Is VSP between a rock and a hard place?

On an online venue for optometrists, a debate rages about VSP’s strategy in the market place. This has become an issue that has presented itself in the forefront as IBM, a major employer of 100,000 or more employees were wooed over to EyeMed, a competing vision care plan. With consternation, VSP doctors all over the country decried either the loss of the contract or the recent move by VSP to include corporate optometry practices in their marketing efforts.  Questions have arisen. How will private practice fit into the new VSP scheme? Is private practice viable for the next generation of optometry students?

I don’t believe that anyone can turn back the clock to the 1970-80’s, the heyday of optometric private practice. What has wrought that change has been a combination of information technology, the internet and the new global economic environment.

It’s funny how an industry can spend tons of money trying to resist change, but when change happens, it is apparent that businesses that focused on the status quo for so long are unprepared for what might happen if the clock could not be turned back.

Like it or not, the corporations have created a brand name that is able to convey quality and convenience, something that optometry has struggled to embrace. Instead of easily-understood properties, optometry has focused on “high-quality”, an inherently difficult to measure and value property. Optometry needs to establish a much more definable brand that we all can get behind. I fear that will be difficult because we cannot even agree on the simple things before fractured discord overcomes reason and everything becomes a stand still.

Financially, most private practices have not been efficient in their cost and business structures, hoping to capture market share through investments that are as heavy and weighty as a large boat anchor and contributing little to the bottom line. In an activity-based cost method, it will be surprising how little some of this technology can contribute to the profitability of a practice. The new practice of the future will have to be more judicious in structuring their financial foundation, either through wiser investment of their capital or equity or through stringent cost controls in operations

VSP has a significant hurdle to leap. Its cost of business includes the cost of individual private practices which is not an issue with its competitors. What must happen is a technology shift that can lower the cost of doing business.  First, it can include e-commerce which can match the cost and business model of their competitors. Second, its leadership health information technology may facilitate seamless exchange of patient data, a leading measure for future meaningful use with other optometric practices, primary medicine and third party payers. Lastly, VSP requires a brand identity that is more public than it has achieved in the last 10 or 20 years. Only through being a brand can VSP be competitive.

Please feel free to use this URL as a convenient bookmark or favorite: http://wp.me/p18zjA-4v

About Richard Hom OD, MPA

Dr. Hom holds Doctor of Optometry and Masters in Public Administration degrees and practices family eye care and consults on public policy, health information technology and program evaluation.
This entry was posted in Health Care policy and tagged , , , , , , , , , , . Bookmark the permalink.

8 Responses to Is VSP between a rock and a hard place?

  1. Interesting insights, Dr. Hom! One aspect of VSP seems to be that they are still trying to fight the battle they won decades ago, which was to get eye examinations done by (private practice) optometrists covered by insurance. While it would be a seismic shift, “any willing provider” would radically enhance their declining ability to compete.

    I recently read that private practices maintained their 38% of the market compared to the year before; the question remains whether they can remain profitable when faced with a growing number of eyes covered by minimally reimbursing payers. There are a few OD’s who have the insights and skills to prosper under those conditions, but revenues of the private practice OD’s continue to be targeted by organizations who will tactically and relentlessly use the advantages of their capital, market reach and influence.

  2. Bill,

    Thanks for your astute comments. Private practice is becoming a much more challenging scenario with the entry of extremely competent players. Vertically integrated players (those who own stores, frames, labs, etc) have the upper hand in cost profile. They have a brand name to minimize the uniqueness of individual doctors. To prosper, private practice doctors will need ingenuity.

  3. I disagree that the 70’s and 80’s were the golden age. More like the 1960’s before price advertizung and before J & J made contacts a commodity. BTW our private practice is thriving, scheduled a month in advance with every piece of equipment you can imagine

  4. Steve,
    Thanks for your comment. I know that there are practices that are doing well. However, I think everyone isn’t resting. I think everyone is looking over the shoulder to see what’s new whether it be another competitor or another government or vision/medical plan regulation. Congratulations on your success.

  5. Provacative article, Richard. I particularly liked your point regarding the opportunity for VSP to better leverage its database and technology capabilities. For example, it seems like a great opportunity for VSP to lead the industry into the portable electronic health record arena. Portability is one of the keys here; if a patient and his/her family moves to another part of the country, they should be able to seamlessly have their new O.D. access their records from their previous O.D. It’s my understanding that this isn’t a currently available feature offered by VSP.

    Even better, what if the patient could have the former doctor or VSP proactively recommend a new VSP doctor near their new residence? That’s the type of value-added service that really resonates with patients.

  6. Go to http://www.optometricspring.com for a possilbe solution to the VSP problem.

    Jim Levinson, O.D.

  7. Dr. Levinson,

    Thanks for your post on the link you left. The governance issue may be important but long range, the more important issue is competitiveness and capital structure. Will either be answered with an “mutual” society or employee-owned organization?

    1. On the former, single purpose plans might be curtailed severely if it cannot get an alliance with a major health care payer.The lack of a medical partner can result in refusal of pediatric coverage by these plans under new federal guidelines.

    2. On the one hand, the issue of OD governance can be satisfying to the individual OD, but that does not translate to competitiveness. If the “new VSP” shrinks significantly must it cut the size of the provider panel to accommodate the smaller size of the plan?

    In summary, you suggest a leveraged buy out and in this environment of severe economic activity, funding for such an endeavor is never certain. In addition, a “shareholder-VSP” might lose its current competitive edge. These do deserve an open discussion.

  8. i think that we have to embrace the medical model if we can thrive in Private practice.. one thing that a flashy brand or logo will never take from us is our patients… customers are frivolous but a relationship with a patient is priceless…. not to sound like a corny visa commercial… 🙂

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s