Retail pricing in refractive surgery part iii


Published on

Published in: Health & Medicine
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Retail pricing in refractive surgery part iii

  1. 1. TODAY’S PRACTICE Retail Pricing in Refractive Surgery, Part III Signs of a turnaround. BY SHAREEF MAHDAVI Three years ago, I became deeply concern- then, was a failed experiment. LASIK did not appear to fol- ed about the lowering of LASIK retail low the typical economic laws of supply and demand. To prices, and I wrote an article1 to try to shed the contrary, most people continue to value their eyesight some light on the issue of pricing and how over their other sensory functions and think long and hard it relates to consumers’ adoption of LASIK. before allowing anyone to touch their eyes. The fear quo- The key points of the article could be sum- tient about the LASIK procedure remains high today. marized as follows: • lower prices were failing to stimulate additional demand ANOTHER CROSSROADS for LASIK; Now, more than 2 years later, we are at yet another cross- • the decline in LASIK prices, widely promoted by some roads in refractive surgery. The good news is that the past ophthalmologists and corporate providers, devalued the 36 months have shown a dramatic turnaround in LASIK entire value proposition offered to consumers by refractive pricing. As Figure 1 shows, average pricing has increased by surgery; nearly $100 each year and should reach $1,900 per eye for • a surgeon who cut his price in half had to work 2.5 times the year 2005. Notably, the total number of procedures per- harder to achieve similar profitability; and formed has also increased during this time period. More- • with only 5% penetration, LASIK was only reaching the over, the 10-year accumulation of data continues to rein- early adopters within the consumer population. force the notion that lower prices do not lead to higher The following spring, I wrote a second article that quanti- LASIK procedural volumes. fied the impact discounting had had on the refractive sur- This turnaround did not happen by accident. For exam- gery category.2 By that time, LASIK’s dramatic drop in price ple, the industry made a concerted effort to develop had caused many surgeons to re-evaluate their desire to perform the procedure. Such a re- sponse was not surprising, considering the data from 2000 through 2002. When average LASIK prices declined from their high nationally by 24%, total procedural volume nationwide declined by 18%. I assessed the resulting financial impact on the category as follows: • discounting cost the industry $1.67 billion, (Courtesy of Market Scope.) which amounted to $335,000 for the average refractive surgeon, and • because the discounting was funded by a reduction in revenue (with costs remaining the same), every bit of this amount was lost profit. 2 Average price pre-1999 estimated by SM Consulting. Ouch! I also suggested that, although it took 5 years Figure 1. This chart shows US LASIK procedural volume and the average to build the value of refractive surgery in the price per eye, 1996 to 2005. Unlike traditional economics, the decrease in mind of the consumer, it took just a few months LASIK pricing was followed by a decline in overall procedural volume, in the year 2000 to destroy much of that value. and the increase in LASIK pricing seen since 2003 has been followed by Value pricing, as it was called by advocates back an increase in overall procedural volume.82 I CATARACT & REFRACTIVE SURGERY TODAY I NOVEMBER/DECEMBER 2005
  2. 2. TODAY’S PRACTICE (Intralase Corp., Irvine, CA) have shown that the(Courtesy of http:// “no blade” message has proven easy for the clini- cal staff to communicate and for patients to understand. The bottom line here is that patients are more willing to pay for a surgical procedure when they can see its value. New technologies have proven to be an antidote to the disease of discount pricing. COMPARING MODELS Granted, some argue that factors such as the economy and the Iraq war are behind fluctua- tions in procedural volumes. I acknowledge that a correlation does seem to exist between con- Figure 2. This graph shows US procedural volume and average surgeon sumer confidence and LASIK procedural vol- fees for breast augmentation, 1996 to 2004. Breast augmentation per- umes, and the Market Scope newsletter tracks formed by plastic surgeons serves as a control group to understand this relationship very closely. However, what if whether or not changes in price and procedural volume can be attrib- we could find a controlled comparison for the uted to outside factors such as the economy. In contrast to LASIK, market of refractive surgery? Is there another providers in plastic surgery have raised prices by 21% and have seen the product or procedure subject to the same envi- total procedural volume more than triple during the same time period. ronmental factors? Indeed there is. Breast aug- mentation is the most widely performed surgical technology that improved refractive surgery in the minds of procedure by plastic surgeons, and its surgical fees of $3,400 consumers. Providers adjusted their fee schedules to simpli- per patient are in the same ballpark as LASIK’s. So what’s fy patients’ operative choices and also offered creative happening in that category? financing to make the procedure more affordable. I want to As Figure 2 shows, the relationship between price and review each of these points and how they shape the overall volume in breast augmentation has been very different than image of refractive surgery in the mind of the public. This for LASIK. During the 9-year period ending in 2004, plastic topic is timely, because we are now at the early stages of surgeons have increased their fees by nearly 21%, and proce- refractive IOL technology, for which the lessons learned dural volume has tripled. Same time period, same economy, from LASIK are equally applicable. and same catastrophic events (9/11, Iraq war). Furthermore, the plastic surgery industry has withstood negative PR simi- MAKING IT BETTER lar to LASIK’s (the rupture of implants). In late 2002 and early 2003, two technologies emerged that So, how does one explain the different outcomes be- significantly impacted laser vision correction: customized tween these similar markets? The history and dynamics of ablation and femtosecond lasers. Both required expensive upgrades that promised to improve LASIK’s outcomes and safety for patients. Manu- facturers invested heavily in developing the right messages for surgeons to use when promoting the technologies and educating consumers, and the (Courtesy of CareCredit.) messages shifted from the marketing of the tech- nology itself (a feature) to what the technology could do for the patient (a benefit). Doctors increased their fees to offset the cost of these new technological upgrades (Figure 1) and reported that patients were not balking. Figure 3. This graph demonstrates financing as a percentage of revenue. Seemingly, the new technologies have helped Nearly all automobile purchases are financed, as are nearly one-third of reduce patients’ concerns about the risk of bad typical consumer purchases such as furniture and electronics. Although outcomes and increased their willingness to con- refractive surgeons as a group lag behind, some of the higher-volume sider surgery. For example, surveys of surgeons surgeons are financing 40% or more of their LASIK procedures via third- who offer flap creation with the Intralase FS laser party patient financing companies. NOVEMBER/DECEMBER 2005 I CATARACT & REFRACTIVE SURGERY TODAY I 83
  3. 3. TODAY’S PRACTICE the plastic surgeon’s relationship to MAKING IT EASIER his patients is based more on the The third trend that has helped skill of the surgeon than the preci- displace the discounting mentality sion of the technology. These sur- in refractive surgery has been geons have done a very good job providers’ increased adoption of of maintaining the value of their zero-interest financing. A spinoff of role in the surgical process. Their the successful model used by professional societies closely moni- automakers, no-interest financing (Courtesy of tor advertising and have strict rules has created the perception of value: governing what surgeons may and patients can spread their payments may not say to patients in terms of for LASIK over 12 months or longer promising results. Moreover, as a and not have to bear the interest. group, plastic surgeons tend to This message has been used effec- have a much better understanding tively both to attract and to con- of what it takes to deliver an over- vert interested consumers into all experience that reduces patients. Consumers are familiar patients’ fear of surgery and builds Figure 4. During the decade ending in 2003, with financing, and this method of on physicians’ primary asset, word- credit card debt nearly tripled to approximate- payment is easier to fit into a of-mouth referrals from satisfied ly $9,000 per household. Similar surveys have monthly budget than a large cash customers. In contrast, the shown that only one in four adult Americans outlay. No-interest financing pro- approach in refractive surgery has has more than $500 in his checking account. vides more motivation to act than been to overpromote technology, simply getting a lower price, and price, and results. the option makes sense in the refractive category, where lower prices are associated in consumers’ minds with lower MAKING IT SIMPLER quality. The second positive trend in refractive surgery during the Oddly, refractive surgery lags far behind other consumer past few years has been the reduction of tiered pricing, categories’ adoption of financing. As Figure 3 shows, only which began in the late 1990s as an attempt by providers to 22% of consumers use third-party financing (not including give their patients greater surgical choices at different price credit cards) for refractive surgery, a rate much lower than points. Patients were allowed to choose between different that used in the consumer electronics and furniture cate- technologies or even different surgeons, each at a different gories. A survey of 25 refractive practices that rank in the price point. Some surgeons even stratified price by refractive top one-third regarding LASIK volume showed a financing error. However, there are unintended consequences to ex- rate of 25% to 40% (data on file with SM2 Consulting). panding the range of choices for patients. In his