As Eye See It

They Said What on “60 Minutes”?

Friday, October 12, 2012

The investigative television show “60 Minutes” recently aired a segment entitled,  “Sticker Shock: Why are glasses so expensive?” CNBC then followed with “Glasses giant crushing the competition.” 

Clearly, the value proposition for eyewear is being challenged. Are industry giants truly crushing the competition?  If so, what is the independent eye care practitioner to do? Needless to say, this increased focus on the eye care industry has created quite a buzz. 

It should be obvious to everyone that competition for the independent eye care provider has intensified. Offers found on the Internet are challenging the benefits of personalized dispensing and are providing a confusing definition of quality. In addition, large corporate competitors like Luxottica have grown via their vertically integrated organizations to increase market share. As a reminder, Luxottica owns LensCrafters, Pearle Vision, Sears Optical, Target Optical, Sunglass Hut, and the second-largest vision plan, EyeMed.

Never has it been more important to fully understand where the profits go within the industry. It is essential that we independents recognize which players are true strategic partners and which are, in reality, competitors. Are profits reinvested to help me in my business, or are profits being used against me? 

Before you determine who you are going to do business with, I urge you to ask the question, “Just where do your profits go?” Are your partners focused on helping you? When I hear “60 Minutes” say that Luxottica is the biggest eyewear company on earth and that they raked in $8 billion last year, that clearly shows me their focus. 

VSP certainly continues to be focused on the success of independent optometry. In fact, it is the mission of VSP to increase the connection between its 28,000 doctors and 57 million patients, and to create new opportunities for growth. In contrast, shouldn’t we remember that some “partners” are, instead, focused on driving as many patients as possible to their retail stores? 

As I see it, the two television segments clearly highlight areas within our business that should demand our fullest attention. We must be able to clearly demonstrate the value proposition inherent in personalized dispensing. We also must choose our business partners wisely. I would encourage you to view the two segments highlighted above with the goal of sharpening the focus on these competitive challenges.

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I encourage conversation about the VSP Global companies and the practice of optometry. All blog comments will be reviewed within one business day prior to posting. Some comments may be forwarded to another person within the company for follow up.
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  • Christen Jankowski

    While I realized these are essentially “cheerleading” emails promulgated at corporate (and not necessarily a bad thing), the buzz abounding is the move by VSP to essentially “force” OD’s who take the Signature plan to accept a “Choice” plan that they may or may not wish to participate in. Not a word…nada…zip…zilch. Rumor? Trial balloon? Nothing.

    All the goodwill associated with VSP to their membership takes a collective hit when what is now being peddled as rumor may or may not become “fact” come 1 Jan 13. Make a statement one way or the other. The doctors who accept this plan deserve as much.

    • Dede N. @ VSP Vision Care

      Dr. Jankowski, thank you for your comment. We welcome the opportunity to respond to the purported rumor about the Choice Network.

      It is, in fact, true that effective January 1, 2013, all VSP Network doctors will be automatically enrolled in the Choice Network and must provide service to patients who have the VSP Choice Plan (except where prohibited by state law). You didn’t receive the message simply because you already accept patients who have the VSP Choice Plan.

      VSP Vision Care chose to move forward with this change due to increasing client demands. Patient disruption is always a primary concern for clients that purchase VSP plans and their employees who have VSP coverage. The Choice Network difference makes competing against other vision plans like EyeMed, Spectera, and Davis Vision that much more difficult. By enrolling VSP Network doctors in the Choice Network, we’ll eliminate the disruption between the VSP and Choice Networks and ensure that patients with the VSP Choice Plan can continue to see their VSP provider for all of their eyecare needs. It will also allow VSP to continue to win and retain the clients that enable us to deliver patients into private practices in Washington and across the country.

      Please call us at 800.615.1883 if you have additional questions. (Dede N., VSP)

      • Getting smart OD

        In Ohio we have a bill that as I slowly ween of of VSP we only take signature and DO NOT TAKE CHOICE PLAN.. I highly suggest this for doctors as a step to ween vision plans out of your practice. DONT TAKE EYEMED at all.

  • Jeffrey J. Kiener, OD

    Are you saying that you can’t sell a “better” vision care product?

    Are you saying that you can’t tell the HR departments “VSP costs more than EyeMed, and here’s why”?

    Do you stand for low, low prices or high, high quality, or see some possibilty of combination of the two?

    I’ve been told by some wise folks “Quality, service, cost; you can choose only two”.

  • Colin Rumary

    As a designer, importer, distributor of unique eyewear for over 20 years now, I am always intrigued when people start shooting their mouths off about how eyewear is excessively expensive. Here are a number of points.
    I sold eyeglass frames in 1992 for much the same price as I am selling them now. As manufacturers and distributors, the only real profit margins we have seen is in our ability to be more efficient at the production level. It also means that retail pricing has not increased very much either, with most stores doubling plus a few dollars as being their formula for many years.
    Secondly, because we now have to provide more exciting and interesting eyewear, our design factor has become more expensive, the risk factor is higher. The demand to come up with more new and exciting styles is extreme. Factory pressures (largely due to their being abused during the “depression” two years ago)to make larger quantities cause risk factors to rise and also the tendency to make more boutique and unusual styling almost prohibitive. Third, because players like Lux go directly from factory to store shelves, their risk factor is much lower, and their margins huge. In addition, they now own nearly all the significant brands in the market place, and have now started to buy up more unique design houses like Alain Mikli. So now they will be able to go direct with this product as well. So they are on a march from oligopoly to monopoly.
    So, two things…. one, I do not understand why IECP’s still support these giants by buying their wholesale goods, and secondly…. why am I not hearing any significant defense/other-side-of-the-story from leading IECP professional groups?

