How to make money from ophthalmology
By Stephen W. Earnhart, MS
President and CEO
Earnhart and Associates, Dallas
In light of the September 1997 Same-Day Surgery article on cataract surgery reductions, I’ve been flooded with calls asking my opinion on the issue. In case you missed the article, Medicare is considering major cutbacks in physician fees for a number of surgical procedures if the surgery is performed outside the doctor’s office. I will not address the obvious quality of care issues this appropriately is going to stir up, but instead I will deal with your questions on the topic.
In my opinion, should this action pass in spite of the lobbying action against it and quality of care subsequently erode, we will see changes. However, I do not believe the changes will be negative for all. Clearly some facilities are not positioned to reap the benefits from this legislation. There will be winners and losers.
This is going to force the retirement of many ophthalmologists who are fed up with the system. These surgeons have seen their professional reimbursement decline from $3,200 per cataract extraction and lens insertion to potentially about $600 in just eight years!
Clearly, the number of physicians entering this field is not going to be what it was just a short time ago. Physicians who perform 50 to 125 cataract extractions per year are retiring or pursuing new career paths. So, what does that create? Increased demand and decreased supply of surgeons. The procedures themselves are not going away just the surgeons.
We are going to see the smaller practices gobbled up by the more aggressive practices. We will see the development of mega-practices, those that perform thousands of cataract procedures a year instead of hundreds. The rule of thumb for ophthalmology used to be that 80% of cataract surgery in the United States is performed by 20% of the surgeons. I think we are going to see that 80/20 quickly change to 95/5.
What can you do? I’ve been a strong advocate of recruiting ophthalmologists into our centers for years. The challenge now is keeping them and/or attracting more. There is too much money to be made on this procedure for people to walk away from it. From where I’m sitting, Medicare is becoming one of the better reimbursers out there.
Do a couple of things if this procedure is interesting to you. I say that because some people still think they cannot make a profit from this case. First, try to recruit the "big cutters" to your same-day surgery program. If you are in the position, offer purchased equity. Second, make your facility more efficient to accommodate large numbers of cases by considering the points in the box at left.
Medicare will reimburse you about $900 (regional variations abound) for this procedure. That is going to include the price of the intraocular lens (IOL) for which they tack on another $150. The 20% patient co-pay (which you’d better go after) is included in that figure. So you have a potential reimbursement of about $900 that should not cost the average surgery center more than $300 in supplies including the IOL.
I know. Some centers are shelling out significantly more than that amount. Some have contacted me with supply costs of more than $1,200 per case. But they also are paying $375 for a lens for which the rest of the world is paying about $60, more than $100 a vial for a vitreous replacement solution for which others are paying $21, and $85 for a "custom pac" that should be under $30. The list goes on. I did an audit for a hospital-based surgery center a few months ago and discovered this and more. They ended up saving more than $800 per case! You don’t need to do an audit. Just follow the free advice at left.
Those are just some of the things to consider. I know that your center is unique, but I have yet to find a center that should be paying more than is necessary.
Another statement I hear is, "Our MDs are so slow!" So, book them in the afternoon and have a different shift come in later (no overtime) to handle just these cases. I know this is a simplistic response to a real dilemma for some. Sometimes there is no cure for the expediency-challenged surgeon. But even if your supply cost per case is $300 and your labor is $200, you still have a pool of money to contribute to your overhead.
Bottom line: Someone is going to try to capture the cataract market. Waiting until the legislation goes through might be a little late to start. The ophthalmic physician practice management companies probably will flourish as a result of this action and will be looking for a receptive home for their surgery. Contact them and offer a haven before they contact someone else. The cases you may lose will be performed just not in your center!
(Editor’s note: Earnhart can be contacted at Earnhart and Associates, 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: surgery@ onramp.net. World Wide Web: http://rampages. onramp.net/~surgery.)
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