"Point/Counterpoint -- VSP Helps VSP"


"Point/Counterpoint -- VSP Helps VSP"

Is optometry's "friend" still friendly?

Gil Weber, MBA
Contrubuting Editor

Adapted with permission from Optometric Management
© Copyright 2003. All rights reserved.
September 2003

As I travel around the country I hear more discussions than ever about third-party vision programs. Many optometrists wonder, "Should I join the 'XYZ' vision plan?" "How many vision plans should I join?" "Which plans pay the most, and will any really benefit my practice?"

My response is always, "It depends." The answer is more involved than simply looking at the reimbursement rates. It depends on each practice's relative "need" to participate at any given time (i.e., the practice's maturity, available appointment slots, number of other vision plans, etc.), and on the administrative and logistical hurdles that the staff must negotiate. It's an issue of "dollars and sense."

Inevitably, discussions about vision plans narrow to Vision Service Plan (VSP). Many O.D.s seem concerned that optometry's traditional "friend" is no longer so friendly. With reimbursements squeezed and administrative burdens increasing, they're considering a previously unthinkable thought -- dropping VSP.

Sometimes the truth hurts

I was a speaker at an American Optometric Association leadership conference in 1991. Representatives of national vision plans including VSP addressed state leaders. Each described how his program was designed to help optometrists. When it was my turn I stood up and said, "It's time for optometrists to realize that the emperor isn't wearing any clothes. Third-party vision plans aren't your friends. They'll use O.D.s as a means to advance their own purpose -- to make money."

Since then, third-party vision care has grown, with VSP becoming significantly more influential. Some optometrists opine that the ways VSP "uses" O.D.s to build its profits have become increasingly annoying.

Does everyone benefit?

All vision plans strive for a competitive edge when selling to health plans and other purchasers. This almost always involves benefit programs tailored to the needs and budgets of the client. However, attractive benefits for employees/members, affordable programs for employers/health plans and positive cash flow for the vision plan don't necessarily translate to profitability for the doctors. For example, when responding to a Request for Proposal from a health plan, the vision plan might toss in a perk for all members of this new program. But there has to be a cost somewhere to deliver that "free" discount benefit, and it's the providers who would have to take the hit.

VSP facts

VSP reports on its Web site that 2002 revenues were $1.86 billion dollars and that it provided eyecare coverage for one in eight persons living in the United States. VSP says that along with this growth, payments to doctors are increasing and systems are being implemented to raise O.D. margins.

Yet an increasing number of O.D.s claim that margins have been cut and administrative requirements made so burdensome that they're considering dropping VSP -- or already have done so. They wonder why financial and operational decisions that affect optometrists across the country (for example, the WellVision Savings Statement) are made without their input. They wonder who chooses the board of directors that "speaks" on behalf of the tens of thousands of panel members who are supposedly the "owners" of VSP.

Because VSP isn't a publicly traded company, answers are often vague and sometimes not available. But public information indicates that, financially, VSP is healthy.

It's there in black and white

The following self-reported information is for VSP California as reported to the Department of Managed Health Care, the regulatory agency that oversees all California HMO and limited-license (single service) HMO operations. These numbers apply to between eight million and nine million enrollees (out of VSP's national total, now approximately 36 million).

You can review these VSP California self-reported financials at the following URL: www.dmhc.ca.gov/library/reports.

Halfway down the page you'll see "Healthplans' self-reported financial information." In the drop-down box, select the report you'd like to view. You'll get the data on VSP and on all other vision plans operating under the authority of the DMHC.

Quarter or Year Ending Enrollees Net Income
Quarter/June 30,2000 9,535,958 $12,487,579
Quarter/Sept. 30, 2000 9,800,202 $17,211,749
Year/December 31, 2000 8,281,585 $24,736,246
Quarter/March 31, 2001 8,419,854 $14,407,320
Quarter/June 30, 2001 8,469,431 $15,073,717
Quarter/Sept. 30, 2001 8,510,683 $11,697,133
Year/December 30, 2001 8,600,129 $40,724,687

For even more detailed VSP financials, go to http://wpso.dmhc.ca.gov/fe/search.asp. Scroll down and you'll see "HMO or Healthplan." Next, select Vision Service Plan and then click "submit." You'll be presented with seven recent financial reports. For fiscal year 2002, VSP California reported net income of $83.0 million, and cash-on-deposit of $66.8 million. Looking at numbers such as these while facing profitability squeezes such as new frame and contact lens mark-up rules makes O.D.s ask what's going on with optometry's "friend."

Why are they still there?

If O.D.s believe VSP's policies are not in their best interests, why aren't more getting out? Certainly many O.D.s are happy with VSP, and most at least tolerate VSP because it does bring in patients and revenue. Still, for all the public "belly aching," why isn't there a more active demonstration of displeasure with VSP compensation and administrative policies?

Most optometrists would admit it's because they're held captive by a four-letter word: fear. While some O.D.s are trapped by circumstances -- practicing in towns dominated by one or two employers who have VSP -- many other optometric practices have become so dependent on VSP that they feel they can't afford to drop the contract.

The practices didn't have to pursue these patients; they didn't have to market or promote or advertise or do anything else. The patients came in based on a listing in the VSP provider directory. If that VSP business goes away, who's going to fill the empty appointment slots?

There really is life after VSP

O.D.s who've cut the ties to VSP report that though revenue drops initially, finances typically turn around -- they discover that the net starts to rise despite a lower gross. Over time, with effective marketing and promotion to attract private pays and others, and by devoting more attention to each patient, those who leave find that the gross also starts climbing. Some O.D.s discover that they can reduce their staff expenses when they drop one or more third-party plans.

It won't be easy

Please don't misunderstand. You can't reduce any of this to a simple process. Dropping any vision plan, but particularly VSP, is a huge decision that you can't make without a complete analysis of the "dollars and sense."

If your analysis says that staying the course is the right thing, then more power to you. But if you decide not to be economically tied to one vision plan, then take encouragement from others who've traveled this path and who've found that there's life after VSP. However, remember that life without VSP means you'll have to pursue patients and satisfy them as never before to retain their business.

Can things change?

As for VSP, can member O.D.s encourage it to change? Many large HMOs have undergone significant changes vis-a-vis their providers recently. Those changes were brought about, in part, by providers willing to walk away from contracts.

And if you're a VSP panel doctor, you have the right to query VSP management and your "leaders" on the VSP Board. Who will look out for your interests if you don't?

Mr. Weber is a nationally recognized author, lecturer and practice management consultant to the managed care and ophthalmic industries and has served as managed care director for the American Academy of Ophthalmology.

Note: the "counterpoint" portion of this article, written by another author, is available online at http://www.optometricmanagement.com/articleviewer.aspx?articleID=70824

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