Article

Can your practice make a go of FLACS?

Conduct a thorough analysis before integrating femtosecond laser-assisted cataract surgery.

In August 2018, my practice, Brazos Eye Surgery of Texas, was looking to integrate femtosecond laser-assisted cataract surgery (FLACS) into our community of Waco. There was great fear and trepidation within the administration about whether this would work. We had many questions and concerns — specifically, the capital investment, whether the community would embrace new technology, whether they could pay for it and whether it was necessary/ethical in our area of the world. The closest practice to offer FLACS was 100 miles away from Waco. Our town has a little over 150,000 people with the average income of a resident being $18,623 a year. To put this into perspective, the U.S. average is $28,555 a year.

Ultimately, we decided to add FLACS to our practice. So, how is it working out? Nine months after its introduction into our community, our average FLACS conversion rate per month is around 63%, with total volume on pace for a little more than 1,400 cataract surgeries per year. In our first month alone, the conversion rate was 43% and has never dipped below that figure.

If we can do it, so can you. But first, you must address several critical factors to make a success of FLACS, including cost, acquisition and price setting.

A GLANCE AT THE COSTS

Femtosecond lasers are expensive. Not only is the initial capital investment pricey, but the “per- use” fee, or “click” fee, adds to patient cost for the procedure. The conversation about the cost of the procedure would be easier for practices if the prices were fixed within the industry. Because they are not, prices can vary based on bundling with other technologies from the same company, volume and relationships.

Generally speaking, the more volume that you do, the more likely the financial modeling detailed in this article will work. Surgeons must calculate their break-even point to evaluate if there will be a return on investment (ROI) and subsequently adjust their patient pricing. In general, if a surgeon can perform a minimum of 35 refractive cataract surgery cases a month, buying a femtosecond laser will be profitable.

BUYING VS. RENTING

Should you decide to offer FLACS, your next big question is whether to buy a laser outright or use a roll-on/roll-off rental service. Both options have advantages and disadvantages. The advantage to owning the laser is that the only recurring costs associated are the click fee, the yearly maintenance contract and the electricity to run it. You can also rent the laser to other ophthalmologists that use the same ASC, thereby creating passive income.

The disadvantage to buying is the large capital investment required: from $250,000 to $500,000. This is confounded by the uncertainty of whether your community will believe in the technology and sustain the volume needed to stay in the black. Owning your laser also incurs the cost of yearly maintenance, which can be relatively expensive.

The alternative to buying a laser outright is to use a rental service. For example, Sightpath Medical brings lasers to ASCs the morning of surgery; a company representative sets up the machine and takes it down at the end of the day. Think of this arrangement as a virtual time-share, since other surgeons will use the same machine. Sightpath Medical charges its rental fee per use, with a typical contract requiring a minimum number of cases per day. The fee includes the machine’s click fee and the rental cost bundled into one price per use.

The advantages to a rental service are that your risk is low and you are not responsible for maintenance of the laser. Also, the service is tax-deductible, which ultimately makes the prospect less expensive (capital cost is not tax-deductible). The disadvantage to renting is that the rental fee is relatively high, making the pricing to the patient higher — which could lead to less conversion to FLACS in your practice.

Some laser companies have devised a happy medium between ownership and renting: the rent-to-own model. In this model, you gain all of the benefits of owning the laser as well as the benefits of renting. The rental fee is monthly and not based on volume in most cases. These companies also incentivize volume by reducing the click fee in a stepwise progression agreed upon in the contract as the volume increases. The cost per patient is lower, the rental is tax-deductible and you are not stuck with a machine you can’t afford if your community cannot support the technology.

The disadvantage to this model when compared with roll-on/roll-off is that the laser occupies space, requiring storage when not in use. If you own an ASC, this is not an issue. For everyone else, this forces a negotiation with the ASC. Offering to pay rent to lease space in the ASC at fair market value is one way to handle this scenario.

FINANCIAL MODELING — MORE IS LESS

Most of the manufacturers of femtosecond lasers offer variable models to help a practice gain access to it. Generally speaking, the more cases you convert to FLACS, the less the cost per case. The caveat is that the companies will stipulate a minimum number of cases per month.

The affordability/profitability of this technology is dependent on a few variables, including conversion rate, volume of cases, capital investment and per-case cost. As an example, using (fictional) round numbers, let’s say that the sticker price on a femtosecond cataract laser is $500,000 including first-year maintenance. Additionally, the per-click fee is stratified per case based on volume as follows: 30 cases per month = $500 per click, 40 cases per month = $450 per click, 50 cases per month = $400 per click, 60 cases per month = $350 per click, 70 cases per month = $325 per click, 80 cases per month = $300 per click. Using a rent-to-own model, assume the rent is 1% of the capital amortized over 100 months, making rent $5,000 per month. Tables 1 through 3 illustrate the cost breakdown based on conversion rate from standard to FLACS in this example.

