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HomeminewsVSP Agreement: OAA Says Carefully Consider

VSP Agreement: OAA Says Carefully Consider

General Optical Group (GenOp) is urging independent optometrists to sign up to the ‘VSP Neighbourhood Eyecare’ network before this Friday, 16 November. GenOp has established the network in conjunction with its US parent company VSP. Members of the network will be promoted as Medibank Private preferred optometrists.

In return, they will be obliged to pass on a 20 per cent discount on frames, lenses and frame and lens packages as well as a 15 per cent discount on contact lens sales, to all Medibank members, regardless of whether they are new or existing customers. Additionally, they will be obliged to spend AUD$1,800 per month with GenOp on “lenses and frame and lens packages”. They will also be contracted to stock more than 70 No Gap frames, across several price points, which must either be purchased from GenOp or “from the collections approved by GenOp”.

Peter Lewis, CEO of GenOp said optometrists that don’t meet the deadline will miss Medibank’s first quarter marketing campaign to promote the Members Choice program, which includes private hospitals, dentists, dental prosthetists, chiropractors, physiotherapists, podiatrists, acupuncturists, naturopaths, remedial massage therapists and optical retail outlets.

“Medibank has a marketing budget of AUD$20m for the coming year for the Members Choice program and optical is part of that. There’s a push by Medibank to drive their members into the optical choice network – which will comprise of three groups: Luxottica, Specsavers and VSP Neighbourhood Eyecare – so that Medibank can save money and provide value for their members.”

mivision asked Mr. Lewis about the specific promotion optical practices can expect and whether practices will be able to use Medibank’s database to directly target members living in the local area with marketing.

“Medibank wants its members to use their optical benefits and obtain services and materials through Member Choice Providers. They advertise their programs and direct patients to Member Choice providers throughout the year. While Medibank will not provide membership lists, they do work with the plan partners, such as VSP, to market to members who have not obtained care from any particular provider,” said Mr. Lewis.

He added, “VSP plans to work with Medibank to market to those interested in obtaining care from independent optometrists who belong to the VSP Neighbourhood Network. Additionally, participating providers will have door and in office marketing identifying each location as belonging to the Medibank / VSP Neighbourhood Network. Participating providers will be able to represent themselves belonging to Members Choice and have the ability to advertise to their patients as well as the general public.”

He said Neighbourhood network members will be listed on the Medibank database.

OAA Says Carefully Consider

In a statement issued by the Chief Executive Officer of the Optometrists Association Australia, Genevieve Quilty advised optometrists to carefully consider the implications before signing any contract that includes ongoing discounting.

“Margins are already low so you need to ensure that your practice can afford this discounting or attract new patients to your practice to increase revenue to balance out the discount. If you need to attract new patients, this may have a flow on effect of requiring additional staff – another cost to your business,” said Ms. Qulity.

“It is generally accepted that the net profit on the sale of spectacles is approximately 20 per cent of the sale price, therefore, without other changes to the way in which your practice functions, a discount of 20 per cent would result in no net income from the sale of goods at all. If the margin on goods is even smaller, then each pair of spectacles sold to a member of a Health Fund (in this case, specifically Medibank) would represent a loss to the practice. It does not matter how many more patients are attracted to the practice, the loss could not be recovered unless other actions were taken.”

Ms. Quilty also suggested optometrists consider whether they would be able to offer all patients the same discount upon request and reminded them that many of their patients would be Medibank members. “So instead of continuing to pay the price you have charged them previously, you now are required to provide them with the discount. Can you afford this change to revenue?”

She warned that health funds may change their required provider offers in the future. “It is in the interests of Health Funds to negotiate Preferred Provider contracts with the sector. Often the arrangements presented to practitioners include a provision, which allows the Health Fund to make unilateral changes to the arrangement first proposed by the Health Fund.”

In a statement issued by the Association, Genevieve Quilty said: “before entering any such arrangements, OAA recommends you:
• Understand the economic impact of these arrangements on your practice and the likely effect on your patient base
• Carefully consider the impact of discounting. Overcoming the loss of margin that discounts entail requires a larger increase in patient numbers than most realise. Discounts have a severe effect on net income.
• Ensure you are aware of your legal obligations, including competition and consumer laws and any other relevant legislation.”

Expanding Access

Mr. Lewis said the arrangement with Medibank, which the network hopes to extend to other private health insurers in the future, will help independents compete against the corporates.

“The Neighbourhood network has been brought about because independents are being crushed between the global giants, Luxottica and Specsavers. In addition to that, because independents are not part of a provider network, patients are being driven away by the health funds. We’re trying to stem the tide, level the playing field,” said Mr. Lewis.

Laz Cotsios, Group Executive – Medibank Private Health Insurance, said the agreement will broaden member access to optical outlets.

“Our consumer research shows that a large portion of our members want to go to an independent optometrist for their eye care treatment. This new agreement means they will have access to a network that is up to 30 per cent larger,” he said.