Is It Time to Drop a Vision Plan? Steve Alexander on Retaining 50-70% of Patients as Cash-Payers

Summary

Power Hour Optometry: Is It Time to Drop a Vision Plan? Steve Alexander on Retaining 50-70% of Patients as Cash-Payers

Release Date: November 20, 2024

In this insightful episode of Power Hour Optometry, hosted by Eugene Shotsman, the conversation delves deep into a critical and often contentious topic within the optometric industry: Should practices consider dropping vision insurance plans? Joining Eugene is Steve Alexander, a seasoned consultant with over two decades of experience in enhancing practice profitability. Together, they explore the nuances, data, and strategies surrounding this pivotal decision.

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1. Understanding Independence in Optometry

Steve Alexander opens the discussion by challenging the commonly held notion of "independence" among optometrists. He draws a compelling analogy:

[03:44] Steve Alexander: "When you go in network with some of these vision plans, you're giving away a fair amount of control for the quality of experience that your patients have."

He emphasizes that true independence is compromised when practices enter into vendor-like relationships with vision plans, relinquishing control over pricing, product offerings, and patient interactions.

2. The Hidden Costs of Vision Plans

The episode underscores that while vision plans are often perceived as valuable marketing tools, they come with recurring costs:

[05:20] Steve Alexander: "With vision plans, that is not the case. You're paying acquisition every year."

Unlike traditional marketing, where customer acquisition is a one-time expense, vision plans entail residual customer acquisition costs, continually impacting the practice's bottom line.

3. Patient Retention Insights

A significant portion of the discussion revolves around the data supporting the retention of patients when a vision plan is dropped:

[06:18] Steve Alexander: "If you've been in network for a period of time and you decide to no longer be in network the following year, you can expect to retain about 50 to 70% of your patients from that vision plan."

Steve highlights that 50-70% retention is achievable, especially in practices that prioritize quality patient experiences. Remarkably, many patients who initially leave may return within a year, recognizing the superior service your practice offers.

4. Financial Implications and Profitability

Eugene and Steve delve into the financial mathematics of maintaining versus dropping vision plans. Steve provides a clear framework:

[20:10] Steve Alexander: "A private pay transaction will drop way more money to your bottom line, typically two to three times what an in network vision plan patient on the lower reimbursing side of things would."

By transitioning patients from low-reimbursing vision plans to private pay, practices can significantly enhance their bottom line revenue. This shift not only increases profitability but also simplifies administrative processes, eliminating the need for reconciliation and reducing overhead.

5. Effective Communication with Patients

One of the pivotal strategies discussed is how to communicate the discontinuation of a vision plan to patients:

[24:21] Steve Alexander: "We've decided to end our contractual relationship with that vision plan. However, we will find what out of network benefits you have available to you, and we will file the claim on your behalf."

Steve advocates for transparency and support, ensuring patients understand that they can still leverage their out-of-network benefits. This approach fosters trust and encourages patients to continue their relationship with the practice despite the change.

6. Leveraging Technology for Seamless Transitions

The conversation highlights the importance of utilizing software solutions to assist patients in maximizing their out-of-network benefits:

[43:22] Steve Alexander: "Anagram software for out of network insurance eligibility is called open access. So, as an open access provider, which is basically an out of network thing with slightly nicer language, it allows the practice to convey to the patient what the benefits actually are."

Implementing such technologies streamlines the process, making it easier for both the practice and the patients to navigate insurance benefits without the typical administrative burdens.

7. Operational Efficiencies and Growth Opportunities

Steve brings to light the hidden operational costs of being in-network with multiple vision plans:

[49:38] Steve Alexander: "There are hidden costs associated with being in network with too many plans... those things take time and effort where your team isn't doing something else."

By limiting the number of vision plans, practices can enhance operational efficiencies, reduce administrative workload, and open up more opportunities for practice growth. This strategic focus allows for better patient management and the ability to accommodate new patients more swiftly.

8. Benchmarking and Profitability Metrics

Eugene challenges Steve on establishing profitability benchmarks, to which Steve responds with practical advice:

[36:25] Steve Alexander: "Your per patient profitability should always be above how much time you're spending on that patient or the cost of spending that time with the patient as it sinks to even, or your cost is higher than you're getting back from the vision plan, then that's a clear indication that you should step away from that plan."

He emphasizes the importance of understanding fixed and variable costs, ensuring that each patient interaction contributes positively to the practice's financial health.

9. Addressing Patient Objections and Value Communication

Handling objections is crucial when transitioning away from vision plans. Steve advises:

[42:50] Steve Alexander: "If you are able to confidently convey we're out of network or with Anagram customers, say we're an open access provider, then your patient knows that you know what you're talking about."

By positioning the practice as an expert in maximizing out-of-network benefits and emphasizing the superior value and services offered, practices can effectively convert potential objections into opportunities for engagement.

10. Final Reflections and Best Practices

Concluding the episode, Steve highlights the importance of strategic planning and foundational skills:

[41:01] Steve Alexander: "If you're able to develop those skills, those conversion skills on a low patient volume, and then you move to the next one up and you're able to convert at a higher clip, and then if you're converting half of your phone calls who are out of network to patients, then it doesn't matter what vision plan you Drop."

He reiterates that success hinges on the practice's ability to adapt, communicate effectively, and prioritize high-value patient interactions.

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Key Takeaways

• Assess Profitability: Regularly evaluate the financial impact of each vision plan, focusing on bottom line revenue and profit margins.

• Strategic Dropping: Prioritize dropping lower-volume and lower-profit vision plans first to maximize financial benefits.

• Enhance Communication: Develop clear, transparent communication strategies to inform patients about the change, emphasizing the value and quality your practice offers.

• Leverage Technology: Utilize software solutions like Anagram to streamline benefits processing, making it easier for patients to access out-of-network reimbursements.