Table 1. Number of cases per month converted to FLACS by percentage. The per-click fee is stratified per case based on volume as follows: 30 cases per month = $500 per click (white), 40 cases per month = $450 per click (red), 50 cases per month = $400 per click (orange), 60 cases per month = $350 per click (yellow), 70 cases per month = $325 per click (blue), 80 cases per month = $300 per click (green).

Table 2. Profit produced per month before the capital cost of the laser. This assumes the stratified per-case cost in Table 1.

Table 3. Profit produced per month after the capital cost of the laser. This assumes the stratified per-case cost in Table 1 and $5,000/month capital cost. The black line is the break-even line.

These tables illustrate the ROI. There is a clear point at which FLACS is a financial loss. When evaluating whether FLACS will work for your practice, you must evaluate both your case volume and the conversion rate needed to make the venture profitable. Keep in mind that these are fictional numbers and every physician will have a different capital cost, down payment, cost to the patient and stratified case cost agreed upon with the laser company. Table 2 is included because some companies allow a three- to six-month “trial period” wherein you are not charged a rental fee, which allows you to get the technology in place and be profitable immediately. This is a great strategy for the company and very advantageous for the practice.

The bottom line is that ROI varies widely based on volume, bundling of other technologies and negotiations with the individual company. The savvy businessperson will do a thorough ROI analysis before committing to FLACS.

Educate to convert

No matter how carefully a practice gauges the financial viability of FLACS in its community, one additional element is critical to address: education. It is paramount not only for the patients, but also for the clinical staff and the surgical counselors.

I start with educating myself about the patient. Upon meeting a cataract patient, my goal is to learn as much I can about that person and his or her visual goals. I pay particular attention to the patient’s personality, lifestyle, activities and degree of desire to be free of spectacle correction. After five to 10 minutes of focused conversation, I can develop a sense of what technologies will make the patient happiest. If the patient is a good candidate for refractive cataract surgery, we have a brief discussion about the benefit of laser astigmatism correction and the safety and precision provided by the laser. It is important to communicate that the laser is one of the surgical tools that helps in delivering good vision without glasses and is an important part of the astigmatism correction process.

Once I leave the room, the patient almost always begins asking questions that he or she previously didn’t consider. So, the clinical technicians need to be well versed about the technology as well. Most companies have sales and marketing teams that will help practices launch the technology and are helpful in staff education and practice integration.

Once we agree on a plan, the patient then goes to see the surgical counselor. The surgical counselors in my practice are of particular importance as they are the personnel tasked with educating the patient in depth after the physician sees them. These conversations with the patient are centered on informed consent and the benefit of a refractive cataract procedure utilizing FLACS. The counselor educates the patient on the risks, benefits and alternatives of all planned surgical procedures along with the safety and astigmatism correction provided by FLACS.

At this point, the patient has received education on three separate occasions by three separate personnel: the doctor, the technician and the surgical counselor. This level of interaction is of vital importance: The patient goes home with a thorough understanding of the procedure.

PRICING AND THE PATIENT

When formulating the cost to the patient, the surgeon must consider the community, its demographics, the break-even point for each month and what competitors are charging.

FLACS is an elective procedure tied to astigmatism correction and presbyopic correction, which are noncovered services. Our aim as surgeons is to improve quality of life for our patients in the most ethical way possible. For this reason, modest pricing solutions should be considered. At the same time, FLACS coupled with excimer laser touch-up capability has allowed us to promise our patients a successful refractive outcome the majority of the time. This promise has monetary value and should be accounted for when calculating the cost.

Some practices charge a flat fee independent of the technology offered, while others have an a-la-carte model wherein patients can pick and choose what technologies they want, including femtosecond laser. At my practice, we have found that there is a point at which you can overwhelm the patient with information. For this reason, we’ve decided to create a “package” model that is easy for the patient to understand. Packages were crafted with patient outcome and expectation in mind but also highlight the noncovered services and procedures that are provided. These packages increase in out-of-pocket expense as more technology is utilized.

The most important consideration for the adopting surgeon is belief in the technology. The best way to get experience with FLACS is to find a surgeon who has successfully integrated it and to shadow an OR day. This will serve to demonstrate in real time how to accomplish better patient flow, improve outcomes and limit surgical complications.

CONCLUSION

Building a viable business model can be complex, but, with careful evaluation and realistic projections, FLACS is viable in almost all practices. Educating the staff — from technicians to surgery counselors — is paramount for successful integration (see “Educate to convert,” above).

With proper planning and foresight, FLACS can be a major benefit for your patients and your practice. OM

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