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Change is inevitable: Prepare for a challenging future in ophthalmology
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The future of ophthalmic care will be different from the current landscape, and those who cannot adapt to the medical and economic changes may have difficulty practicing in this new age.
Ophthalmologists will face significant challenges in the way they practice, the way they do business, and the way they treat patients. Certain megatrends are shaping the future of ophthalmology, and those who cannot position themselves well may find themselves struggling to keep up.
We recently put together a presentation on our thoughts on the future trends of ophthalmology for the Cataract Surgery: Telling It Like It Is meeting, and this likely validated the fears of ophthalmologists in all stages of their careers.
Fortune favors the prepared mind, and our goal is to open the minds of those who listened to us give this presentation. Neither of us liked all the projections that we made, and we do not advocate for everything discussed in the presentation. We simply want to give our listeners insights into the megatrends that we see.
Costs are rising
Health care, we believe, is a classic bubble market. It is growing, and by one estimate, 100% of the U.S. budget would go to health care in the year 2040 if no change in financial commitment occurs. Of course, 100% of the budget will never go to health care. It will not be allowed by our congressmen and senators.
The health care budget is attached to another bubble, the U.S. economy, and America is due for another recession. The so-called yield curve is about to invert, signaling a recession is on the way. Our country currently has less than 5% of the earth’s population but generates nearly 24% of the earth’s economy, which is why we have been able to afford the luxury of higher-priced health care. The rest of the world is catching up economically, and more competition is already coming America’s way.
Health care costs will have to be cut down from the current to 15% or less of the gross domestic product to be in line with other developed countries and what they pay for health care. This is a steep challenge, as we all know the demand for health care services is increasing year by year with an aging population.
This nexus between health care and the general economy was seen in the early 1990s when the country went through a moderate recession. Health care costs were 12% of the gross domestic product at that time and described then as being in a “crisis.” The country rushed to prepaid medicine and managed care programs, but when the economy rebounded, consumers rejected HMO care.
Be aware of recession signs
Ophthalmologists need to be aware of the natural ups and downs of the general economy. We believe the next recession will be a good excuse for the federal government to push closer toward a single-payer system, integrate the Department of Veterans Affairs into the system and institute “Medicare for All.” This sounds great, but it is not the Medicare we love and appreciate today. It is more likely to be “Medicare Advantage for All,” which will bring us right back to the HMO era of the early ’90s.
When will the next recession occur? Depending on the source, as early as 2020. Almost certainly by 2021. When the next recession occurs, higher unemployment rates will constrain the roles of well-insured patients, deductibles will rise, and the purchase of elective services will likely decrease.
For ophthalmologists who have just a few years left in their careers, we will not need to adjust as much as those who have decades of their careers ahead of them. It will be necessary for all of us, however, to learn how to see more patients with fewer resources than we ever have before.
For those with 20 or 30 years left in their careers, you can expect meaningful disruption regarding how you are reimbursed and the amount of reimbursement you will receive.
Consolidation is inevitable
You also need to realize that consolidation is not just coming to health care — it is already here, whether we like it or not. No longer is a small, private, independent practice an easy option in every market. Consolidated doctor groups are getting larger in response to rising costs and higher regulatory burdens. If practicing in a traditional, smaller-scaled private setting is important to you, seek out opportunities in secondary markets away from the over-doctored coastal populations centers. Such communities could be spared from the consolidation trend.
If you are going to practice in an urban area, we strongly suggest you look at joining a larger practice or grouping up with other practitioners. Larger eye clinics have increasingly dominated urban areas for a generation, and this trend will continue at the cost of smaller, more traditional operators.
Power is shifting
The control of patient care will continue to shift from physicians to non-physicians, including payers. The largest health care market consolidators in the country own not only hospitals and health systems. They are also payers who own and control patient premium dollars. They employ an increasing percentage of doctors and other caregivers. The former direct link between patient and provider is now crowded with numerous transaction intermediaries: federal and state authorities, corporate payers, amalgamating regional health systems and numerous vendors. Doctors are no longer in much control.
Electronic medical records, for all their promise of better patient care, may represent the leading edge of a much larger future power shift. We doctors put EMRs in place in our practices at great expense, but who will benefit the most from these? We believe they will chiefly benefit the third-party payers.
EMR systems will enable practitioners to be evaluated at a very granular level. “Preferred practice patterns” will eventually shift to “obliged practice patterns.”