• Operational Focus: Reducing the number of vision plans can lead to operational efficiencies and growth opportunities, allowing practices to better serve high-value patients.

• Team Training: Ensure your team is well-trained to handle patient inquiries, articulate the value proposition, and convert out-of-network patients into loyal, profitable customers.

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Notable Quotes with Timestamps

• Steve Alexander: "With vision plans, that is not the case. You're paying acquisition every year." [05:20]

• Steve Alexander: "If you're able to develop those skills... you are more profitable than if you captured both in network." [41:01]

• Steve Alexander: "Anagram software for out of network insurance eligibility is called open access." [43:22]

• Steve Alexander: "Your per patient profitability should always be above how much time you're spending on that patient." [36:25]

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Conclusion

This episode of Power Hour Optometry provides a comprehensive exploration of the strategic considerations involved in maintaining or dropping vision plans. Steve Alexander's expertise offers optometric practices actionable insights into enhancing profitability, improving patient retention, and optimizing operational efficiencies. For practices grappling with the complexities of vision insurance, this episode serves as an invaluable guide to making informed, strategic decisions that align with both financial goals and patient care excellence.

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For more information and to access resources discussed in this episode, visit www.PowerPractice.com.

Transcript

[Steve Alexander]

Foreign.

[Eugene Shotsman]

Hi, everyone. Welcome to the Power Hour. I'm your host, Eugene Shotsman. Thank you for making this optometry's largest and longest running show. We just crossed a major milestone. Over 40,000 listener downloads in a month. And so thank you our listeners and thank you to our exceptional guests who bring so much value to these conversations. And today's guest is absolutely no exception. Today I'm talking with Steve Alexander. He's got a 20 year consulting career in helping practices be more profitable. And today I pose a challenge and sometimes a controversial question to Steve. When is it time to drop a vision plan? So I know what you're thinking. We can't afford to lose all those patients, right? So Steve gives us another perspective and some interesting data about what retention with these patients actually looks like and what you can do to turn more than half of those patients into. Into cash patients that won't leave your practice. So we also talk about the money math behind figuring out which plan to drop and what that will do to your practice and whether you should ever drop one of the major plans. But we also talk about just generally changing your team's mindset and how you talk to patients about plans you don't accept. What if instead of saying, no, we don't take that, we say, oh, we're out of network with that plan, but we can still help you. So I'm not doing it justice in the introduction here, but Steve and I have some real fun riffing on this during the show, and it kind of becomes an interesting concept because it's true. Think of how many patients were all turning away with the word no. And so we're giving you a strawman to fix that and to fill that in. And of course, we talk about the tools, skills and technology and the mindset that it takes to make your practice more profitable if it is in fact time to drop one of those vision plans. As always, I can't wait to hear what you think. Reach out to me directly on the Power Hour website or on Eugene Shotsman.com. again, the that's Eugene Shotsman.com. i look forward to your feedback. And of course, if you subscribe on Spotify, Apple, or wherever you get your podcasts, you'll get notified every time we drop an episode. All right, let's go to today's episode. All right, Steve Alexander, welcome to the Power Hour.

[Steve Alexander]

Thank you for having me, Eugene.

[Eugene Shotsman]

All right, so we're excited to have you here because I think there's lots of providers who have been pondering this question, and you have over a decade in consulting and trying to answer this question. And the question today is, when should you drop that pesky vision plan or when should you drop any vision plan in your practice? And we're going to jump right into that conversation. But first let's set it up a little bit. Steve, you know, I've heard you say things about the true value of independence, so maybe just share a little bit of your perspective on this.

[Steve Alexander]

Absolutely. I've been in eye care for over 20 years. I started as an optician when I was 16 at a local Pearl Vision. And in the intervening whatever period of time it's been, the industry's gone through a lot of changes. But something that hasn't changed is the interest among practitioners to refer to themselves as independent. The question that I often raise when we're having this conversation is if you think of a business, any business, and there's another party that says to the business what they can charge for a given product, what products they can sell, how much they can profit on that product and who they can partner with for manufacturing, what would you call that kind of business? And there are lots of names for that kind of business, but independent is not one of them.

[Eugene Shotsman]

Yeah, it's more like a vendor supplier relationship rather than an independent decision maker.

[Steve Alexander]

Precisely that. Yeah. So when you go in network with some of these vision plans, you're giving away a fair amount of control for the quality of experience that your patients have. A lot of vision insurances would push back on that in concept. They say they work with good labs, but, and it's true, they've got good lab networks, some of them make good lenses and all of that stuff. But when you're talking about a high volume experience at the lab, the quality.

[Eugene Shotsman]

Of work does decrease and you know, the contrary opinion. And I've had, as you may know, but certainly our listeners will know that I've had the former president and CEO of VSP on the show, Jim McGran, and we've had the conversation, the debate of, you know, how should you be able to see, how do you look at a vision plan and how do you perceive the role that a vision plan plays in the practice? And, uh, you know, the typical response is, well, it's a marketing tool, it gets the patients in the chair and that kind of thing. And so what do you say to that?

[Steve Alexander]

It's interesting and I think it's common wisdom says think of it that way as a marketing tool. But you know as well as I do that when you pay a customer Acquisition cost. In marketing, you only pay it once because once they come in, they're your customer going forward. But with vision plans, that is not the case. You're paying acquisition every year.

[Eugene Shotsman]

Yeah, it's a residual customer acquisition cost.

[Steve Alexander]

Correct? Right. And look, there are circumstances where being in network with vision plans makes more sense than in others. There are plenty of specialty contact lens practitioners that do a great business with vision plans, and I wouldn't tell them to step away from those. It's not a silver bullet that dropping vision plans is just going to make things better, but there is repeatable math that can be done to help your practice evaluate when the right time to pull the trigger is.

