Optometrists

1. Optometrists

2. Industry Overview About 20,000 optometrists offices operate in the US with combined annual revenue of about $12 billion. No major companies dominate the industry, which is highly fragmented: the 50 largest companies account for less than 10 percent of revenue. Optometrists perform routine eye examinations, mainly to write prescriptions for corrective lenses, and can treat some simple eye conditions. Opticians, covered in a separate industry profile, sell eyeglasses and contact lenses in retail stores based on prescriptions written by optometrists or ophthalmologists (physicians who specialize in eye care).

3. Competitive Landscape Demand is driven by demographics. The aging of the US population increases demand for eye exams and glasses as well as increasing incidences of eye disease such as glaucoma, which is often diagnosed by an optometrist although treated by an ophthalmologist. The profitability of optometrist practices depends on efficient operations and whether they also sell glasses and contact lenses. Eyeglass purchases are mildly cyclical with the economy, as many consumers view extra glasses as an expense that can be deferred. The industry is labor-intensive: average annual revenue per employee is about $100,000.

4. Products, Operations & Technology • Optometrists perform routine eye examinations, mainly to write prescriptions for corrective lenses, and can treat some simple eye conditions. Complicated conditions like glaucoma, cataracts, or retinal detachments are referred to ophthalmologists. Optometric eye examinations are fairly standard, usually take less than 20 minutes, and are charged at a flat fee. Revenue from eye exams depends almost entirely on how many customers an optometrist can see. Both optometrists and ophthalmologists may also sell glasses and contact lenses directly from an office dispensary. Because of space constraints, retail sales in office practices are often limited to contact lenses. • Contact lenses come in hard or soft varieties, may be colored, and may allow extended wear or be disposable. The lenses for glasses also come in various colors and with various coatings and may contain areas of different correction (bi- or tri-focals). "Progressive" lenses are bifocals with the corrective areas smoothly blended into each other. Simple conditions such as near- or far-sightedness can be corrected with either contact lenses or glasses, while some can best be corrected with glasses.

5. Products, Operations & Technology Lenses for glasses are made of plastic and are bought from a few large manufacturers, such as Carl Zeiss Vision. Frames are usually bought from a dozen manufacturers but may carry a large number of brand names. Contact lenses are made by companies such as Bausch & Lomb, Johnson & Johnson, and CIBA VISION. Only ophthalmologists are allowed to perform LASIK surgery (laser-assisted in-situ keratomileusis) to correct vision defects. In LASIK surgery, the outer layer of the cornea is cut and folded back and a laser is used to precisely vaporize tissue in the middle layer, changing the shape of the cornea. The cost of LASIK surgery, generally between $1,000 and $2,000 per eye, isn't covered by most health insurance plans. Because of the high cost of the laser devices, ophthalmologists often lease the equipment or share it with other ophthalmologists in outpatient centers.

6. Sales & Marketing • Typical customers are consumers in need of eye exams and corrective lenses. Optometrist offices, like those of physicians and dentists, get new patients by referral or affiliations with insurers and get much of their revenue through repeat visits from patients. • Many health insurance plans (but not Medicare) cover routine eye exams and corrective lenses, so optometrists enter into agreements with insurers to provide services and products at rates often lower than their regular rates. Vision care plans are also common, which often provide for a pair of glasses at a reduced price from participating offices. Consumers covered under vision care plans are two or three times more likely to have an eye exam than patients who have vision coverage in their health plan, according to the National Association of Vision Care Plans. • Internet sales of contact lenses have become common in recent years, because they can be ordered exactly according to prescription and don't require fitting. Many optometrists get substantial revenue from contact lens sales and could be adversely impacted by this trend.

