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HomeminewsQuestions over VSP’s Medibank Deal

Questions over VSP’s Medibank Deal

Optical industry analysts are questioning whether the deal between Medibank and the General Optical Group’s VSP Neighbourhood Eyecare Network has the potential to deliver its promised boost to independent optical retailers.

Late last year Gen Op and its parent company, the US based VSP, urged independent optical retailers to sign up to a network to be promoted as a preferred supplier to Medibank members.

Independents were urged to join the new network before 16 November to ensure Medibank members would “have access” from 1 January.

GenOp said it hoped the VSP Neighbourhood Eyecare Network would help Australia’s independent optical retailers reclaim market share from the corporates.

All you need to do is put a sign in the store window promoting the equivalent 20 per cent discount to Medibank customers…

The company expects Medibank members will be enticed to visit VSP’s Network because of their independence and because they offer a 20 per cent discount on all eyewear, except for No-Gap frame and lens packages, which are 100 per cent covered by the insurance provider.

One question being asked is how will Medibank members find out about the new Network and its offerings?

A VSP Neighbourhood Eyecare Network FAQ sheet distributed to interested optometrists late in 2012 said participating providers would be conveyed “as trusted professionals who provide quality care with great service, value and access”. Additionally, it promised that Medibank and VSP would implement “special promotions later this year (2012) and in 2013, communicating the importance of vision examinations and the introduction of the VSP Neighbourhood Eyecare Network”.

Each of the more than 350 optical retailers that have signed up with the Network is now listed in the VSP Australia website as well as on the Medibank website where they’re identified as a member of the VSP Network.

On the VSP Australia website the company promises: “A link to our website will display prominently on Medibank’s website. Co-branded VSP/Medibank communication materials, advertising, and marketing materials will be distributed to Medibank members. We will provide you with in-store signage to further promote your participation with VSP Neighbourhood Eyecare.”

Still getting up to Speed

In early January, when mivision rang Medibank to enquire about optical benefits and preferred optical providers under the Members Choice offering, a customer service staffer advised, “that Medibank doesn’t have any preferred partners for optical care – you (that is, customers) can claim 100 per cent with any provider”.

They then went on to say “with optical you (customers) don’t have to worry about Members Choice” and that “this changed about two years ago”.

Medibank’s Corporate Affairs spokeswoman Victoria Hanlon admitted there seems to have been “some confusion” in its customer service team about the provider’s preferred optical suppliers.

“The VSP partnership, as you are aware, is very new, having commenced at the beginning of January, so we are still getting up to speed and will be promoting this new offering this month (in January)… we have notified the customer service team to address the level of clarity in information being given out.”

Ms. Hanlon said Medibank does have “preferred providers” for optical care. They are “Specsavers, Luxottica (OPSM and Laubman & Pank) and VSP – all part of our Members Choice network,” she said.

However, Ms. Hanlon confirmed that “a Medibank member can go to any optical retailer and claim back 100 per cent up to their annual limit”. The difference is that preferred suppliers are obliged to provide “additional discounts off the retail prices – in the case of VSP, this is 20 per cent for glasses”.

Questions Being Asked

As reported in mivision’s December issue, the Optometry Association Australia, has already questioned whether the obligation to provide a 20 per cent discount on glasses – combined with GenOp’s minimum stock requirements – could wipe out already slim profit margins for practices.

Now, industry analysts are questioning whether the hook of discounted glasses will actually encourage Medibank members to use the VSP Network at all.

Robyn Wren, former National Sales Manager with General Optical and now a consultant to the optical industry with Retail Theatre, said that optometrists are well positioned to attract Medibank member business on their own, without the need to enter into a contractual obligation with VSP.

Peter Lewis, the Managing Director of VSP’s sister company at General Optical, says members will be provided with “access to VSP branded window decals and A5 promotional cards” to promote the VSP offering.

But Ms. Wren said, “at this point, there is very little to stop an independent optometrist” from outside the network, doing something similar.

“All you need to do is put a sign in the store window promoting the equivalent 20 per cent discount to Medibank customers.”

“Network membership may help some independents compete against the corporates on offers like ‘two for one’, but it will be interesting to see whether it brings in new clients – or whether independent optometrists will simply find themselves giving away substantial discounts to existing patients,” she said.

Lukewarm Response

mivision has spoken to several high profile optometrists who have signed their practices up to the network, but even they have guarded expectations about the VSP network, saying they’re still “sitting on the fence” and have adopted a “wait and see” attitude.

Said one industry leader, who asked not to be identified: “I’ll be keeping an eye on the numbers (of Medibank Member clients) to see whether they increase – and that will determine whether or not we remain with
the network.”

A simple 90-day notice period is all that is required to exit the VSP Network and the VSP says on its website: “you are not obligated to continue your participation and may discontinue at any time. We only ask that you give us 90 days’ notice so we can give Medibank sufficient time to update their systems and provider directories.”