[Eugene Shotsman]

Well, and so we're going to get to some of that calculation later in the show. But let's start kind of at the basics. What is some of the data that supports that it might actually be good to drop a vision plan? And I know you've talked about this in the past, but I think it's valuable for people to understand what happens to their patient base if you drop a vision plan.

[Steve Alexander]

Absolutely. So I've been consulting, like you said, for about a decade and I've worked with hundreds of practices at this point and often suggest they go a bottom up approach when stepping away from vision plans. Bottom up meaning in terms of patient volume. But generally speaking, across all vision plans, if you've been in network for a period of time and you decide to no longer be in network the following year, you can expect to retain about 50, 50 to 70% of your patients from that vision plan. As an out of network patient, it's a pretty wide gap, that 50 to 70%. And a lot of that depends on how invested the patient is in your practice and how easy you make it for your patients to stay in year two. We see that about half of the patients that you lost in year one do come back again precisely because they didn't receive the service somewhere else that they received at your practice. So a lot of the pushback I hear anecdotally is, well, my patient, those patients aren't loyal. They're just going to go anywhere. And some subset of that is true. Right. But those were never your patients to begin with. So I wouldn't build my business around them at all. But there is a measurable difference when patients get a lower quality of service and they feel it and recognize it and then come back to you because of it.

[Eugene Shotsman]

So the presumption is that the practice that we're talking to is a practice that really does Something superior in the market. It's not kind of a typical spin and grin type of situation. It's an actual relationship. And so if you are, in fact, a practice that provides that, then what you're saying is, Steve, is that 50 to 70% of the patients will stay even if you're no longer in network with their vision plan. And then some percentage of those patients that left will come back in year two because they tried somewhere else and the eye exam wasn't as good and the technology wasn't as good. And I said, oh, you know what? That discount that I get, maybe they see it for what it is. So I heard you say that there are two things that kind of determine where you are in that range, because that is a pretty wide range. How invested the patient is in the experience, and then how easy it is, how easy you make it for the patient to stay. So let's talk about both of those.

[Steve Alexander]

Great. Yeah. Pretty common metrics suggest that the more a customer pays at a given practice or a given business, the more loyal they are to that business as a kind of investment in anchoring psychology. And that certainly applies in eye care. The patients that go with the services as recommended by the practice are more bought into the way the practice operates. And everybody listening to this will have an instinctive understanding of the difference between a patient who comes in through your doors and says, I only want what's covered by my insurance, and a patient who says, help me, Doc. I'm looking for your input. And the experiential difference, the financial difference, the loyalty difference, is actually measurable and significant. So stepping away from a vision plan opens the door for you to see fewer of the I only want what's covered by my insurance. And more of the I'm here to. I'm here at this practice because this practice does what I want it to do, or they have a level of service that I'm very happy with. The second part. Yeah.

[Eugene Shotsman]

And I just want to.

[Steve Alexander]

Easy for them.

[Eugene Shotsman]

I want to comment on that in particular. So you're saying the more the patient typically spends, the more likely they are to come back. And it's interesting, though, and I've run a test on this from a marketing standpoint, so I just want to comment on this, is that, you know, sometimes we look at it and say, well, if a patient spends more, oftentimes they're buying more frames and they're, you know, they're. And maybe they're like, this is their big. Their big thing. Right. And so we've actually when we've ramped up recall efforts for certain practices, we've measured the frequency at which patients come back and whether or not patients who spend more, whether they come back less frequently. Because, you know, for you would imagine that that patient bought whatever they need, and then they're going to say, you know what? I kind of. I blew a thousand bucks this year. I'm just going to kind of skip next year and then I'll come back. Or maybe I'll come back in 18 months instead of 12 or 24 months instead of 18, whatever that mindset was. And what we found is categorically false. That data is actually extremely difficult to mine because you have to go through thousands and thousands of patient records and return records, and you have to try to figure out how often on average, your patients come back, which is not a data point that EHRs spit out all that often. Turns out, with the assistance of AI, we actually can mine that data. And what we found is that patients who spend more money in your practice will likely come back more often and certainly are not going to come back less often because they spent that money.

[Steve Alexander]

Yeah, that's important context. That's a huge thing to understand. To your point about the kind of data that EHRs give, there's no way to know that unless you go digging for it.

[Eugene Shotsman]

So let's talk about the second piece. Steve. We talked about the investment in the practice. Now let's talk about the. Let's make it easy for them to come back.

[Steve Alexander]

Yes. So when a practice is in network with a given vision plan and a patient calls and asks whether the practice accepts it, the conversation is easy. Yeah, we do. Come on in. When a practice is no longer in network with that plan, the conversation can get a little trickier. And the desire from practices across the country has often been to respond to, hey, do you accept this vision plan with, no, we don't. And then the conversation ends, right? What the patient on the phone that's out of network with that plan or that that has a plan that you're out of network with, what they're actually saying to you is, I have this thing that I don't understand, but I'd really like to use. Can you help me? And you're saying, no. But if there was a method by which you could find their benefits easily, they're out of network benefits easily, and explain to the patient what their benefits are at your practice, then they're confident in knowing they can come to your practice, leverage some of their benefit, and get the service that they want from you. Important kind of intertwined in that is most times when a patient or a prospective patient calls your practice, they've already made a series of decisions that have made it enough. You made your practice interesting enough to them for them to pick up the phone and call you. If a millennial is calling your practice, they want to give you money, let them.

