PRK centers boost referral return through physician ownership

Issue: November 1995

OKLAHOMA CITY—Both ophthalmologists and optometrists can benefit from owning majority interests in photorefractive keratectomy (PRK) centers, according to Jack W. Melton, OD, in private practice here, who has developed a plan to offer such an arrangement.

The plan involves setting up a number of Laser Eye Institutes in major cities to perform PRK, which was approved by the Food and Drug Administration last month.

The surgery would be performed by contracted staff ophthalmologists, "and they will do the surgery for however many dollars it comes out to be," said Warren D. Cross, MD, in private practice in Houston, who is also developing the arrangement.

"[But] the majority of the fee goes to the doctor who has the patient," said Melton. The reimbursement to the party that refers the patient "is going to be twice as much as anyone else's plan."

Owners get bigger share

According to Melton, under existing arrangements, an ophthalmologist or optometrist who refers a patient to a PRK specialist receives only a nominal fee. Under this plan, because the referring doctors own the PRK center, their share would be larger.

"One big advantage from a doctor's standpoint is that the doctor is completely in control of his or her own patients," said Melton. "The majority ownership by local optometrists and ophthalmologists is unique. I have not seen any other group's plan that lets the doctors in the community own the center," said Melton.

Melton's plans call for setting up 20 centers by the end of the year under the name Laser Eye Institute in cities including Honolulu, Los Angeles and Dallas/Fort Worth. He said he plans to open as many as 50 by the end of 1996.

While ophthalmologists and optometrists will own a majority of each center, the day-to-day affairs will be run by Laser Management Institute (LMI), a management firm in which Melton also has an interest.

"LMI does financial development and day-to-day center operations," said Melton. It has the same principals as does Surgery Centers of America, of Edmond, Okla., which develops and operates ambulatory surgery centers.

Two owner arrangements offered

The plan has two variations, according to Cross. Under one, which Cross calls the "Houston deal," the doctor-investors will own 90% of the center, while LMI owns 10%. Under another arrangement, LMI will own between 25% and 35% of the center, with the doctor-investors owning the remainder.

Cross said he expects the Houston deal to "control whatever market we go into" because the financial incentives are so powerful. An optometrist who is a member of the ownership group of the center will get half the overall fee per eye, he said.

"That is two, three or four times more than any other [PRK arrangement] in the country. For that, he or she is expected to do all the preop workup, to be there at the center the day the surgery is done and go through the entire chart, and to be involved with the postop scheduling and do the lion's share of the postop care," Cross said.

Should the optometrist elect not to be present during surgery, the reimbursement will be reduced 35% to 40% per eye, Cross added. Melton said he expects to begin opening the PRK centers in the fall.