PRACTICE ADVISORS

Profit Picture

Who is more profitable…eyeglass patients or contact lens patients?

the easy answer to whether eyeglass or contact lens patients are more profitable is “both.”

The problem is that too many ECPs pigeonhole patients as either contact lens or eyeglass patients. This mentality minimizes what the ECP does. Plus, designating someone as one or the other limits our care. Until otherwise determined, every patient should be given the opportunity to receive contact lenses and glasses.

At the very least, contact lens patients need back-up glasses for times when they are not able to wear their contacts. Sometimes, the patient’s prescription requires eyeglasses to be worn over contact lenses. These needs can range from something as simple as computer glasses over dual-distance-vision contacts to night-driving glasses over monovision contact lens prescriptions.

Eyeglass wearers can likewise benefit from having contact lenses and should be given every opportunity to enhance their lives with contacts for occasional wear. Why deprive a patient of the freedom of contact lens wear for a special evening, for example, just because an ECPs has “cubby-holed” him or her into an either/or transaction?

QUESTION OF NEED

Should we look at a patient based on what he or she needs or what we as eyecare professionals get paid? Do we not run a full visual field on a potential brain tumor if a patient’s insurance plan may not pay for it? Thus, in the overall scope of healthcare delivery, it really doesn’t matter which is more profitable. What matters is what the patient needs.

COMPARING PROFIT

However, for the sake of argument, let’s look at this from a numerical perspective.

• CL PROFIT: We examined approximately $7 million dollars of retail contact lens sales and found the gross profit to be 45.1 percent. This is right in line with the 47 percent number in the 2013 Management Business Academy Contact Lens Report produced by the Essilor-sponsored program.

• EYEGLASS PROFIT: However, we also evaluated $27 million dollars in eyeglass sales ($11 million in frames and $16 million in lenses) and found the average gross profit to be 64.1 percent.

It’s little wonder you sometimes see “side-by-side” locations where a major chain will allow the optometrist to perform eye exams and even sell contact lenses, while the chain dispenses eyewear. Never, however, do you see a “side-by-side” where the doctor performs the exams and sells eyeglasses while the chain sells only contact lenses. There is simply too much profit in eyeglasses.

SIGNIFICANT DIFFERENCE

The difference in profitability between the two vision correction options is significant when you consider the spread between our 64.1 percent average gross profit on eyewear and the 45.1 percent gross profitability on contacts: 19 percent (64.1 to 45.1). That’s a $19,000 difference for every $100,000 in sales of eyeglasses vs. contact lenses. For a large practice that performs $1,000,000 in material sales annually, the number becomes $190,000. That is truly significant.

That being said, however, ECPs need to concentrate more on providing both products. Here’s why: Let’s say a practice has an average revenue per patient of $350. Some purchase eyeglasses only, others purchase contact lenses only, and some purchase both. However, we all know that there are many missed opportunities in practices where patients could or should have both products, but only receive one.

DOING THE MATH

For the purpose of comparison, let’s assume a $250 pair of eyeglasses and a $100 eye examination.

• EYEGLASS PROFIT: The gross profit on the $250 eyeglasses would be $250 x .641= $160.25. Add to this the $100 eye exam and the gross profit becomes $260.25.

• ADD CL PROFIT: Providing this patient with a $200 supply of contact lenses adds another $90.20 ($200 x .451). Add a $50 contact lens exam to this, and the total becomes $140.20 ($90.20 + $50).

This increases our gross profit on the same patient to $400.45 ($260.25 + $140.20). Put another way, adding contact lenses increases the gross profit on the formerly eyeglasses-only patient by 53.9 percent ($140.20/$260.25). These are real dollars that add to a practice’s profitability.

• ADDING EYEWEAR: You can also work the reverse situation where a contact lens-only patient becomes an eyeglass purchaser. In this case, the $140.20 gross additional profit from the contact lens patient ($90.20 materials plus $50 contact lens exam), plus a $100 eye exam, becomes $240.20. With the addition of an eyeglass purchase, we now have $240.20 plus $160.25 for eyeglasses, for a total of $400.45. This is the same number as before because the components, though sold in a different order, are the same:

$100.00 eye exam

$  50.00 contact lens exam add-on

$  90.20 contact lens materials

$160.25 eyeglasses

$400.45 TOTAL

When moving from contact lens only to contacts plus eyeglasses, we go from a total sale of $240.20 to $400.45. Thus we increase gross profit by $160.25, or 66.7 percent (160.25/240.20 = .667).

PRACTICE GROWTH

A realistic goal of increasing dual materials could be just 15 percent of a practice’s patients. That would produce astounding results.

If, for example, a busy office sees 3,000 patients a year—and the practice can increase by 15 percent those patients receiving both contact lenses and eyeglasses—that would amount to an additional 450 patients receiving both products.

Remember that adding the contact lens produces $140.20 in gross profit; adding the eyeglasses produces $160.25. For the sake of example, let’s say that the conversion rate is 50/50.

How does that math work in terms of increased revenue per year? The following equation may be long but the numbers are impressive:

(225 patients x $140.20) + (225 patients x $160.25) = ($31,545) + ($36,056.25) = $67,601.25. And that only represents a 15 percent shift in converting patients to both forms of vision correction.

The math can seem complicated, but the bottom-line benefit is obvious. So rather than argue the nuances of which is more profitable—contact lenses or eyeglasses—let us answer the question with a simple answer: both.

Not only would most patients benefit from both, but so would your bottom line.

— Allan Barker, O.D. and Greg Stockbridge, O.D., MBA

SEND US YOUR QUESTIONS

Drs. Barker and Stockbridge will answer your questions about practice growth, business management, as well as other issues. Please email your questions to eyecarebizeditor@pentavisionmedia.com