[Eugene Shotsman]

Yeah. You know, it's funny that you say that, Steve, because I, and we've done a show on phone best practices and it's absolutely true that, you know, and I call it just setting money on fire because so much money gets set on fire on the phones. And oftentimes when I listen to some of these calls, I mean, it totally, you know, it's extremely painful and breaks my heart to watch these hard working, hard working business owners literally just, you know, have a, sometimes a $7 an hour overseas employee flushing their money down the, just down the drain over and over again. And sometimes the conversation really goes and you know, hey, Steve, I'd like to set an appointment. Okay. And what's your first name? It's Eugene. Okay. And what insurance do you have? This one. Oh, okay. Well, I'm sorry, we're not a network with that or we don't accept that Insurance.

[Steve Alexander]

Insurance.

[Eugene Shotsman]

I'm sorry. Okay, bye. You know, and that's the conversation. And, and I hear that so many times. And somehow we've trained a lot of our phone folks to ask about insurance because we know it's going to be an objection later. So we're just trying to eliminate that pain point up front. But sometimes the way we're eliminating the pain point is we're kind of killing the golden goose.

[Steve Alexander]

Absolutely right. And you know, there is a, a lot of the industry is responding to things that have happened to them in the past. So I presume an office like that has set an appointment for a patient didn't ask about the vision plan. And patient came in and was upset that they couldn't use their benefits at that practice. So instead of solving that specific problem, the practice created a much bigger problem by turning away patients left, right and center.

[Eugene Shotsman]

Yeah. And so let's just make this clear. If you don't accept somebody's vision plan, can they still get something like that? Can that patient still, you know, do something to get whatever it is out of that vision plan?

[Steve Alexander]

Typically, the vast majority of nationwide vision plans have both in and out of network benefits. They're different. The benefits are structured differently. But if your patient has a vision plan that you're out of Network with odds are they can get a pretty significant reimbursement from them if they file it themselves. If they fill out a CMS form and attach a receipt and mail it to the vision plan, the practice, the patient will receive a reimbursement in two to four weeks. And it's somewhere around $50 to $70 for an exam, somewhere around $50 to $70for a frame, and somewhere between 40 and $90 for lenses. And so not in significant dol.

[Eugene Shotsman]

Yeah, it's not bad.

[Steve Alexander]

It's not bad. And then when you think about the fact that your patient is coming in as a private paid patient, ostensibly you can give them a time of service or a time of sale discount as long as it's consistent across the board. So many practices will give 20 to 30% off of the total price of everything. So if you get exam frame and lenses, you get 20% on the day and then the patient receives a check in the mail for $150. It's a pretty good experience.

[Eugene Shotsman]

Yeah.

[Steve Alexander]

Now, whether or not the patient wants to do that homework is in question.

[Eugene Shotsman]

Well, and obviously there's technology that helps with doing some of that stuff as well. But let's. So we've established the opportunity, right? The opportunity is we're turning away patients. Those patients could easily be private pay patients who tend to. I don't know if you have data on this. I know that our data shows that tends to be the case that private pay patients tend to generally spend more money than insurance based patients spend more.

[Steve Alexander]

Money at the top line and importantly, more money gets to the bottom line. In network insurance, patients broadly run on kind of thin margins and some are different than others. There are better vision plans in this way than others. But no vision plan is as profitable as a cash pay patient.

[Eugene Shotsman]

So if there's a, if there's a reasonable way to attract and retain out of networks patients, then we turn to the next question, or maybe to the original question. The first question is, okay, so how do we decide which vision plan to chop and what's the process for doing that?

[Steve Alexander]

What's interesting about this is most people listening to this already have a vision plan in mind that they would rather not be in network with. One that they're currently accepting, but they don't like working with for one reason or another. And usually those vision plans are the lowest volume in terms of patients. So the things that you see less frequently and that your practice is less equipped to work with, also if they tend to be a lower proportion of your patient base they tend to be lower reimbursing and they tend to be the least profitable opportunity for you. So the way that I would break this down is let's say there's a vision plan in your practice that represents 10% of your patient base. And if they represent 10% of your patient base, let's say they represent 6 to 7% of your top line revenue. If that's true, let's say they represent 2 to 3% of your bottom line revenue. If you drop that plan today and don't change anything about your process, what are you actually doing to your practice? You are freeing up 10% of your time of your appointment book at the cost of 2% of your bottom line. So the question that you got to answer at that point is, is 10% of my time worth 2% of my revenue? And the answer to that question is always yes. But you shouldn't let it happen and then do nothing. What you should do is drop a vision plan with a plan to retain as many patients as possible. So when you take a patient who's with a low reimbursing vision plan and you turn them into a private pay patient, any one private pay patient in terms of revenue is worth 3 of an in network patient.

[Eugene Shotsman]

Explain that. Wait a second, Explain that.

[Steve Alexander]

So your bottom line margins with a low reimbursing vision plan is pretty low. Obviously it's going to depend on cost of goods and everything else that goes into providing that experience for the patient. But a private pay transaction will drop way more money to your bottom line, typically two to three times what an in network vision plan patient on the lower reimbursing side of things would. I know it's a lot of numbers to consider, but instinctively you know that an in network patient generates less revenue than an out of network or a private pay patient does. And if you're able to get the patient there out of network reimbursement, that doesn't come out of your pocket, that comes out of the vision plans pocket. So you get 100% of your revenue from the patient directly, making your admin simpler. No reconciliation, no writing off anything. So your whole process becomes streamlined as you move forward in this process, deciding which plans to step away from. Every time you step away from a vision plan, your admin becomes easier and your team becomes more equipped to capture private pay patient.

[Eugene Shotsman]

So it's interesting, what are the objections that private pay patients have in the optical? Because I could see a world where a private pay patient might say, well, I'm going to spend less or an out of network patient might say, well, I'm going to spend less. How do you deal with those objections?

