say you took 6 weeks for time off, holidays, a couple of weeks to go on vacations. You operate 41 weeks a year. You’d have to do 59 cases per week in order to make a decent income. So a lot of people that are rushing to this procedure have found out that discounts can’t work, and even at a premium price you have to do very well.”

In defense of discount

Speaking in defense of lower premium cost LASIK, Dan Z. Reinstein, MD, MA(Cantab), FRCSC, replied to Dr. Durrie after his presentation.

“I was delighted to hear what you had to say, because I think we agree wholeheartedly,” he said. “Actually, the content of my talk is precisely the same as yours. A price of $1,700 found in the Goldman & Sachs survey is in fact lower than premium, so I just think that we’re on a definitions issue here.”

Dr. Reinstein said he is still a proponent of less than premium LASIK. He commented that he was well aware of the economics of LASIK, particularly because he successfully helped to establish the high-quality clinical practices at the now-bankrupt LASIK Vision chain of laser refractive surgery centers.

“Their expansion strategy, as many of you know, was one of direct marketing and extreme low pricing, which produced very high volumes of surgery. Many of you who know me know that I accepted the job with the best of intentions as a physician to help them create a multiclinic refractive surgical system with standard operating procedures, based on the highest possible standard of care. I was responsible for building and setting up what I believe was the LASIK industry’s first multiclinic quality control and active surveillance system to ensure that those clinical goals were being met — and as many of you know, they were.”

Dr. Reinstein pointed out that he had no intention of arguing whether quality of care is correlated to the price of LASIK, but rather to examine the business success of the LASIK Vision model in the context of pricing. “And we all know that that company failed to produce a viable business,” he said.

Dr. Reinstein defined his terminology. For premium pricing he quoted the dictionary difinition as “higher than normal” pricing. Defining ophthalmology, he distinguished four major participants: the “branch of medicine,” “ophthalmologists (and optometrists),” “patients receiving eye care” and the “industry of companies providing technology.”

Dr. Reinstein said that to a certain extent, refractive surgical volume increases in a price-dependent way. He said pricing and volume issues affect ophthalmologists. “If volumes are higher, ophthalmologists get better at doing LASIK, and this benefits patients, as well as the branch of medicine,” he said.

If the price ophthalmologists are charging for LASIK is too low, he said, industry may be pressured to reduce costs, and that could reduce budget items such as research and development.

“On the other hand, if LASIK pricing is too high, it will not be best for the health of ophthalmology either,” he said. “Lower volumes will affect surgeon skills, as well as industry who rely on annuities for their products, e.g. keratome blades. Industry actually needs the price of LASIK to be sort of in the middle, not at the top and not at the bottom.”

Pro marketing and comanagement

As though LASIK pricing issues are not controversial enough, the symposium then moved on to discussion of how to market and comanage a LASIK office.

Jeffrey Robin, MD, had the unenviable task of showing the need for marketing and comanagement in a refractive surgical practice.

“The traditional reaction to medical marketing is usually quite negative, in spite of the fact that all of us, in one form or another, market,” Dr. Robin said. “Marketing is a complex process that is critical to the success of any organization. Why is it done? To educate, particularly on a new product or service; to inform about availability, experience, results, price and value; to communicate; to advocate; to encourage a particular behavior. It truly is the cornerstone of building and maintaining a business.”

Dr. Robin explained that marketing does not equate to advertising. He said marketing involves defining a message and communicating that message internally in your business, and then communicating externally by a variety of factors — interaction with customers, public relations, and, yes, advertising.

“Is marketing inherently evil? Absolutely not. Well done, it communicates a variety of important concepts, it educates and informs an increasingly sophisticated consumer-oriented public that wants to participate in the decisions that affect their lives, and it helps differentiate us from competition,” Dr. Robin said.

Refractive surgery marketing is unique in ophthalmology, Dr. Robin said, because it is an elective procedure, with the great proportion of LASIK marketing done direct-to-consumer.

“The rapid expansion of LASIK surgery has caused a tremendous need for patient education and information,” Dr. Robin said. “One of the interesting and important ways is via the Internet. There are literally thousands of LASIK Web sites. They give extremely detailed information about the surgeon, the center, description of eye anatomy, refractive conditions, procedures, technologies, side effects, patient experience and even statistical presentation of results.”

Dr. Robin said that in its many forms, marketing has enabled LASIK patients to be better informed and educated than perhaps any other patient category.

“So why are we debating this issue? Obviously if you subscribe to the ‘best offense is a good defense’ philosophy, we know LASIK is taking a pummeling in the public media and public image. But is that because of widespread marketing? No. It’s because of increasing recognition and reporting of complications.”

No doubt, Dr. Robin said, in some cases there is inaccurate, questionable or dishonest advertising in relation to LASIK. But he said procedures are in motion to deal with this issue. He noted that the Federal Trade Commission (FTC) has asked the AAO, ISRS and the American Society of Cataract and Refractive Surgery to help the commission address inaccurate and unethical marketing in refractive surgery.

“Marketing has played a critical role in the evolution of LASIK today. LASIK’s image problems are the result of a recognition of complications, a wildly confusing marketplace and aggressive sales tactics. Done accurately and honestly, widespread marketing will continue to inform and educate prospective LASIK patients and will thus continue to be a critical component of the public’s image of the procedure.

