hot topic
Spiffs: Reward or Punishment?
The optical industry is concerned about handling spiffs correctly. But the complications of the regulations and a tradition of reward programs have created confusion. Now ECPs are reaching out to address the issue
by Karlen McLean, ABOC, NCLC

An expectation of rewards by ECPs—one laboratory's customer survey revealed that the lab would lose around 80 percent of its business by ceasing reward programs—has kept spiffs alive and well.

This topic was so hot that information was provided anonymously, and of nearly a dozen manufacturers asked to participate, most chose not to comment. The Vision Council of America currently does not have any policy on spiffing. Its spokesperson said, "We represent the masses of manufacturers all with their own personal approach to this somewhat controversial subject."

When it comes to spiffs, one lab executive may have said it best: "I love the comment 'selling trouble.' But rebates, promotions, and gimmicks are a part of the American culture."

Clarifying how rewards are handled in your practice is essential to doing good business today. Here are comments, tips, and pointers from inside the trenches to help you take action.

LEGAL BRIEFS

Some ECPs interviewed for this story choose not to participate in any reward programs, while some manufacturers and labs don't offer them, citing concerns about breaking anti-kickback laws.

The reason spiffs are on the radar today is due to government regulations. The Federal Anti-Kickback Statute makes it a felony punishable by up to $25,000 and up to five years imprisonment for any person to knowingly and willingly offer to pay, solicit, or receive any remuneration directly or indirectly in cash or kind for purchasing or ordering any facility, service, or item which is payable under a federal health care system.

Any eyewear that's dispensed to current or retired federal employees, Medicare or Medicaid patients, or in some cases state government employees, can be under scrutiny. As a general rule, discounts are encouraged under federal health care programs. But if the federal health care program doesn't get its appropriate share of a discount, then the program may be violating federal law.

"One perception or concern is that the government may view it that they're paying artificially high prices due to spiffs," one lab executive says.

That's why most manufacturers and labs now have disclaimers on their discount and reward programs, making ECPs the responsible party in any violation.

Many labs have already taken steps to define their position when it comes to safe harbor provisions, and advise ECPs to do the same.

In many cases lab rebates in the form of cash prizes such as TVs or vacation travel are slowing. Instead, rebates are given as a check or as a credit on an invoice along with a follow-up statement from which the discounted price of the covered items can be determined. However, government regulations make no distinction between cash or any other item of value.

Marketing programs and the laws regulating them vary, so ECPs and staff members must understand federal and local law where they do business," a manufacturing executive advises.

BUSINESS BASICS

Like it or not, spiffs continue because they work. Manufacturers, labs, and ECPs all profit from spiff-fueled sales. "Spiffs are necessary to help drive premium product sales. If we didn't have spiffs, we'd lose new product excitement from salespeople," another retail manager says.

But managing spiffs at the retail level can turn into an employee satisfaction and retention battle. "It can be a major problem," observes one retail manager. "Dispensers fight each other for spiffs. If a check or prize comes in and one dispenser takes it and doesn't share, employees call for more. It's unprofessional, creates tension in the office, and puts our vendors on the spot."

Business owners may not know how spiffs are handled. "Some owners leave the dispensary to its own devices. They focus on the medical side of the profession. The result is untrained, unprofessional, and at times unethical behavior in the biggest profit center of a practice," one optical retail manager observes.

Labs tend to pass along programs offered by manufacturers. But sometimes labs get caught in tricky negotiations. "We had a big account that expected money under the table each month. They asked, 'What can you do for us?'" says one lab executive. "We refused. It's not ethical and it's not fair to other accounts. We offer discounted lenses, food, dinner, sporting events, theater, seminars, eyewear and other perks."

SPIFF REFORM

Some ECPs and lab owners see spiff reform in the future. Clarifying the spiff process and keeping the focus on good business practices top the list. Following are some redesigning suggestions offered up by ECPs and lab owners.

■ Restructuring. Don't allow direct spiffs and rewards to staff. Owners and manufacturers should create a trickle-down effect. When staff is spiffed directly, business owners lose control.

■ Personal packet. Supply eyecare dispensaries with forms that are approved by the practice owner listing each employee's name with space for each spiff-entitled invoice. This keeps everyone on the same page.

■ Price points. Manufacturers could lower their prices instead of giving back for purchases.

■ Building to last. Generally, promotions create spikes of product increases. So spiffs are a temporary business building strategy rather than an ongoing one. Consider coming up with ways to offer ongoing business value to your customers.

But are spiffs going away anytime soon? Industry input indicates that while many in the business would like to see spiffs hit the road, it's unlikely, even considering federal statute concerns.

Notes one lab manager: "Once accounts get hooked on spiffs, it's hard to take away."