[Steve Alexander]

It's going to be pretty context specific, but often they might actually spend less on an out of network basis than in network because in some cases, in order for a practice to be profitable with a patient on an in network basis, they have to dispense the most expensive progressive available, not necessarily the best one. Although all the ones in the higher tiers are very good progressives. I don't want to malign any of them. They're all good. But that doesn't mean it's the best one for the patient. And it doesn't mean in a private pay scenario that's the lens the patient would end up with. On that same token, there are a lot of great private label lenses, progressive lenses, that have all these great features that those top tier branded progressives do as well. So a practice does have the opportunity to lower their cost of doing business and speed up the turnaround time for their private pay patients without having to go to a lab that may or may not be overloaded with insurance work to do. So there's an element of higher quality manufacturing that might come into play as well.

[Eugene Shotsman]

Well, and actually you just brought up a really interesting point is you can drive down your cost of goods by partnering with an independent lab potentially.

[Steve Alexander]

Exactly.

[Eugene Shotsman]

To serve those patients. If you did that, then, yeah, maybe they will spend less, but they'll be more profitable.

[Steve Alexander]

Precisely. Precisely that. Yeah. And as you develop this relationship further, like, you know, I've spoken with many practices that are 80, 90% vision plans and they have a private pay lab relationship, but it's for such a small subset of their patient base that they can't leverage that relationship to lower their prices. But imagine if that 10% of your business, of 10% private pay part of your business becomes 20%, becomes 30%. And then you're providing a heck of a lot of work for that lab suddenly that they are actually making money on. Suddenly that they are much more inclined to give your practice better pricing or faster turnaround times or free stuff or other service that you wouldn't get if a small proportion of your business was private pay.

[Eugene Shotsman]

Yep, that makes perfect sense. So let's go back. You've got. So we picked the plan, right? Lowest volume, lowest profit, and we chop it. What are you saying to the patients? How do you deliver the message to the patients?

[Steve Alexander]

There are great examples all over the Internet about how to do this, but my favorite way to do this is to explain honestly why you're doing it, we talked a little bit earlier about how, like, generalist practices that are have been in network forever and back when it was profitable to do so, and that's just not kind of how things operate anymore. But if you're able to communicate to the patient, we're stepping away from this vision plan because it makes it so that we can't provide you the service or the product or the quality that we believe you deserve as our patient. And I know some people might be rolling their eyes thinking about, like, that's not what patients think, and probably not that's not what patients think. But all successful practices that I speak with have a standard of care that they establish. Not that somebody in Sacramento decided 25 years ago.

[Eugene Shotsman]

I like the wording. That we're not able to provide you the level of care that you, the patient, deserve with the constraints placed to us by this vision plan. So then what do you say? Okay, so we have decided to drop it, and you're now out. Like, how do you soften the blow?

[Steve Alexander]

Yeah. So we've decided to end our contractual relationship with that vision plan. However, we will find what out of network benefits you have available to you, and we will file the claim on your behalf. So you will be able to leverage your benefits at our practice. And that is the making it easy part. So an analogy that I draw is in rebates, right? Rebate redemption across all industries is less than 10%. Some statistics say it's like 6%. Yeah. And it doesn't matter how big the number is. Could be a $500 rebate, could be a $50 rebate. Redemption is less than 10%. Because people don't like sending stuff in the mail, shockingly. And they don't like filling out forms, shockingly. And if you're already out of network and you're giving a patient a form to fill out, some will definitely do it because they value that reimbursement and want to put in the work. The vast majority of people don't want to fill out a form that they've never seen before. Like, if you give a layperson a CMS 1500, their eyes glaze over immediately, and then they've got to attach their receipt, and then they've got to remember to mail it in, and then they've got to remember to check the mailbox to see if it. If it has finally arrived. And the other. Another thing that people don't really think about is with rebates, nobody on the receiving end of rebates is incentivized to say, no, you don't get it. But with vision plans, there are people on the other side of it that are incentivized to say, no, you filled this out incorrectly. You don't get it. And the number of patients who will fill things out a second time is even smaller.

[Eugene Shotsman]

That 10% is shocking to me. I'm the guy who, when I used to. And maybe I'm in the transition phase of the people going down the slope from 100% compliance with all rebates to zero, but the reality is I'm the guy who, at Microcenter or whatever, I'd get the tech deal and I got to cut out the UPC code and I got to stick a copy of my receipt and the form filled out and whatever Menards Micro Center. Those rebates were my jam. And although now that you say that I don't actually know if I ever got the checks. I know I sent them in, but I don't actually know if I ever got the checks. So I never really kept a spreadsheet to follow up. That just seemed like maybe not the best use of time.

[Steve Alexander]

Right. And nor should you. Right. It would be weird for a consumer to try and keep tabs on that. But I would say based on that, you are an outlier. Right. To jump to filling out the paperwork and getting. Aiming to get the rebate right away. But even still, you know, filling out a rebate is your name and your address. You don't have to include diagnosis codes or procedure codes or make sure the box is filled out specifically and you can't cross anything out. So there's a lot of barriers for the patient being able to do it themselves. That makes it harder for them to realize those benefits.

[Eugene Shotsman]

But that's where technology solutions come in. Those are available. I think some listeners know about those, and we can talk more about those later if time allows. Let's go back now to. Okay, well, you no longer take Vision Plan X. You know, pick a. I don't, you know, I don't want to pick on any one of them. But we pick a vision plan, we no longer take it. So when people call on the phone, what do you say to those people instead of the, well, no, we're not a network or not even like, oh, no, we don't take it.

[Steve Alexander]

It depends. So if you have access to software that'll let you identify the patient benefits, you would go down that path. If you don't, what you would say is with your vision Plan, you have out of network benefits. I don't know what those are, but we can help you leverage those on the day of your appointment. We're experts in the industry, we know what you're going through and we can make it easy for you to leverage those benefits. But we are not an in network provider. Provider.

