LASIK pricing: looking into the crystal ball with a group of experts

Issue: November 2000

ByHoward Gottlieb, OD

For practitioners involved in laser in situ keratomileusis (LASIK) and other refractive procedures, these are indeed exciting times. “Laser fever” is driving patients to their practices in droves. Patients are pleased with their procedures and are referring others for surgery. Optometrists are enjoying comanaging these cases. So why aren’t all eye care practitioners happy?

The unhappiness stems from increased competition within the LASIK market and the creation of a two-tier pricing structure. Increased LASIK competition that prices procedures at the lower end of the spectrum has placed increased pressure on surgeons and centers charging higher prices. The lower-priced competition is making it tough for practitioners to predict where the market will go and, more importantly, how they should proceed with their business plans.

Swinging markets and prices

To help readers through these unsettling times, I spoke with a panel of refractive surgeons — who perform a high volume of procedures — about their pricing strategies. Surprisingly, the physicians I spoke with confirmed an average price of $5,000 per bilateral procedure. More importantly, these individuals predicted that their pricing in 2001 would be the same or higher.

Without question, these ophthalmologists are appealing to a segment of the market that is willing to pay a fee to go to “their” doctor, and, in that decision, price may not be a factor. In truth, however, a growing number of patients perceive that the lower-priced LASIK centers can provide a satisfactory outcome.

How are the lower priced LASIK operations affecting eye care practices around the country? Here are some examples:

An MD about 50 miles north of the central California-Mexico border reports that patients are obtaining bilateral procedures in Mexico for $1,200 to $1,500;
MDs in Buffalo are finding it difficult to compete against surgeons in Canada who are under-pricing procedures by $1,500 or more; and
In the Midwest market, a surgical group catering to affluent patients saw its refractive business plummet more than 65% when low-cost refractive centers sprung up in its market.

Knowing all this, it is easy to understand why an increasing number of providers feel the need to lower their prices. Unlike medical and surgical procedures that are driven by necessity, the LASIK market is driven by healthy consumers. And it does not take a marketing expert to tell practitioners that patients as consumers can be fickle and price-conscious.

Reap while you can

I recently spoke with a group of distinguished refractive surgeons, who confirmed my suspicions on the two-tier pricing structure permeating the LASIK market.

Kansas City, Mo.-based Daniel S. Durrie, MD, is affiliated with a large, 16-MD, 10-OD practice that performs about 7,000 LASIK procedures per year. He has focused exclusively on cornea-related procedures since 1990. Anthony J. Kameen, MD, with offices in the Baltimore-Annapolis service area since 1986, has converted his practice from general to “all refractive surgery” over the past 4 years. He performs about 4,000 procedures per year. For more than 6 years, John A. Lucca, MD, has been the sole refractive surgeon in a two-MD, two-OD practice in the New York/New Jersey metro marketplace, performing about 2,000 procedures annually. Located in the heart of Silicon Valley, Edward E. Manche, MD, is director of cornea and refractive surgery at Stanford University, where he performs about 5,000 to 6,000 procedures per year. Jacksonville, Fla.-based Robert I. Schnipper, MD, began performing refractive surgery in the late 1970s, and does approximately 1,700 procedures annually. Steven Siepser, MD, splits his time between the Wills Eye Hospital, as a clinical assistant, and private practice in the Philadelphia metro area, where he performs about 1,600 LASIK surgeries per year.

I asked the surgeons to provide their viewpoints on the business of LASIK and its future.

Howard Gottlieb, OD: How does LASIK fit into your practice’s business model?

Daniel S. Durrie, MD: In our practice, we made the decision that refractive surgery is not just for the corneal specialist to perform but for 10 out of our 16 physicians to perform, as well. Our oculoplastic surgeon does LASIK. Our glaucoma surgeon does LASIK, and many of our cataract surgeons do cataracts and LASIK as primary portions of their practice. As a result, LASIK has become a strong growth area for us, even though I had been the only one doing refractive surgery for the first 5 or 6 years. But as we have gotten more people involved in the practice, there has been more support for growth from the surgeons.

John A. Lucca, MD: I have limited my practice to refractive surgery, so the only other thing that I do is cataract surgery on patients referred by doctors that refer refractive into the practice.

Edward E. Manche, MD: I have been at Stanford for 4 years and my practice is devoted exclusively to refractive surgery and cornea. I do approximately 99% refractive surgery and 1% cornea. We are in the middle of Silicon Valley. It is a major metropolitan market for young, highly successful high-tech individuals.

Robert I. Schnipper, MD: I have been in Jacksonville since 1972 and have been doing refractive surgery since 1979 or 1980, starting LASIK in 1996. My practice is about 50% cataract surgery and 50% LASIK. I work with two optometrists and we run a surgery center that is used by 12 outside ophthalmologists. Jacksonville has a metropolitan area of about 1 million, so it is quite urban.