  • Brett Johanson

    Along the lines of Dr. Jankowski’s comments, I find it interesting you have chosen to address this topic. I’m curious on the key factors that VSP considers itself to differ in their operations from Luxottica. If I’m not mistaken, you do own Marchon Eyewear, obviously a major player in the industry – not to mention practice management software and a number of laboratories. And with your recent moves into some corporate campuses in the US to directly serve patients, along with your Eyeconic online retail presence, aren’t you essentially following the same model they are? In fact, hasn’t VSP lost its tax-exempt status with the IRS despite the efforts put forth by former Solicitor General, Ken Starr?

    • Daniel L. Mannen, OD, FAAO

      The VSP business model has a primary mission of connecting independent doctors with patients and reinvesting profits in the system to further that goal. VSP Vision Care is a not for profit corporation and fully 90 cents of every dollar is returned to meet the eyecare and eyewear needs of patients. (Please see my response to E. Dean Butler for more on this topic.) With regard to your comments about VSP Global’s subsidiary businesses, these moves were made to help both VSP and its network of doctors better compete with corporate giants like Luxottica whose goal is to generate profits for shareholders. I encourage you to read my earlier posts on online optical.

      • NJ Eye Doc

        eIf I allocated myself a salary as well as pay my staff to run the daily operations of my practice/business and reinvest 90% of any additional profits into thebusiness, could I be a non-profit? A written mission statement alone does not make one a non-profit. VSP or any other entity can state anything they want. while it sounds good, the fact is that the actions don’t match the words. period.

  • E Dean Butler

    I would appreciate an explanation as to the basis for VSP’s claim to be “not for profit.” I was under the impression, along with Brett Johanson (above) that VSP lost their tax exempt status in (I think) 2003. Then VSP filed lawsuits to get the tax exempt status back but lost in 2009 when a Federal Judge issued Summary Judgement against VSP. VSP still claims to be “not for profit.” How does this fit with no longer being tax exempt?

    • Daniel L. Mannen, OD, FAAO

      While no longer tax exempt, VSP Vision Care is still not for profit. Unlike other companies that are focused on generating profits for shareholders, VSP reinvests surplus revenues back in to the system providing eyecare and eyewear services. In addition to paying nearly 90 cents out of every dollar for eyecare and eyewear services, more than $70 million have been invested since 2008 in activities that include US based charity programs. These programs directly benefit independent optometrists with sponsorship of events, legislative support to state and regional optometric associations, and donations, grants and other support for optometry schools.

  • P Duncan Roy Jr OD

    Cephaodynia has been less frequent and less intense since I dropped VSP (just like I dropped Luxottica) about ten or twelve years ago. Have not missed them. These are my personal thoughts, although I was involved in efforts to improve the standing of the profession of optometry in the State of Alabama for many years prior to statutory changes in 1995.

  • Tom Clark

    The goal of vision care plans is to bring patient to your office. Which is marketing. As independent OD’s we allow companies like VSP and Eyemed to reduce our fees by as much as 60%. What other business creates a marketing budge that is 60% of revenue? My practice removed both VSP and Eyemed in August of 2011 which accounted for 30% of my patient volume. In 2012 we will see a 2.8% increase in adjusted net income on 59 less doctor days. Thats right I work 2 months less and made more money by not being a whore to vision care plans. It was a risk but you would be surprise the operational dollars that these companies will drain out of your practice. I had 2-3 additional staff just to deal with complication and issues with plans, reimbursment issues, products, and EHR intergration. I was also surprised how it changed my new patient volume. I have stole private or higher paying plan from my competitors, because 70% of my VSP and Eyemed patient (I retained 30% of loyal patients who now pay full price for my services)have moved to their offices which has filled their books and now the better paying patients who do not want to wait see us. I don’t feel my competitors were ready for my move. Now I see some of my competition is follow my lead and removing themselves from vision plans. To top if off the small business owners who see me now have drop VSP and Eyemed because I am not a provider. So Daniel I complete agree you have to ask yourself “where do your profits go” and would like to add “IECP have the power in this game” we just need to wake up and stop playing their game and start playing ours. That means stop buying all their products,software, and vision care plans. Time to take back our profession and I am proof it is successful.

    • Greg Wolcott

      Hi Dr. Clark, Congratulations on your successful decision! Would you mind answering a question for me? How many days out was your chair booked when you decided to drop VSP and EyeMed?

    • Kelly

      Tom couldn’t be more right about the need to wake up and stop playing their game. I work for a major university that is the largest employer in my town. They opted to use Eyemed for their vision plan and my eye doctor (independently employed) is not covered. Oh well, that’s too bad for Eyemed because I’m not giving up my doctor just to get a few dollars off my eye examination. In this age of constantly-shifting medical, vision, and dental coverage plans, it makes being loyal to a particular doctor tricky. I’d rather shell out a few more dollars than allow some Goliath to dictate my choices. Glad to hear your business is thriving!

      • pattha990

        I am not sure what VSP plan your employer provided. But it was more than a few dollars off for the plan my employer provided. All my eye exams are 100% covered by EyeMed. I am saving hundreds of dollars with it.

  • Joel H Goffman MD

    These plans have nothing to sell if practices drop them. What other business would pay 60% for referrals. Too steep a price to pay. You can see that slowly their “profits” are providing funds to compete with all of us.

  • E Dean Butler

    You say VSP Vision Care is “not for profit.” Is this entity a subset of VSP Global? What is the relationship, and what where does VSP Vision Care fit into the picture? I believe VSP Global is the top company? Is VSP Global a not for profit entity?