book, The Many of those practices indicated that patient financing Paradox of Choice: Why More Is Less,3 psychologist Barry has expanded their marketing potential. My guess is that Schwartz illustrates how choice overload can make a con- refractive surgery’s lower average adoption rate is outdated sumer second-guess and stall his decision. More options thinking on the part of providers who view patient financ- mean more effort, and any postoperative problems will be ing as a necessary evil rather than a strategic weapon. interpreted by the patient as a bad decision. In refractive Reality dictates that financing will become more impor- surgery, which inspires fear in many consumers to begin tant in the future. Household debt has nearly tripled in the with, offering too many choices may cause patients to sim- past decade in the US (Figure 4). Factor in the introduction ply say, “I’ll wait.” of premium IOLs at retail price points of $8,000 to $11,000, Because the new refractive technologies have allowed and financing becomes even more necessary in order to surgeons to clean up their fee schedules, many have revert- expand market acceptance. Just like the technological ed back to a single-price philosophy that sets the fee to advances described earlier, patient financing is another anti- include whatever technology is best indicated for each dote to the disease of discounting fees. patient. Multiple-year surveys of Intralase customers4 have confirmed this trend: the percentage of those surgeons IMAGE MATTERS incorporating the femtosecond laser into their basic surgical Although the past several years have brought a healthy fee has increased from about one-half to two-thirds. Single- rebound in refractive pricing, the aftereffects of discounting option pricing has simplified the discussion of cost between will persist. Perceptions can become firmly planted in the the counselor and the patient. (Continued on page 86)84 I CATARACT & REFRACTIVE SURGERY TODAY I NOVEMBER/DECEMBER 2005
  4. 4. THERAPEUTICS Tetracaine for Post-PRK Patients The drug provides pain control after surgery without serious complications. BY RICHARD MAW, MD uring the last 5 years, PRK has re-emerged as aD common procedure among most experienced refractive surgeons. Numerous reasons for this resurgence are that (1) PRK avoids flap-relatedcomplications, (2) PRK may be safer in some eyes with re-gard to preventing ectasia, (3) PRK allows the treatment “I have used Tetracaine to control pain after PRK in all of my patients during the past 2 years.”of some corneas that are too thin for LASIK, and (4) theintroduction of mitomycin C to prevent haze has broad-ened the treatment range of PRK to include high myopes that they may use Tetracaine q.i.d. for the first 4 days post-and deep ablations. operatively to help control their eye pain. Because I supply The drawbacks to PRK include more pain and a slower them with a single, 2-mL bottle, patients who use thevisual recovery compared with LASIK. I certainly think that medication too often will run out of it before they injureLASIK is more convenient for patients and that it therefore themselves. I also tell patients that they may use a topicalwill remain most informed patients’ procedure of choice NSAID q.i.d. for the first 4 days after surgery to help con-for the near future. However, I believe we are entering an trol their eye pain.era of much better pain control with PRK patients, and For antibiotics and steroids, patients start the followingthis change will make the procedure better accepted by regimen on the day after surgery. They use Quixinpatients. (Johnson & Johnson, New Brunswick, NJ) q.i.d. for 1 week. For me, the biggest advance in pain control for PRK Starting the day after surgery, patients use Lotemaxpatients involves the routine use of topical anesthetics (Bausch & Lomb) q.i.d. for the first week, t.i.d. for the sec-such as Tetracaine (Alcon Laboratories, Inc., Fort Worth, ond week, b.i.d. for the third week, and q.d. for the fourthTX) during the first 4 days after surgery. week. I instruct patients to use artificial tears every 1 to 2 hours for the first 2 weeks after surgery and then as need-RE SULTS ed for symptoms of dryness. I have used topical Tetracaine to control pain after Finally, I prescribe one or more of the following oralPRK in all of my patients during the last 2 years. In that medications as needed: Tylenol No. 3 (Johnson &time, I have treated 541 eyes of 293 patients without Johnson); Ambien (Sanofi Aventis, Bridgewater, NJ);any serious complications. One of my patients experi- and/or Celebrex (Pfizer Inc., New York, NY).enced delayed epithelialization in both eyes (see sidebar,Case of Delayed Wound Healing, on page 86), but he sus- CONCLUSIONtained no visual loss and eventually recovered fully. All Without topical anesthetics, only a minority of PRK pa-of the other eyes I have treated have achieved complete tients’ pain is well controlled on topical NSAIDs and/orepithelialization within 1 week of surgery. oral pain medication. In contrast, an overwhelming major- ity of my PRK patients have reported that topical Tetra-REGIMEN caine effectively controlled their pain. Many have said to My postoperative regimen for PRK is as follows. Imme- me that, in retrospect, they would be genuinely fearful ofdiately after surgery, I instill a fluoroquinolone antibiotic in undergoing PRK without having Tetracaine as an option tothe patient’s surgical eye and place a bandage contact lens control their pain postoperatively.(Bausch & Lomb, Rochester, NY). Next, I instruct patients I consider the use of topical anesthetics for PRK patients NOVEMBER/DECEMBER 2005 I CATARACT & REFRACTIVE SURGERY TODAY I 85