[Eugene Shotsman]

Got it. So what's interesting is that, and this, you know, just kind of the off the cuff marketing hat is the. Yeah, sure, we help patients with ABC vision all the time. We are a while we're an out of network provider for them. We make it really easy for, for patients to still get the full, the, the full out of network reimbursement for them. And we'll show you how to do that. But one of the things that makes our eye exam different than most ABC vision plan providers is that we have X, Y, Z in our office, which allows us to provide a more comprehensive experience. And that's not even to mention the 800 frames that we have on display in our practice. So just a little bit like off the cuff, like thinking about how that conversation might sound rather than a no and you're not going to get 100% of them, but no, like you get 10% is better than zero.

[Steve Alexander]

Exactly right. If you're capturing 33% of your, you know, one out of every three calls that comes in from a vision plan that you're out of network with, you're generating more revenue for your practice than three in network patients. More bottom line revenue for your practice because they are private. Effectively a private pay patient.

[Eugene Shotsman]

More profit, right, Steve? I'm thinking more profit. And what's, because it's, it is interesting. And then you can have a pretty big cash pay component to your practice. And like you said, you know, then you can be more efficient in the lab and all that type of stuff. So let's actually dive into that a little bit more. Is the revenue value of the types of patients that are there. I've heard you say before, you know that some patients are, you know, some patients you're, you're gonna, you're gonna be willing to pay a lot of money for. And then there's some patients that may actually be hurting your practice. So let's talk about the difference and how you figure that out.

[Steve Alexander]

Yeah, absolutely. So I've spoken with a lot of practices that when they're thinking about which vision plans to step away from, or even if they're not thinking about it, some of them will come out and say, I operate with this vision plan at a loss and they will understand that that's happening. They will have done the math with their accountant and know that because the relative reimbursement is so low and hasn't been increased in 10, 15, 20 years in some cases. But their cost of goods, their cost of being open, all their staff salaries and benefits and so on has gotten so much more expensive over time that what used to be reasonably profitable is now causing them to operate at a. But it also represents a significant proportion of their patient base, a significant enough proportion of their patient base that they're afraid of stepping away from it because they're afraid of losing those patients, which is a reasonable concern. But to the point that we're making, it is.

[Eugene Shotsman]

And it is right. Like, I'm operating at a loss, so I want to keep doing more of that.

[Steve Alexander]

It's. It's reasonable that they don't want to lose their patience. You know, a lot of the best part about working in this industry, industry that I have for, for the time that I've been here is that every doctor and optician that I speak with genuinely loves their patients. They love taking care of them. So the concern isn't like, I'm operating at a loss, and I'm afraid if I lose this plan, I'm going to operate at even more of a loss. It's, I'm operating at a loss, but I don't want to lose the opportunity to take care of those patients that I've been seeing for years. So it is a sacrifice the practice knowingly makes to take care of their patients. And sometimes what's lost in that conversation is that if the practice stops being profitable, then eventually you will be able to take care of no patients.

[Eugene Shotsman]

That makes sense. Now, let's talk about the numbers. You should watch for every single vision plan. Obviously, revenue per patient, but let's break that down a little bit more. So I've got revenue per patient, and that's probably not billed. It's collected revenue per patient. Then we should probably look at capture rate, what else?

[Steve Alexander]

You'd want to look at your bottom line revenue as well, profitability per patient. And consider your cost per hour, your cost per charge, chair time in that. Because even if a practice, even if a plan is profitable or moderately profitable on the surface, if your time is better served building out a specialty that you don't have right now, then you should consider stepping away from your lowest profitability plan. So understanding your cost of doing business is really important in this calculation.

[Eugene Shotsman]

But at the same time, Steve, I have to challenge you on that because I don't think that everybody really knows how to build. You know, how do I allocate my rent and my front desk and my, you know, and the, I don't know, the fixed cost that I have in my practice, not the variable cost of the frames, the lenses, and the chair time, but the fixed cost of my practice. How do I allocate that to vision plan A versus vision plan B versus, you know, patient X?

[Steve Alexander]

Well, it's, it's a comparison of your profitability. So once you're able to identify your per patient profitability with a given vision plan, you then can calculate how many patients you're seeing over a given period of time. So you know your chair time profitability. And then if you know your fixed costs over chair time, you can compare those two. Your per patient profitability should always be above how much time you're spending on that patient or the cost of spending that time with the patient as it sinks to even, or your cost is higher than you're getting back from the vision plan, then that's a clear indication that you should step away from that plan.

[Eugene Shotsman]

So you're saying I should take all of my fixed costs? Let's say I'm just making this up. I have $50,000 of fixed costs to run my practice, and in that is my rent, and that is my, you know, my utilities, and that is my office manager and my secretary and my whatever. I'm going to take all of those people. I got $50,000 and I'm going to. And let's say I have, I'm just going to make this up, but I have 100 hours of chair time. That happens in a, in a month is a really bad, not a very profitable practice. But. So I would take that 50,000 and I would divide it by my hundred, and then I would know that it cost me 500 per hour of chair time to run my practice.

[Steve Alexander]

Exactly right. Exactly right. And then if you think about how many vision plan patients or not you can see in that hour, if you're not clearing $500 over the course of that hour, then you're kind of your business is petering out.

[Eugene Shotsman]

Okay, so what's the benchmark? So now, and I know this is going to vary whether your practice is in rural Missouri versus in, you know, downtown la, but what's the right number to be shooting for, for practice profitability?

[Steve Alexander]

I mean, obviously it's going to vary pretty wildly, but I think at the very least, you can't be losing money on every transaction. And You've got to build enough cushion into each transaction that when you have to go back and do a remake that you're not then suddenly losing money. Not that you expect a remake or anything, but if it does occur and you're barely skating by with those margins, then as soon as you've made that remake, you've retroactively lost money. Money because it costs you that time to do it. Not to mention the negative patient experience that comes along with that. But you want to have a buffer enough where you're not losing money in a given hour. So sometimes if your practice is in with some medical plans as well, doing like health visits, if you're able to see three patients an hour, one of them is medical, one of them has a high reimbursing vision plan, and one of them has a low reimbursing vision plan, on balance, you want to exceed your cost per hour of chair time. If it, if most of your time is spent with low reimbursing vision plans, then it's going to be increasingly difficult for you to make that work.

