OVERVIEW
In preparation of our EYE Black Book, Best Idea Long | COVID Opens an $EYE for Growth, on February 5, 2021, we spoke with a contact that is responsible for all operations at a multi-specialty vision care practice in the southeastern US [urban setting, 3 MDs, 2 optometrists, 30-40% routine screening (the focus of the call), 60-70% cataract, retina, LASIK, etc. procedures, patient volume skews older and averages 130-150/day]. We came away from the discussion with a greater appreciation for the impact that COVID-19 had on practice volume and the velocity of the rebound back to full capacity. Feedback is consistent with other segments of the U.S. Medical Economy in that the practice is back to within reach of pre-COVID levels, but not 100% due to practical adjustments to how a multi-specialty practice is run in today’s “normal.”
HIGHLIGHTS
- We were able to corroborate the trends discussed during this check with data, giving us confidence in our $EYE thesis - i.e., there’s the potential for above-trend volume to come through near-term; however, given the strength of 4Q20 (+15% y/y for our contact), perhaps 1Q21 will surprise to the upside.
- We continue to hear of 2-3-month wait times for a routine screening appointment. Practices are at full capacity given the constraints of operating in the current environment. For example, staffing is an issue, and operating expenses are up 15-20% y/y due to PPE, cleaning supplies, etc.
- There's a lot of competition, but America’s Best is a good option for simple, quick prescriptions.
CALL NOTES
How did COVID-19 impact your practice, and what’s the current trend?
- Our numbers are pretty close to pre-COVID levels - i.e., about 90-95% of prior patient volume. March, April, and May were not normal - we were down to 20-25% of normal due to being restricted to treating vision-threatening conditions in late March and April. We were renewing contact lenses virtually for people that couldn't get in for a visit for 3-6 months (more on this below).
- The recovery started at the end of May/early June and by Sept./Oct. we got to 90-95%, which is where we’ve stayed. There’s no lack of patients wanting to be seen - have had to reduce volume.
- Lots of new protocols - patients wait in the parking lot (lobby not open), no registration kiosks, visibly wiping down/disinfecting anything a patient touches/sits on (instills confidence).
- Regular exams - surgical masks worn at all times. Staff will wear N95s if someone is sensitive/expresses concern.
So your case volumes didn’t get to a high point until October? How does the 78-year-old woman get back to the office for a new prescription for eyeglasses? What’s the wait time?
- Yes. What I’ve heard is that we take extra precautions compared to others. We shut down/out reps (drugs, contacts, etc.) - didn’t have to adjust patient numbers. We think this helped us get back to current levels quickly.
- When we had to cancel patients, our practice management software (PMS) helped with rescheduling. It has a queue, so it offloaded all the appointments into the queue, and we effectively spent the following months working those patients into the schedule.
- We might be the exception, not the rule. Other practices may not have had the planning, foresight, or resources to manage bumped appointments.
- Nextech is the PMS - we use their EMR as well.
- I think we saw more cancellations due to civil unrest than COVID (the latter got rescheduled, and the COVID-related cancellations were due to active infections or exposure).
- We had over 2k patients at max in that queue, and ~15% have not rescheduled due to COVID concerns. For others, like some of the elderly, we offered early or late appointments to accommodate concerns.
- Of all the patients waiting for surgery, only 5 (very small %) want to wait until the pandemic is over.
- We occasionally add evening hours or a Saturday if staff can do it. We get nervous when the wait time hits 3 months. It’s about 2-2.5 now, and normally it’s 1-1.5, at most. We lose patients when they must wait 3 months to be seen.
How were new patients impacted? Are you at full capacity?
- We did lose some new patients during the recovery because wait times are extended. We are at full capacity.
- New patients are currently ~12-15% of patient volume (2020) - it’s usually close to 20%.
What do you think about the potential for a major uptick in volume as COVID cases come down and vaccinations go up - is it possible to accommodate an uptick?
- I’m expecting that uptick, but the biggest hindrance is staffing. If we can get more technicians, we can see more patients. People want to be seen.
Do older people wear glasses and younger go with contacts?
- Yes, contacts are definitely a younger demographic. Our older patients tend to have glasses. Remember, if someone gets surgery (cataracts, etc.), they may still wear glasses if it’s not a premium lens, for example. So, those prescriptions will stay.
- Our demographic is primarily Caucasian w/ 15-20% minorities. It’s more established patients, only new Medicaid. It’s a middle-class patient demographic.
What about the contact lenses and when people must be seen?
- Some surgical procedures aren’t really “elective,” so a glaucoma patient may have had to come in.
- We extended contact lens prescriptions by 3-6 months, but patients must be seen to order more. That’s a trigger. They’ll make an appointment (this was logged in the PMS, so they are baked into the schedule and are part of the reason for the ~2.5-month wait).
If COVID goes away tomorrow, and we’re back to normal, what do you think growth will look like this year vs. 2020 and ‘19? Can you share any data?
- I am probably conservative, but I think we’ll exceed 2019 levels in early 2022. We were down ~8% y/y in ‘20 vs. ‘19, but the 4th quarter was up ~15% vs. 4Q19 - December was very busy - could have seen some deferred volume coming through.
- So, we’re prepared for the growth if it comes in 2H21, but a lot is still up in the air. January was ~2% below Jan 2020, but January is deductible season - it can be hard to tell. There’s not a lot of cash flow from payers.
- I think there’s enough community demand - inbound - for multiple retailers/practices to grow.
Have you had any issues with supply lines and costs? How are expenses trending?
- Some orders for contacts - certain brands - were delayed. What normally took 2-3 days -> a month, but that wasn’t common. There were no issues with eyeglasses.
- Expenses - primarily PPE, cleaning, etc. - are running nearly $200k higher y/y - up roughly 15-20%. Not expected to change.
- Staffing - ophthalmic techs - we need more techs. The doctors could see more patients if we had the people. We thought we’d be in a prime position to hire, but it’s a struggle. The wage is $15 to the low $20s, depending on certification (COA) and experience. We delayed hiring people early in the recovery, and now we can’t find them. We had a freeze on overtime, but we removed that when we got back to 90-95%. Overall, staff labor expense is level y/y.
What are the competitive considerations? How do you view America’s Best or the vision centers at big box retailers?
- The price for contacts is the biggest factor. Eyeglasses are more custom - we make recommendations based on needs. It’s easier to talk to and counsel a patient on investing in their vision vs. getting the best deal on contacts. For 2021, we rolled out online contact lens purchasing (we use a fulfillment center).
- There’s a lot of baiting and switching - people see prices online for Sam’s Club or America’s Best, so we must keep an eye on prices and keep things in line.
- Warby Parker opened a new store nearby last year - it's hard to know if we lost any business to them.
- I’d rate America’s Best as middle of the road. That’s due to the exam patients get there and the quality of the physicians - just my opinion based on what I’ve seen. The exams are not as in-depth, things are overlooked. People use them for quick prescriptions, and that’s fine.
Any issues with claims or insurance lately?
- No, there have been no issues with or noticeable differences among payers. Everything there is about the same.
Please reach out to with any feedback or inquiries, questions for future field checks, or requests for underlying data.
Thomas Tobin
Managing Director
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