It has been years now since managed care began its stronghold on the optical business. And in these years, optical dispensers of all shapes and sizes have had the chance to strategize ways to maintain their margins and profitability. Chain retailers, in particular, have been proactive in turning these ideas into action.

A survey of some chain stores across the country reveals that all have been greatly affected by the vast number of managed care patients and customers they serve. "Managed care takes up a lot of time, and it�s very hard to make money on it," says Phyliss Sweeney, regional manager and frame buyer for Sterling Optical, which has close to 300 stores across the country.

However, most of these chains have created unique strategies for maintaining profits on their value eyewear. Here, we take a look at how a few of them are keeping their heads above the water.

Giving the Discount

"We have set up managed care different than most," shares Wendee Butters, marketing manager at Knighton Optical, which has close to 30 optical stores in Utah and surrounding areas. "We have no specific frame boards for managed care product. People can pick any frame and lens that they want. We just give them better pricing if they are on a managed care plan�something like wholesale plus a small percentage."

Knighton has set up an interesting strategy to survive within the parameters of managed care. Instead of offering what managed care plans usually provide for their members�such as a typical $100 reimbursement toward complete eyewear�they have arranged a separate deal with the managed care companies.

"We discount readers, sunglasses�everything," says Butters. "The customer just pays it straight to us. There is no reimbursement from the insurance company to Knighton."

The situation begs the question: How do they make a profit? The answer is simple: By seeking both volume and manufacturer discounts.

"We have 1.7 million lives contracted under discount plans with insurance companies," says Butters. "But we still have to make a decent margin so we try to get extra discounts from our suppliers," adds Gary Knighton, the company�s lens and frame buyer. "We deal with the companies who give the extra margin and that has not changed our assortment."

Thus, customers can have anything they like as long as Knighton has an account with that company. "This way people can come in and get an Armani if they want it," he says. "If that�s in violation of the dealer�s policy, we will discount the lenses and mark the frame at regular price."

Since not all frames in stock have had extra discounts from suppliers, Knighton says they try to run promos to make it attractive to the managed care patients to buy particular frames. "We also use incentives to motivate employees to sell certain frames," he says. "We have to as management�to tie a promo to frames we want to push. Addition-ally, the consumer gets to come in and not be discriminated against if they are on an HMO plan."

Knowing the Plan

At Chester County Opticians, which has six stores in eastern Pennsylvania, about one-third of the eyewear sales are to managed care patients. According to president Robert Stratton, the stores have a mixed bag of reimbursement plans. But they have also developed a strategy to stay profitable in a managed care environment.

"We have made ourselves very familiar with the programs we are participating in," says Stratton. "We know how each one works, and we use it to our best advantage while still delivering a quality product."

For example, for plans that pay only on the wholesale price of the frame, Stratton finds out which frames are approved in the plan and figures out what those cost.

"You can get a 15 to 20 percent discount on those products through most buying groups," he says. "So you can get the additional margin. If not, then you are basically getting $15 for a dispensing fee. We all have to find some way to supplement that and this means you have to get the best discount that you can get from the distributor."

Many plans also allow customers to trade up and out of their planned reimbursement. And Stratton says that it�s critical to know the parameters of these plans as well.

"There are some where you can make more money on flattops than progressives," he notes. "You have to know what those plans are. You may not need to oversell a progressive when you may make more money on a traditional flattop within that plan."

Stratton makes a point to go over the plans and their details with all of his employees in their periodic meetings. They discuss the best selling strategies. "If people really understood how each of the plans work, they could make more profit out of each sale," he says.

Some say that frame prices have gone way down due to managed care. "Yeah, it�s cheap, cheap, cheap," says Sterling�s Sweeney. "It�s like $2 frames now. But managed care does bring people in the door, and we have the hope of upgrading them."

Sweeney notes that about half of all managed care customers trade up. And she also points out that while the lower-priced product is important, it�s critical to have a varied mix of offerings.

"The whole idea is that you don�t buy all $2 frames," she says. "You try to have a good selection of frames that people can upgrade to." At Sterling, frame prices range from $79 to $300. "The low end is to get people in the door," she says. "Getting customers to trade up always depends on who is behind the counter and if they can properly illustrate the features and benefits of the higher-priced products."

Many chains also note that it is important to mix product all together in the store so it does not create a stepchild-like effect for the managed care frames.

"We try not to have a specific area which concentrates on plan merchandise," says Stratton. "That way they cannot just focus on the lower-priced goods, and they can also see some designer frames which could be covered. It helps them trade up to better quality merchandise."

And for those plans which require a tower of their merchandise to be on display for their members, Stratton says that most don�t specify where it goes in the dispensary. "So you don�t have to put it out by the front door. But you also can�t put it down in the basement with the lights off." EB