[Eugene Shotsman]

Makes sense. So what about dropping the big dogs? You know, you got vsp, you've got iMed. Have you watched practices make decisions to drop those plans and what's happened in their practices? Talk about the good, the bad and the ugly.

[Steve Alexander]

So it's, it's interesting because it depends on the reasons you're going to step away from that. If you've got good math reasons to suggest you're going to be able to do this successfully, then you're probably right. Right? If you're dropping a vision plan because it's like the cool thing to do, or because I convinced you to do it, those are not good reasons to do it. And what I mean by that is part of the reason I suggest everyone goes from the bottom up is because converting a phone call to a patient is a skill. And it's a skill that needs to be developed. And particularly if a patient is accustomed to having a $10 copay or whatever, using those benefits are getting your team to be able to understand and convey the benefits for that patient to come to your practice is vital to the success of doing what you're suggesting. So if you're able to develop those skills, those conversion skills on a low patient volume, and then you move to the next one up and you're able to convert at a higher clip, and then if you're converting half of your phone calls who are out of network to patients, then it doesn't matter what vision plan you Drop. Because if you capture one out of two, you are more profitable than if you captured both in network. In most cases. There are certainly exceptions to that, but the math is pretty clear on that.

[Eugene Shotsman]

Yeah, you know, that's interesting. So you're saying the things you should establish, it's kind of like the foundation, and part of the foundation is let's establish the tools, technology, the scripts, the people, the skills that you need in the practice in order to be able to do this successfully otherwise. And practice on your lowest consequence vision plan. Like, practice on the thing that in Your example is 10% of your time and 2% of your profit. So practice on that thing. And of that, if you can figure out, if you can monitor the learnings and figure out what's going well, what's not going well, then you move, move and say, okay, I'm going to make an adjustment, I'm going to be better at this and I'm going to go, go move to the next vision plan. And you kind of potentially just increase your chopping block as long as you're good at the fundamentals. So what is, what, what's the right benchmark of calls that get converted? I mean, I think you. We've talked about some percentages here and there, but I just kind of want to nail down a number we should all be shooting for, is what percentage of calls for vision plans that we don't accept in the practice should turn into patients who spend real dollars in our chairs.

[Steve Alexander]

For the lower reimbursing plans, if you capture one out of three, you're making more money than you would be capturing three in network. For the higher reimbursing plans like iMed and VSP, 1 out of 2, 10.

[Eugene Shotsman]

So I have to get good at having the conversation of we're out of network with X, but we'll help you maximize your plan benefits for that. But we serve patients from that plan all the time and we'll help you maximize your benefits with that.

[Steve Alexander]

That's it? Yeah. Your patient wants to be invited in and they want to know that you understand what you're talking about. So if you are able to confidently convey we're out of network or with anagram customers, say we're an open access provider, then your patient knows that you know what you're talking about. You're going to be able to get them their reimbursement and they will be able to check off in their head, I used my benefits.

[Eugene Shotsman]

Okay, just explain the language. With the we're open access provider, what does that mean?

[Steve Alexander]

So Anagram software for out of network insurance eligibility is called open access. So, as an open access provider, which is basically an out of network thing with slightly nicer language, it allows the. The practice to convey to the patient what the benefits actually are. So if a patient calls an anagram practice and says, I have this vision plan, do you accept it? The practice can respond with, if you just give me a few pieces of information, your first name, your last name, and your date of birth, I can let you know what your benefits are here. So rather than saying out of network or open access or no, what you're saying to the patient is, I need a few more pieces of information before I can answer that question. And in so doing, you are inviting the patient in.

[Eugene Shotsman]

Yeah. And you're already getting the buy in because they're working to get the thing to get the information on the phone. And, you know, the more time they spend on the phone with you, the more likely that that kind of whole. The. The idea that I'm already invested and I'm invested, and so I'm spending the next three. All right, fine, I'm not going to look for the next guy. I've already spent time on this person, and they're pretty nice and they help me and they sound really great. And if you can somehow also communicate the value of your eye exam, or you can tell the story that your eye exam and your service offering is going to be somehow better than what else is available to them, then you're kind of in the money, right?

[Steve Alexander]

Absolutely. Yeah. This is a really important point. This is not related to Anagram, but in consulting with some practices, I was speaking with an office manager and practice owner, and I had asked the office manager how much their exam cost, and she responded with, It's $215. And then I said, why? And then I sat there for about two minutes in silence while the office manager could not answer that question. And to your point, it's so important that your team understands the value that you provide, especially because $215 for an eye exam sounds like a lot when you compare it to the free exam you can get at some of the big national players or the $70 exam you can get locally in some cases as well. But if your team is able to convey, we have a different level of technology, you have a different level of service, you are going to receive X, Y, and Z when you come in, then the patient will be comforted by that and be much more likely to become your patient. But if you can't explain why your prices are your prices, you're not going to convert them.

[Eugene Shotsman]

Well, and while we're on that topic, have you heard a really excellent response to how much is an eye exam for a cash pay patient?

[Steve Alexander]

Not often, if I'm being candid. But the best responses are fine tuned to the person asking them. So it's often like when I was in practice and I'd get, the most common question I'd get is how much are glasses? Which is an impossible question to answer without more context. It depends on how often you need them, what you're wearing them for, what your prescription is like, and how cool you want to look when wearing them. Them. And while that's probably how I'd answer that question, the glasses question on the phone, it's not helpful on the exam side of things. So I think answering that question with our exams start at this dollar amount, but it depends on what you need. So let me ask you a couple of questions and then we'll figure out what your exam would be. And then again, you're pivoting to having a conversation with a person and not trying to convince somebody to come in.