Steven Siepser, MD: My practice (consisting of myself as operating surgeon, two other MDs, a fellow and an optometrist) operates three locations for laser vision correction in the suburbs of Philadelphia. In Philadelphia, laser vision correction is in its earliest stages. Since 1992, I have been using a Visx laser at Wills Eye Hospital. I now operate at two TLC centers. This is in addition to my 1,000 intraocular cases done in the Wills Eye system.

Anthony J. Kameen, MD: Having jumped into LASIK — with both feet — in the mid-1990s, I served in an open access agreement with LCA Vision until last year. I subsequently partnered with TLC and became its regional medical director for the Baltimore/Annapolis service area. I am now co-invested and co-owned in the company.

Dr. Gottlieb: Where do you think pricing and the market are going?

Dr. Durrie: There will be a lot of division in this market. There are people who will never have LASIK at $2,500 per eye, so a portion of the market will respond to a lower price. I think there will be lower priced providers in each of our markets. We have competition that takes that side of it today and we compete very effectively at this higher level. In many areas where that has already happened, it has expanded and not cannibalized the market.

I believe there will be surgeons who will stay at the higher end. They will stay with the newest laser every year, the newest technology and custom cornea — and all the things that ophthalmologists need to invest in to stay at that higher price in the market. Physicians cannot provide those things and be at the discount part of the market. And I believe patients — there are a lot of them — will continue to seek the upper level, as well. Consequently, I believe we will see price differentiation within each of the markets according to reputation and service.

Dr. Lucca: I agree with Dr. Durrie. I really want to try to maintain my price point and stress quality, similar to the plastic surgery market. But I definitely see downward pressure and average fees just starting to drop a little bit in the New York market. I see a two-tier market, and perhaps a multi-tier market as it shakes out. However, I would really like to hold my present price.

Dr. Manche: I also agree with Dr. Durrie. I will keep my price at $5,000. My market is somewhat unique in that pricing will not be an issue. Most of the people in the Silicon Valley are just looking for the highest quality surgeon with the best experience they can get. I do believe, however, that the market will become segmented into at least two tiers. There will be the low end — the Wal-Mart or McDonald’s of LASIK — and high-end providers. Today, competition in the Bay Area is intense. You can have bilateral surgery done for $2,000 to $2,800.

In fact, no other major center charges more than $4,000 in the Bay area. I have been steady at $5,000 since the very beginning and have had no reduction in my volume. My volume increases 10% per month, and I believe it will stay stable. But many centers in my area have reacted to the low-price centers. Many will either match the price if patients go in there and ask for it, or they will lower their price for a limited time.

In my area, the LASIK war has arrived and it is really intense. We have over 30 laser systems within a 60-mile radius. Again, I do not plan to lower my price. I would rather do half the business at the same price.

Dr. Schnipper: My price has been steady for 3.5 years since I started performing LASIK. However, there is another provider in town who charges more than $1,000 less than me and I am able to compete quite nicely against him. But I understand there is a seriously discounted laser company opening soon, so I do not know what I am going to do. I will have to see how the situation goes. My plan is to attempt to keep my price at $4,600 and to market quality and service. I will have to see if my marketing works at this level. I do not want to become the “McDonald’s” of LASIK.

Dr. Siepser: I guess I have to be a little contrary here. We plan on pricing at $2,950 per eye. We are going up from $2,750. The reason? There are three market realities that are interrelated: cost, access and quality. If you increase access, you have got to drop cost and quality. If you keep cost up, you can boost up quality, but you have to limit access. That is what we are going to do. We are going to cut back access, so we are not going to have everyone coming to see us. But we are going to make sure we have the latest laser and the finest equipment with the best employees handling patients in the finest way. I believe that with that strategy, we will be able to compete in Philadelphia.

Dr. Kameen: My strategy is pretty similar. We rarely go below $2,500 per eye.

I believe Dr. Durrie is right in that what we are going to see is a move toward a segmented market over the next few years. I believe the word “quality” will become overused in advertising campaigns and we will see more discussions of technology. I also believe corporate ownership of technology will become the future of laser vision correction. I cannot see a single surgeon being able to keep up with new technology — it will be tough to buy successive pieces of equipment. In Baltimore, we are already getting calls from some independent surgeons and they are distressed. So our strategy is to sit back and keep the fee stable. I am not going to raise it, but I think it will average out to about $2,500 an eye a year from now. We will do that by stressing technology and obvious quality and service.

Dr. Gottlieb: What advice would you give to general practitioners just entering the LASIK market?

