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Service agreements change as contact lens technology improves
Contact Lenses and Eyewear
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The name may be the same, but the spirit behind contact lens service agreements has changed. While past service agreements were introduced to ease the financial burden for contact lens wearers, current agreements function as a way to ensure that a patient’s care is being managed effectively.
‘Replacement insurance’
“Before the popularity of disposable contact lenses, contact lens materials typically had a high mark-up,” Neil B. Gailmard, OD, MBA, FAAO, said in an interview with Primary Care Optometry News. “There was a need for patients to replace contact lenses that were lost or damaged at a reasonable cost, and since a simple lens replacement within 1 year of an eye examination did not require much service from the doctor, a lower price was justified. Service agreements were similar to contact lens replacement insurance.”
Patient retention, revenue
Carmen F. Castellano, OD, FAAO, still uses this type of service agreement in his practice and has found that it benefits both the patient and the optometrist. “It’s designed to tie the patient into the practice for a year at a time and also as a revenue stream,” he said in an interview. “It also helps the patient in terms of some savings.
“We have two different plans — a supplemental plan and a comprehensive service agreement,” he continued. “In 2007, the sale of service agreements alone accounted for 17% of our revenue.”
According to Walter L. Choate Jr., OD, a member of the PCON Editorial Board, this large percentage of profit comes from a group of patients who prefer to pay once a year for their vision care. “Patients who are the happiest – those who keep seeing us year after year – prefer to have their visits pre-paid because they’re coming in all the time anyway,” he told PCON. “They do not want to come in mid-year and pay a nickel, even if they may be paying fewer dollars.”
The ‘new’ agreement
As the popularity of contact lens service agreements seems to be waning, practitioners such as Dr. Choate have adopted a new type of agreement focused on patient compliance and follow-up care instead of discounted materials. While he does not consider this a service agreement, Dr. Choate’s practice charges a global fee for follow-up visits, depending on the complexity of the fit. Patients who wear gas-permeable contact lenses, experience complications or are considered “high-risk” are prime candidates for this modified agreement, he said.
“We’ll construct a fee schedule that covers four components: the eye exam, their contact lens evaluation, their follow-up care and cost of materials,” Dr. Choate said.
“For a new patient, depending on the complexity of the fit and what I perceive as long-term follow-up needs, we may put in the follow-up care component a dollar amount that includes a year’s worth of care,” he continued. “More commonly, we will combine the evaluation and the follow-up care component to allow for about two follow-up visits after they receive their contact lenses.”
An argument against service agreements
While some depend on the revenue and retention a service agreement brings to a practice, practitioners such as Dr. Gailmard consider them outdated, with a deceiving bottom line. Having not offered them for 20 years, Dr. Gailmard advises other optometrists to drop them as well.
“The discounted fees really hurt the bottom line, because most of those discounts are for services or products that would be purchased at full price anyway, and the revenue stream is of little value if the process causes many patients to seek care elsewhere because they don’t like the policy,” he said. “The revenue seems significant when it’s totaled as a category, but it still remains in other categories if service agreements are dropped.”
Dr. Gailmard added that it is not economical to provide interim routine office visits that may not be necessary. “It used to be common to perform a 6-month check-up on all contact lens wearers, but today’s newer contact lens materials have made lens wear safer, and most doctors have dropped those visits because they’re a waste of doctor and patient time,” he said. “The doctor could replace that low fee appointment slot with a much higher production visit.”
Paying for service as needed
Others feel that charging per visit and by services rendered maintains standard, quality care in a practice.
Christine W. Sindt, OD, FAAO, suggests that service agreements could be more problematic than beneficial. “I treat all my patients absolutely identically,” she said in an interview. “We do fee-for-service — a patient comes in, a service is provided, and a standard fee is charged.”
Dr. Sindt said bundling may be a problem in cases that turn out to be surprisingly complicated. “Then you can’t charge the patient any more, because you have this agreement, and whether it’s meant or not, the quality of care has the potential of going down if you feel you’re losing money,” she said. “If you charge a fee for a service, every time a patient calls, you’re happy to see them because you’re getting the same amount — no matter who it is — and that has a certain level of professionalism to it.”
For more information:
- Neil B. Gailmard, OD, MBA, FAAO is in private practice in Munster, Ind., and is president of Gailmard Consulting. Dr. Gailmard can be reached at (219) 836-1738; e-mail: neil@gailmard.com.
- Carmen F. Castellano, OD, FAAO, can be reached at 2511 South Brentwood Blvd., St. Louis, MO 63144; (314) 863-0000; fax: (314) 961-1041; e-mail: ccastellano@koettingassociates.com.
- Walter L. Choate Jr., OD, is a member of the Editorial Board of Primary Care Optometry News. He can be reached at 607 Due West Ave., Suite 111, Madison, TN 37115; (615) 868-4262; fax: (615) 860-2016; e-mail: wchoate1@aol.com.
- Christine W. Sindt, OD, FAAO, can be reached at e-mail: christine-sindt@uiowa.edu.