[Eugene Shotsman]

Yeah, and I think every time I hear the cost question, what I think is the patient is trying to commoditize the offering because they don't know any better. And so I tend to say the first time I hear that question, that's an opportunity to communicate value in that conversation. So it's almost, I think you and I would have a very similar answer. I'd love to help you with that. Let me just make sure that I can. Because we have different kinds of exams that we do here and we have lots of different offerings. And so why don't you tell me a little bit about your eye health or your, your vision so that I can tailor, I can get you, I can get you a pretty precise answer. And then rather than saying it's 129, but if you need contact, it's another 75 bucks because, like, well then we're just, we're just commoditizing, right? And I'm thinking, oh, 129 plus 75. Oh shit, I'm already at 200 bucks, man. Like, I can spend $200 on, you know, really nice dinner this weekend. Do I really need this right now? Like, even if I, even if I'm not. And so all of a sudden we're commoditizing. Commoditizing. So decommoditize it. Start a conversation about something, something different. And in my kind of, in in the way that I'm hearing you talk about it, it's also just change the conversation.

[Steve Alexander]

That's right. That's right. Yeah. Because the person on the phone in practice is supposed to be the expert. So often, to your exact point, a patient is asking a question to the best of their knowledge, but their knowledge about what we do is extremely limited, and it is incumbent on us to change that, actually.

[Eugene Shotsman]

Yeah, exactly. So, you know, Steve, we've covered a lot, and I think we've tried to answer this question, and I think your answer is absolutely to the question of should you drop a vision plan? And the when has to do with do you have the tools, do you have the skills, do you have. Have you done the analysis to figure out what's profitable, what's not profitable, and how's it all going to work? I think we've, you know, I. I think we've covered that question and everything in between. Is there anything you'd like to add or anything that kind of. As a final parting thought, as we kind of think through this particular topic.

[Steve Alexander]

Yes, there are hidden costs associated with being in network with too many plans. And I'll say it that way because it's true when you're in with any of them, but it exacerbates the more you're in network with. And some of those things are that you might have to work with several labs where. To the point where your optical department is opening three and four boxes every day to varying levels of quality. And that takes time for your opticians to fix and verify and make sure the work is good. And sometimes it isn't, and sometimes it is. Right. But those things take time and effort where your team isn't doing something else. There are also the hidden. The opportunity costs associated with being in network with too many plans. Often practices that I've spoken with are booking out three, four, five weeks in advance. And on one hand you'll say, like, hey, that's great. I'm in demand. Right. But when you actually think about it, a new patient is not waiting five weeks to come to your practice. Existing patients might, but a new patient wants to come in, and they want to come in right now. And if you can't accommodate that, you are actually turning away growth whether they have a vision plan or not. If you can't accommodate a new patient today, you're turning away growth. And being in network with too many vision plans is a recipe to turn away growth. Growth.

[Eugene Shotsman]

Yeah, that's a really interesting point, and I completely agree with you. New Patients want to get in within 72 hours. And we have hard data that kind of shows on both sides that it's not, it's not good to have a patient to have. Even in your online scheduler, there's nothing available for three weeks. They're looking somewhere else. So I agree with you. If you're looking to see a different kind of patient or see a patient with a particular specialty or that kind of thing, you're right. Just like open up your schedule so you can do more high value things. Highest and best use theory. Right. And it kind of creates this opportunity. And at the same time, I understand why people get reserved about this topic. So I think you, you've brought up some excellent points. Steve, thank you.

[Steve Alexander]

It was a pleasure.

[Eugene Shotsman]

Yeah. So thank you so much for joining us. We'll post some of your information and anybody who wants to reach out to Steve will post some of your information in our show. Notes, notes. And a little bit more information about the company you run called Anagram. I think we could probably have this conversation and continue. I'd love to hear what our listeners have to say from a debate standpoint. I tried and this is what went wrong or I'm not quite ready to pull the trigger. This is what I found. Maybe there's another angle. So I'd love to have you back on the show when we get some feedback from our listeners. But Steve, thank you for sharing some time with us today.

[Steve Alexander]

It's my pleasure. Thank you.

[Eugene Shotsman]

If you're enjoying the power hour, you might be asking yourself, what can I do today in my practice that's going to make an impact? So over the years, the practice coaches and consultants at the power practice have helped thousands of practices improve. And they often start with one thing, and that's a proprietary methodology called the Practice Profitability audit. For about $2,400, they look at all of your practice numbers and they stack them up against where a practice of your size could and should be. It takes about a week for them to do. And because they're so experienced, they know what your potential looks like. And they're often able to take that $2400, multiply it several times over and hand it right back to you and found profits in your practice in months, not years, in months. But you get to keep the much more profitable practice for years afterwards. But here's the best news. I'm going to tell you how you can have the practice profitability audit completely free. See, we're really trying to get people onto the show website, which is by the way, powerpractice.com and then you click the Power Hour podcast button. The reason we want you there is because I want the audience participation, I want to hear your feedback and I want to know how to make the show better for you so you can interact with us, send us your feedback, offer your suggestions and for a limited time when you go there you can also request a practice profitability audit for free. Right? We're going to cover 100% of the cost but only for five people per month. Month. And five people per month is all we really have capacity for because this is a resource intensive audit and the practice power practice coaches are generally busy serving their clients but for five people a month they've agreed to cover 100% of the cost. So it's totally free to you. So again take action immediately in your practice. Go to powerpractice.com click on the power Hour podcast, interact with us but also request a practice profitability audit today.