“The public image of LASIK is ultimately dependent on the message, not on the messenger or how widespread the message is delivered,” Dr. Robin said.

With regard to comanagement, Dr. Robin pointed out that it has been practiced for nearly a generation in a variety of ophthalmic procedures and is legal under federal guidelines and in all 50 states today.

“It is particularly widespread in LASIK. Perhaps up to 30% or 33% of patients are comanaged, particularly with optometrists,” Dr. Robin said. “This is not surprising because refractive error correction is a primary focus of optometric practices. It’s been estimated that up to three-fourths of prospective LASIK patients are under the care of optometrists.”

Con marketing and comanagement

Terrence P. O’Brien, MD, took the opposite viewpoints on marketing and comanagement in his presentation.

“Widespread marketing and comanagement will damage the public perception of LASIK,” he said. “There has been an enormous amount of direct-to-consumer marketing of the LASIK procedure, and this has created some challenges for all refractive surgeons by elevating patient expectations to unrealistic levels. The success of LASIK as a medical procedure is obvious. But let’s realize that LASIK also has become a retail medical service. It’s not medically necessary in most cases. It’s an elective procedure, paid for by discretionary in come, often in younger patients.”

Dr. O’Brien said he believes that the recent flattening of the growth curve of refractive surgery procedure volume can be attributed, in part, to widespread marketing and excessive promotion as well as negative publicity surrounding rare complications.

With regard to comanagement, Dr. O’Brien warned that the patient has to agree with the plans for care in advance, and there must be proper disclosure of any financial arrangements. It is best if the patient reimburses the comanaging doctor directly, he said.

“We have to be careful that sometimes improper statements are made by comanaging individuals, such as ‘The surgeons are board-certified refractive specialists,’ or ‘The surgeon won’t need to see you after the surgery,’ or that the surgeon has either invented LASIK or is the best LASIK surgeon in the country,” he said.

In addition, he pointed out that comanaging optometrists may not have the necessary pharmacologic knowledge or appropriate mal practice coverage with sufficient limits. He said ophthalmologists have sometimes found themselves as the “deep pockets” when malpractice claims have been made.

“Realize that one comanaging partner may be held accountable for the false claims of another and that the patient perceives the comanagement team as one group,” he said.

Moving on to marketing and advertising, Dr. O’Brien showed the audience an over-the-top advertisement that appeared in the Baltimore Sun. He noted the steady increase in print, radio and other advertising for refractive surgery procedures.

“We have also seen LASIK surgery ‘for free’ advertised with a big asterisk and lots of fine print,” Dr. O’Brien said. “We’ve seen advertisements that maybe don’t make ophthalmology look as good as we might ordinarily for an excellent medical procedure. And we’ve even seen the LASIK procedure moved into unconventional medical delivery locations, such as the shopping mall. This is a negative trend that hurts ophthalmology in general, and something that hopefully will go away.”

Dr. O’Brien said that while the FTC does monitor the marketing of LASIK, ads are still not always substantiated by facts and sometimes imply a guarantee.

Marketing and advertising need to be accurate and not deceptive, Dr. O’Brien said. “They shouldn’t be overly sensational or overreaching. And they should follow the guidelines of both the FTC and the Food and Drug Administration. Full disclosures should be made where appropriate,” he said.

“Physicians need to take a leadership role, both legally, professionally and personally,” in ensuring the accuracy of their advertising, he said.

Recent high penalties from malpractice verdicts that occurred as a result of excessive promotion and marketing should be a warning to surgeons, Dr. O’Brien said.

“I think we’re going to see, as a result of this excessively promotional marketing, an increase in malpractice cases surrounding LASIK. Physicians must meet the appropriate guidelines for LASIK. We have to have informed consent, and always the patient’s best interests must be central. It’s not that easy in some cases before we pick up the microkeratome or the excimer laser. I would submit to you that widespread marketing and comanagement not only will, but has already, damaged the public perception of LASIK.”

For Your Information:

• Daniel S. Durrie, MD, can be reached at 5520 College Blvd., Overland Park, KS 66211; (913) 491-3737; fax: (913) 491-9650. Dr. Durrie has no direct financial interest in the products mentioned in this article, nor is he a paid consultant for any companies mentioned.
• Dan Reinstein, MD can be reached at 42 Molyneux St., London W1H 5JA, England; (44) 20-7724-5061; fax: (44) 20-7681-1233. Dr. Reinstein has no direct financial interest in the products mentioned in this article, nor is he a paid consultant for any companies mentioned.
• Jeffrey Robin, MD, can be reached at 1180 Spring Centre South #116, Altamonte Springs, FL 32714; (407) 571-1033; fax: (407) 540-9333. Dr. Robin has no direct financial interest in the products mentioned in this article, nor is he a paid consultant for any companies mentioned.
• Terrence P. O’Brien, MD, can be reached at 10753 Falls Road, Pavilion 2, Suite 305, Lutherville, MD 21093; (410) 847-3510; fax: (410) 847-3519. Dr. O’Brien has no direct financial interest in the products mentioned in this article, nor is he a paid consultant for any companies mentioned.