Reducing Lab Costs

How electronic ordering reduces unnecessary lab costs

By Alex Yoho, ABOM

In this world of ever-tightening belts aimed at making offices run more efficiently, we sometimes overlook the very things that could make a tremendous difference. Laboratories have often absorbed the brunt of the give and take between your office and them, but keeping your lab financially healthy can go a long way toward your office's health as well.

In this two-part article, sponsored by the lab division of The Vision Council (formerly the OLA), we'll look at the dynamics of this balancing act.

This month, we'll address the cost benefits of electronic ordering.

Participants in this roundtable include: Tom Brophy, Perfect Optics, Vista, Calif.; Bruce Calhoun, Riverside Opticalab Ltd., Ottawa, Ont., Canada; Joe Jowanowitch, Homer Optical Company, Silver Springs, Md.; Mike Klotz, Duffens-Hawkins Optical, Topeka, Kan.; Danny Pugh, Optical Prescription Lab, Inc., Pelham, Ala.; Jonathan Schwartz, Pro Fit Optix, Grapevine, Texas; and Rick Tinson, Hoya Vision Care, Lewisville, Texas.

COST CONTROLS

Q What advantage does electronic ordering have for the office in controlling costs?

BROPHY: It reduces in-office consumable costs and increases visibility of orders to all members of the staff. It also ensures each member of the team is ordering in the same way, which maximizes efficiency.

CALHOUN: Electronic ordering has the potential to control costs by transmitting the order in a fraction of a second, but often the logistics of receiving the order at the lab introduces other costs.

It all depends on the accuracy of the order that is sent and the effectiveness of the electronic order interface at the lab.

JOWANOWITCH: The job shows at the lab almost immediately and the job can be started right away Opticians can select base curves and thicknesses to get lenses started.

KLOTZ: Time is saved when labs don't make return calls looking for information that costs dispensing time.

A great advantage is the office has access to lens databases, styles, base curves, coatings, tints, and frames. This saves look-up or phone time to the lab for information.

Also, when tracers are used, the patient will receive optimal lens thickness for their frame dimensions

PUGH: In essence, electronic ordering is a swifter and more productive process, which significantly decreases errors in the long term.

SCHWARTZ: Electronic orders eliminate the occasional data transcription error in order entry, caused by penmanship, clarity of fax, or local mistakes. It improves the customer experience.

TINSON: We try to teach ECPs to take the printout from our electronic order system and drop it in the patient's folder as a record of exactly what was ordered…which contains more information than just the Rx.

The electronic ordering system also shows real-time job status.

COST ADVANTAGES

Q How about cost advantages for the lab when accounts use electronic ordering?

BROPHY: It creates its own challenges, but allows for slightly better service levels.

CALHOUN: It is a service point only. If we had to pay a support fee to receive an order, then the third party portal is the one with a cost advantage.

JOWANOWITCH: Phone time is reduced, freeing up customer service to match frames to their trays and to make calls on breakage and answer questions about jobs with problems or job searches.

KLOTZ: Turn time is quicker. The Rx is entered directly into the system, which saves at least a half day. There are no postage or shipping charges on incoming written Rx's. We don't have to manually enter data into the system. We get complete Rx's, eliminating phone calls on missing information. The frame names are automatically printed on the lab forms. We get lenses that fit since C-sizes match the ECP's tracer info.

PUGH: From a lab's perspective, receiving orders electronically expedites the order process and reduces communication with customers.

SCHWARTZ: Keying errors, which can cause delays, breakage, or remakes, are eliminated.

TINSON: It is not unusual for a lab to see 1.5x or 2x as many incoming jobs on a Monday as on a Thursday. Thus, we either have to have a lot of excess data entry labor to handle the high-water mark, or we'll have jobs delayed due to data entry. One of the biggest advantages of electronic entry is removing the data entry labor and delay from the lab processing. ECPs can also view status of jobs in process online.

INCREASED LAB COSTS

Q Describe why you think the cost of doing business is affected when the lab costs increase due to things like redos.

BROPHY: Ultimately, the patient suffers because nobody is going to work for free. The markup will carry to the end user and doctors will lose patients to cost centers like Walmart and Costco.

CALHOUN: All labs look to find ways to reduce the cost of producing lenses while improving delivery times and quality levels. Labs are mass producers of customized products and that requires balance.

If any aspect is out of balance, because of redos, for example, then the additional effort to attend to that issue will frequently cause a disproportional increase to the cost of goods. Short-term this can usually be absorbed, but if it becomes systemic, then everyone pays.

JOWANOWITCH: In most businesses, salary and insurance are the highest costs. When lab costs rise, the employees are affected. Raises or ability to add more employees is compromised. Fewer employees equal less production, creating a bad situation for customers and workers.

PUGH: Our profitability is decreased when costs increase, so it's imperative that we control expenses, operational costs, and costs of goods, including maintaining our lab breakage and customer remakes.

Over the past few years, with improved technology, we spend more [money] and time educating and training our customers.

SCHWARTZ: No one operates on ‘huge' margins any more. The market, the economy, and the competitive nature of our business have forced labs to operate on slim margins and work even harder at cost control. There are costs associated with real and potential loss of future business from dissatisfied customers.

All costs ultimately get passed through the ECP onto the patient. Savings at the lab level will ultimately put labs in a better position competitively through lower pricing and future investment.

For years, we have all considered the ECP office and labs to be partners. In a poor economy, we need more than ever to help each other do business better. EB