Dr. Kameen: In many ways, I believe practitioners must go back to basic business and marketing. I would tell newly entering physicians that they first have to develop their staff and establish a point person for LASIK. They also need to separate LASIK out from their general practice and make it look very different. They also should add another MD or OD to their staff. Then they need exposure. With so many lasers and physicians around, doctors should join their Chamber of Commerce, network and get their name out. Lastly, they just have to hustle to build a successful practice.

Dr. Durrie: I believe there are two ways for practitioners to become successful. One of them is internal marketing. For instance, if you are a general ophthalmologist who does cataract surgery, you can make sure that each successful patient sends in referrals. It is the least expensive way to get into the business. You do not have to have a huge marketing plan or budget. You do not have to comanage. You do not have any other expenses. With this approach, your business is going to grow slower, but you are probably going to have a more solid base that way.

The other way is about the exact opposite; it is buying market share. In order to do that, you have to advertise, and you may have to provide some kind of discounted service. You also have to go out and penetrate the market with your ads. In most markets, you should be able to buy a piece of the market this way. You will not make any money initially. But if you take care of those patients well and eventually reduce your advertising spending and focus on patient referrals, you can build market share.

The way not to do it is some where halfway between where you do not do enough of either to really be successful, and that is where a lot of practitioners get caught. They either need to do one patient this week who brings in five, and then they do the five, and then the 25, and then the 125 because they take care of them; or buy market share. I believe that if physicians are going to buy market share, then they have to go with a pretty strong advertising campaign and plan on spending a lot of time and money.

Dr. Schnipper: I believe it may be almost too late to get into LASIK right now. There is so much competition in practically every market that I believe it would be very difficult to start LASIK in many markets.

Dr. Manche: I disagree. I have personally worked with many community doctors who are late to the game and come in and use our facilities at Stanford. These individuals have had the greatest success when they used effective internal marketing on their patients. These physicians have good relationships with their patients and have practiced in their communities for many years.

As Dr. Durrie said, this approach has a much slower ramp-up than a full-blown advertising program, but it is very economical. I have seen many general ophthalmologists who now do 10 to 20 LASIK cases a month with no advertising at all. I do not believe that smaller community-based physicians will ever do a thousand cases a month, but I believe they will certainly integrate the work into their practices.

Dr. Lucca: I still believe there is room to get into the market. I would suggest telling general ophthalmologists to use the same principles they used when they built their cataract practices. Some colleagues just entering the market have gotten a boost by networking with primary care physicians.

Conclusions

After speaking with our panel about the LASIK market and pricing, and then discussing these subjects with other ophthalmologists around the country, I am impressed by their diversity of opinions. It appears likely that the majority of ophthalmologists will be unable to maintain their fee of $4,000 to $5,000 for both eyes.

LASIK’s prime patient base is young adults who are cost conscious. They are learning through the media and friends that the outcomes from lower-priced LASIK centers are almost as successful as those being performed at higher prices. Many of these potential patients are finding it difficult to justify the added cost and are selecting the competitively priced entities for the surgery.

The essential question now is what type of market(s) will support LASIK surgery? Only time will tell.

For Your Information:

Howard Gottlieb, OD, is president of the Eyecare Consultants, providing consulting and networking services to optometrists. The company is headquartered at 270 Amity Rd., Suite 220, Woodbridge, CT 06525. To receive complimentary information on "Making Successful Practices More Successful," contact Valerie Goodkin at (800) 633-6962; fax: (203) 389-4660; e-mail: eyecarecon@aol.com

Daniel S. Durrie, MD, can be reached at Hunkeler Eye Centers, 4321 Washington, Ste. 6000, Kansas City, MO 64111; (816) 931-4733; fax: (816) 931-9498; e-mail: ddurrie@novamed.com.

Anthony J. Kameen, MD, can be reached at TLC Laser Eye Centers, 555 Fairmont Ave., Ste. 202, Baltimore, MD 21286; (410) 339-7200; fax: (410) 339-7203; e-mail: ajkameen@aol.com.

John A. Lucca, MD, can be reached at Laser Vision Associates of New Jersey, 19-21 Fair Lawn Ave., Fair Lawn, NJ 07410; (201) 475-3505; fax: (201) 398-0086; e-mail: johneyes@bellatlantic.com.

Edward E. Manche, MD, can be reached at Stanford University, 300 Pasteur Drive, Stanford, CA 94305; (650) 723-5517; fax: (650) 723-7918; e-mail: mu.edm@forsythe.stanford.ed.

Robert I. Schnipper, MD, can be reached at Jackson Eye Center, Riverside Park, Jacksonville, FL 32204; (904) 355-5555; fax: (904) 355-9966; e-mail: ris@mediaone.net.

Steven Siepser, MD, can be reached at Siepser Laser Eyecare, 91 Chestnut Road, Paoli, PA 19301; (610) 296-3333; fax: (610) 296-3030; e-mail: ssiepser@clear-sight.com.