The march to automation continues on many other fronts. Reception desk staff are being supplanted by patient portals and kiosks. Automated testing equipment will proliferate in the years ahead, and most patients will be making their own appointments online. Within the career spans of our youngest surgeon readers, automation and artificial intelligence will likely replace (or at least augment) many facets of medical decision-making. You many one day be supported by an algorithm extender that serves up a tentative diagnosis and treatment plan for your review and approval, allowing you to serve twice as many patients in a day.
Automation can increase efficiency and hopefully reduce costs overall if used correctly. But the move to automation and consolidation will continue to decrease personal care in ophthalmology. As practice sizes grow, patients will shift from being under the care of “Dr. Smith” to being under the care of the “Associated Eye Institute.”
Who is at the highest and lowest risk for these health care changes? We believe subspecialists are in the best position moving forward. They will be the ones who receive referrals from comprehensive ophthalmologists and optometrists, who both will be under the most pressure moving forward. Comprehensive ophthalmologists will begin to trend to cataract surgeon subspecialty care as they see mostly cataract surgery referrals.
Losing ophthalmologists
In recent years, the U.S. population has been growing at about the same pace that the number of ophthalmologists has been shrinking. Five hundred ophthalmologists retire each year, and we train about 450 new ophthalmologists each year, not all of whom work full time or even in the field at all after graduating. Every year moving forward we will lose ophthalmologists from the work force while the patient pool continues to age and grow.
The social dynamics of younger ophthalmologists are changing as well. They value balancing business and family life more than previous generations and work fewer hours. Younger residents manage their lifestyles very differently from ophthalmologists of the last few generations.
The 65 and older population will grow by 50% in the next 15 years. Seniors consume up to 10 times the eye care services of younger patients. With this increase in senior patients, ophthalmologists can count on as much as a 5% year-on-year rise in demand, with a less than 0% annual gain in eye surgeons on our current path.
Succession planning is harder in this climate for retiring ophthalmologists. Two decades ago, private practice owners had a pool of young successors willing to pay goodwill premiums to take over their practices. Now, when we tell young ophthalmologists how much it will cost to buy into a practice, they want nothing to do with it. This allows the opportunity for private equity sources to come in and buy practices and for consolidation to continue.
Economically, starting a private practice is much more expensive now than it has been ever before. Twenty years ago, a solo practice could be fully equipped for about $250,000. Now? A solo practice with contemporary equipment and furnishings will cost more than $500,000. With softening fees and rising technology, it could even take 75% or more of your annual cash flow to set up a new office. For example, a 65-year-old surgeon today who started his solo practice 30 years ago could open an office with about 6 months of profits. Now it would take about 24 months of profits to open an office.
Be ready to adapt
Additionally, the era of making a living as simply a refractive surgeon is quickly disappearing. The aging population is becoming more suitable for lens-based refractive surgery, so many high-volume, well-run LASIK-only centers will struggle if they do not adapt. Most refractive surgeons must now also be refractive cataract surgeons to remain relevant in practice.
You can have success in this changing landscape by evolving the way you practice medicine, run a clinic and modify expectations. The skill and career commitment to run even a small practice have grown rapidly. Fewer small practices can afford to hire the necessary administrative talent to ensure a smoothly run organization. This is one of the key drivers for the development of larger practices. Larger practices can afford to hire professional “CEOs” rather than “office managers,” who are increasingly out of their depth in running a successful medical practice today.
Ophthalmology has long been broadening toward “lust-to-dust” patient care. Integrated ophthalmology and optometry practices make both operational and financial good sense. The best compensated eye surgeons in America all work closely with optometrists in a traditional employment role or co-management relationship. Either approach allows better control over access to surgical cases, and the workday pivots to more high-value and high-satisfaction surgical care.
Rising costs and shrinking profits
Adding to the challenges ophthalmologists now face, fees are stagnant, or even decreasing, while practice costs are rising with inflation. This is causing practice cost drivers such as staffing, facilities and technology to climb sharply while profits shrink.
We need to be vigilant and carefully watch our costs. The largest single cost in practices large and small is staffing. The majority of practices evaluated by consulting firms are found to be overstaffed, typically resulting in a 5% or higher headwind on profits.
In addition to increasing costs, value-based health care reimbursement is challenging ophthalmology as well. Most eye care in America is now paid for on a fee-for-service basis, but based on the direction of the government and private payer planning, this could change. We will be monitored on value, and part of value is cost. This is the first year that cost is included in the Merit-based Incentive Payment System Quality Payment Program formulation, which decides how we are reimbursed. It will become important from here on out to focus on providing efficient, high-quality value-based health care.