7. Industry Forecast The output of US optometrists offices is forecast to grow at an annually compounded rate of 4 percent between 2012 and 2015. Data Published: March 2012 Consumer Spending Growth on Ophthalmic Goods Flat First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy. Forecast FAQs

8. Critical Issues • Health Care Reform - The Affordable Care Act of 2010 included several provisions that benefited the optometry profession. Children’s vision care was defined as an essential health benefit to be included in school clinics. Eyeglasses and contacts were exempted from the 2.9 percent tax on medical devices. Eye care insurance benefits were also excluded from a tax on high-end insurance plans. However, a campaign by the Department of Health and Human Services to prevent fraud will require optometrists and other suppliers of durable medical equipment to pay $500 or more in fees in order to be eligible to provide services under Medicare. • Insurance Plan Compliance - Navigating the changing insurance landscape continues to be a challenge for optometrists. Employer health care plans are beginning to include vision care, typically a yearly eye exam. Additionally, supplemental vision care plans provide some coverage, including a discount on glasses. However, to get business from members of managed care and vision plans, optometrists have little choice but to accept the discounted prices. Medical flexible spending accounts (FSA) and health spending accounts (HSA) allow consumers to use funds in those accounts on eye exams and expenses.

9. Business Challenges Too Many Optometrists - Although there are about 20 optometry schools graduating about 1,200 optometrists per year, many current optometrists say the profession is oversaturated. Optometrists face competition from ophthalmologists, physicians who treat eye diseases and perform surgery as well as eye exams, and from opticians, who fit glasses. The volume of competition may cause more optometrists to seek work with large companies rather than opening their own offices Competition from Mass Merchants, Internet Retailers - Optometrist departments in mass merchants like Wal-Mart and Sears, as well as sales of contact lenses and frames online, have been cutting into the dispensary revenues of optometrists for several years. Optometrists will have to replace shrinking revenues from glasses and contact sales with other services and products. Economic Cycles - During downturns in the economy, many prospective patients put off preventive care such as eye exams and discretionary purchases such as new eyeglasses. Although the US economy is officially in recovery, many consumers are still without jobs and lack access to health and vision care plans.

10. Business Trends Improved Corrective Eye Surgery May Shrink Optical Market - Although corrective eye surgery like LASIK has so far had no major impact on sales of glasses and contact lenses, the volume of such surgery is expected to increase as quality improves and costs decrease. Optometrists may provide more pre-operative and post-operative care as some LASIK patients require specialized services. Aging US Population - The US population between the ages of 45 and 64 is expected to number more than 84 million by 2020. This group has the most rapid change in the quality of vision, has frequent eye examinations, and can afford to buy multiple pairs of glasses and contact lenses. This age group is also at higher risk for diabetes, which can cause deteriorating vision, requiring more care. Changing Role for Optometrists - The education of doctors of optometry is changing. Colleges emphasize research, diseases of the eye, low vision, and pediatric optometry, among other disciplines. Career options have expanded from private practice into working for hospitals, large chains, and community health centers, as well as for the military and public health programs. Optometrists are needed in rural areas, as well as to work with children and older patients.

11. Industry Opportunities • Expanded Treatments by Optometrists - Some states are considering allowing optometrists, who already treat infections like conjunctivitis in many cases, to treat complex eye conditions like glaucoma. Other states have expanded the prescription formulary available to optometrists, including steroids, antihistamines, and nutritional supplements. • Patient Co-management - Optometrists are increasingly consulting with colleagues to co-manage their patients’ care, in much the same way that medical doctors practice. Optometrists who have a general practice can refer patients to optometrists who have expertise in pediatric vision care, low vision, glaucoma, and other specialties. This allows the primary care optometrist to manage a patient’s care without losing the patient to another eye doctor.

12. Industry Opportunities • New Technologies - Optometrists are turning to new technology to replace the traditional glasses and contact lens sales that are being lost to new competition. New sensing technology that measures the specific vision deficiencies of an individual eye have resulted in customized eyeglasses that provide superior vision, and artificial lenses that correct for natural aging of the eye. Orthokeratology is a new technique to help patients with low-level nearsightedness improve their vision. The latter treatment is not covered by insurance or vision plans, so motivated patients would pay full price.

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