The recent crisis has brought into sharp focus (excuse the pun) the inadequacy of the current optical business model – No Patients = No Revenue. That is, of course, true for most retailers, and it’s certainly true for the optical businesses that are heavily focused on spectacles to generate their revenue.
The question we all continually grapple with is whether optics is a retail or a service industry? Most independent optometrists like to believe they’re primarily a service industry, but the patient predominantly sees ‘opticians’ as suppliers of glasses and contact lenses. They see what they get for their hard-earned cash and for the vast majority, it isn’t healthcare.
It is interesting that those practices with a decent percentage of contact lens patients are now, more than ever, realising the cashflow benefit of the regular monthly direct debit payments from their patient base. So, it begs the question as to why we don’t fit more contact lenses and why this business model is rarely something practices expand beyond contact lenses?
Of course, the professional fee debate has raged for decades. Back as far as 2007 I was involved in making professional fee charging the theme for our Independents Day conference. Many experts have advocated this model as a way for independent practices to differentiate themselves and break away from the ‘No Glasses = No Profit’ – actually that should read ‘No Glasses = Make Loss’ – business model. Apart from the inherent unfairness of this cross-subsidy model, it also leads the apparent and much maligned inflated price of eyewear.
Those practices who have adopted a higher professional fee, and more specifically those who did so using a monthly payment model, are probably feeling a little less anxious about their future, compared to those whose income has literally disappeared overnight. Thus, it is interesting to postulate as to whether this will become the ‘new normal’ for optometry post lockdown.
What is for sure is that the majority of practices will be seeing fewer patients per hour than before, partly due to new Covid-19 focused health and safety policies and partly due to the inevitable lower volumes of patients post lockdown. Let’s say a practice can now realistically only see one patient and hour rather than three; that has trebled the cost of that patient being in the chair pre-lockdown. What if a conservative one-third then have no change in Rx and do not purchase anything? That means you might have five patients a day actually generating revenue.
The good news is you’ll have time to do all the tests/checks you want, but the question is who is going to pay for that? The NHS fee certainly doesn’t. You could do it as a loss leader? Oh, sorry you already do – my mistake.
It is interesting to consider the businesses doing well during lockdown. Those providing subscription services such as Netflix and Sky are generally bucking the trend. Similarly, in the mobile phone industry, Pay as You Go still exists but is a small part of the business model, it’s now all about the monthly payment contract. Of course, people may have to cancel their subscription. The point is that the majority won’t and the revenue continues to roll in even when the doors are closed.
Some practices might argue that they do charge a respectable fee for their time, only they choose to take it in a lump sum at the point of care. That is certainly a better place to be than most but again, No Patients = No Revenue. You might also argue that charging a monthly fee is deferring revenue, well for those getting high levels of cash on delivery, that is somewhat true. However, a little short-term cash-flow pain might be worth the long-term gain. For those currently losing money on every eye examination they carry out – there is certainly nothing to lose and everything to gain.
The Pay as You Go model was past its sell-by date before lockdown and I suggest is largely unsustainable post lockdown with lower patient volumes taking longer in the chair. Without significantly increasing average dispensing values to cover this cost, practices are going to be less financially viable. Of course, that is one perfectly legitimate way to rebalance the books, but if your average sales value has been largely flat for the last five years or more, what makes you think you can significantly improve it by the required amount now?
Alternatively, you can sell your value and clinical expertise better and then offer a monthly payment plan to pay for it – say £10/month or £2.50 a week, which is less than a small skinny latte. Include as many interim/unexpected appointments as needed to provide complete reassurance and ‘hey presto’ – you’ve just significantly differentiated yourself from your competitors and become a little less reliant on product sales.
I suggest Pay as You Go optometry needs to get up and go! The profession needs to wake-up to another new normal – reducing its continued reliance on unpredictable product sales cross-subsidising the eye care business. Instead get your patients to subscribe to regular and ongoing eye care – because you’re worth it.