  5. 5. THERAPEUTICS TODAY’S PRACTICE CASE OF DELAYED WOUND HEALING (Continued from page 84) minds of consumers, and the idea that One of my patients experienced delayed epithelialization after PRK. He was a LASIK is available for $299 hurts the 24-year-old white male with a history of hepatitis C. His medical history was oth- image of refractive surgeons in patients’ eyes. Secondary to refractive erwise unremarkable, and he was in good health. The patient was using no med- surgery’s primary benefit—that it can ications, and he had no history of unusual wound healing. He underwent un- get rid of glasses—consumers focus complicated bilateral PRK and received the usual postoperative medications, in- most on price. The industry must cluding Tetracaine (one drop to both eyes q.i.d. as needed for pain for 4 days therefore work hard to change its postoperatively). image so that patients think about how great the surgeon is, not what The patient’s preoperative prescription was low (-3.00 -1.50 X 095 OD and price he charges. -3.25 -1.75 X 087 OS). He had thin corneas (460µm OD and 456µm OS). On the first postoperative day, the patient’s visual acuity measured 20/25 OD and SUMMARY 20/30 OS. His bandage contact lenses fit well, and he had routine, 5-mm epi- My goal in this article has been to thelial defects in each eye. On postoperative day 5, it was obvious that his eyes put to rest any notion that price were not healing in a normal manner: both eyes had persistent 3- to 4-mm can be pulled like a lever to stimu- late the demand for refractive sur- epithelial defects; the stromal tissue of both corneas had become edematous; gery. A multitude of issues affect and his visual acuity had decreased to 20/60 OD and 20/80 OS. consumer demand, but price has The patient denied abusing the Tetracaine. Regardless, I instructed him to dis- not proven to be one of them. continue the use of all anesthetics (including NSAIDs), and he returned the bottle Unlike the economy, population of Tetracaine to me as proof that he was not overusing the medication. demographics (eg, aging baby I followed the patient closely during the next several weeks and varied his boomers), war, hurricanes, and avian flu, price is one issue that the treatment regimen. By week 3, both eyes had fully re-epithelialized. Even then, surgeon fully controls. Additionally, however, he suffered several episodes of bilateral, central epithelial breakdown. physicians who plan to offer refrac- After 2 more weeks of failed therapy with bandage contact lenses, his eyes finally tive IOLs can benefit from the les- responded well to pressure patches. His final visual acuity was 20/15 OU, and he sons learned with refractive surgery experienced no further episodes of epithelial breakdown after postoperative over the past decade and thus help week 5. the field to grow and positively impact the lives of the spectacle- It took 5 weeks to achieve and maintain complete epithelialization in both of dependent population. ■ the patient’s eyes, and he only used the Tetracaine for 4 days postoperatively. For these reasons, it seems unlikely that his extremely delayed wound healing was Shareef Mahdavi draws on 20 due to his using Tetracaine during the immediate postoperative period. In 2 years, years of medical device marketing with more than 500 PRK eyes treated, this is my only patient with delayed wound experience to help companies and providers become more effective and healing after PRK. Consequently, this patient has not deterred my use of Tetracaine creative in their marketing and sales in the first days after surgery. efforts. Mr. Mahdavi welcomes com- ments at (925) 425-9963 or to be within the standard of care for refractive surgeons today. Again, I would Archives emphasize prescribing no more than 2mL of anesthetic without refills in order of his monthly column may be found to avoid the potential abuse of the medication and subsequent injury. (All of at my PRK patients must read and sign an informed consent that discusses the potential for vision loss due to neurotrophic keratitis from the use of topical 1. Mahdavi S. Retail pricing in refractive surgery. Cataract & Refractive Surgery Today. 2002;2:9:29-38. Tetracaine.) ■ 2. Mahdavi S. Retail pricing in refractive surgery part 2. Cataract & Refractive Surgery Today. 2003;3:6:39-42. Richard Maw, MD, is a board-certified ophthalmologist and refractive 3. Schwartz B. The Paradox of Choice: Why More Is Less. New York, New York: HarperCollins Publishers Inc.; surgeon in Las Vegas. He states that he holds no financial interest in 2004. any company or product mentioned herein. Dr. Maw may be reached 4. Mahdavi S. IntraLase: coming of age. Cataract & at (702) 228-4554; Refractive Surgery Today. 2005;5:10:117-120.86 I CATARACT & REFRACTIVE SURGERY TODAY I NOVEMBER/DECEMBER 2005