The government wants us to make patients happy and provide quality care, and it wants it all at a low cost. That is what we must provide as best as we can, or we will be left behind.
How can we survive in this challenging climate? Premium and custom services are a huge opportunity for us all. The typical surgeon is now implanting about 15% of cataract patients with premium IOLs, including toric lenses. Eyeglasses, refractive corneal surgery, refractive cataract surgery, contact lenses and oculoplastics are all premium services we can focus on.
The femtosecond laser may have a larger role moving forward, but we are not great advocates at present. We do see a future for mechanized improvement of some of the procedures we do, such as a capsulorrhexis, but we have not been convinced that femtosecond laser provides it. In the current marketplace, femtosecond laser cataract surgery is unlikely to become the standard of care in the way that phacoemulsification replaced extracapsular cataract surgery unless the pricing is greatly reduced.
Despite the changes and challenges, patient expectations will continue to be as high as ever. As baby boomers age and increasingly populate your clinics, their expectations for high-quality service at low prices will be a growing fact of your practice life. They will expect modern facilities, quick service and one-stop cures, all at a time when you, as an owner, will be trying to manage costs.
Evaluate everything
Everything needs to be re-evaluated in the face of softening profit margins. Overhead in most clinics is now well above 60%, and the best way to lower your overhead is to put more patients through your expensive infrastructure per unit time. You need to be efficient and willing to work more intensely (or a few extra hours per month). Seeing just three extra patients per clinic day will generate $100,000 in added profits per year in the typical eye surgeon’s practice.
We can also no longer engage in “catch and release” care with patients. We cannot see patients on referral, perform their cataract surgery and then send them on their way to have everything else cared for somewhere else. We must shift more to “catch and capture,” in which a patient comes to us, and through excellent care and caring, we retain that patient in the practice for all of their future ophthalmic needs unless referred by another eye care provider.
One way or another, we must use our physician extenders, including optometrists, physicians assistants, technicians, orthoptists and opticians, to help take care of patients through their entire arc of treatment. A new patient may only need something simple now, but as they age, they will need cataract surgery, they will need glaucoma treatment, and we want them to get it through our clinics. If they come to us at a young age, why wouldn’t we treat them for the rest of their lives? Why would we send them elsewhere?
In many practice settings, the days of referring new word-of-mouth patients out to optometrists are gone. By employing optometrists, such practices continue to care for a wider variety of patient needs under one roof.
Longer careers
The ophthalmic landscape is changing, and so are our careers and financial plans. Retirement may have to wait. We may have to work longer than we initially planned. The typical surgeon we know retires today at about 67. Younger ophthalmologists, instead of planning to retire at 65, may now have to retire at 70 and even later.
Older surgeons have seen their retirement plans sink and rebound several times over the course of the last three decades. There is no longer a perceived certainty of “market rates of return,” and tough decisions on whether profits should be reinvested back into their practices or used to replenish retirement savings must be made.
The younger ophthalmologists who are just beginning their careers will find themselves navigating through three or four more recessions. Younger surgeons need an early start at saving for retirement. These surgeons will have to save a higher percentage of their income for retirement, while their investment returns will be smaller and inflation will rise. Learning how to recognize the signs of a recession and planning your investments properly with the right financial adviser will help you succeed.
Change is universal, but with change also comes opportunity. You can position yourself to survive, even thrive, in this challenging health care environment. Thankfully, there is no such thing as a robot eye surgeon (yet). America will always need ophthalmic care. There are about 650 million eyeballs in America and, for the next generation of surgeons, an unrelenting market demand to see clearly.
- Reference:
- Lindstrom RL, et al. Do you see what I see? Presented at: Cataract Surgery: Telling It Like It Is; February 6-10, 2019; Orlando.
- For more information:
- Richard L. Lindstrom, MD, can be reached at Minnesota Eye Consultants, 9801 Dupont Ave. S., Suite 200, Bloomington, MN 55431-3200; email: rllindstrom@mneye.com.
- John B. Pinto can be reached at J. Pinto & Associates, 1021 Scott St., Suite 356, San Diego, CA 92106; email: pintoinc@aol.com.
Disclosures: Lindstrom reports he is on the board of directors and is an equity owner with Minnesota Eye Consultants and Unifeye Vision Partners. Pinto reports he is the president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm.
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