Products & ideas for the laboratory professional.
Issue link: https://opticallabproducts.epubxp.com/i/538327
FEATURE BUSINESS 8 july 2015 opticallabproducts.com BY STEVE CURRY IT USED TO BE enough for an independent optical lab to simply churn out an unending stream of lens jobs it received from ECPs and keep the business humming along year-in, year-out. As any lab manager likely knows, it doesn't work that way anymore. TIMES A-CHANGIN' Unfortunately, optical labs can no longer depend on the core business of lens jobs to make ends meet. The market share for labs has been slowly eaten away by various factors over the past several decades, including corporate chain lab buyouts and mergers, the advent of the in-house fnishing lab and discount online eyewear sellers, and potential end users cycling out of the market because of contact lens wearers and refractive eye surger- ies. But the always-resilient laboratory industry has traditionally rebounded from these smaller setbacks. Today, however, the challenge is much greater. MANAGED VISION CARE One of the biggest issues impacting the health of the optical lab is the interference of managed vision care plans. Managed vision care has been a hot topic in the eyecare industry for quite some time, as the plan administrators provide discounted vision benefts for consumers who otherwise would not have them, but there are serious downsides to these plans. Some will dictate what examinations and diagnostics an ECP can perform, and/or what eyewear frames and lenses may be prescribed to patients, typically skewing towards less-expensive products. Managed vision care providers may even demand that the lenses be produced by a lab contracted or owned by the organization. Obviously, this harms the patient, the ECP, and the lab in different measures: the patient may not get a complete eye exam and be forced to purchase eyewear that doesn't give them the best vision possible and the ECP loses out on a premium eyewear sale, but the independent optical lab loses everything. The end result of this perfect storm of technology and managed vision care infuences on the lab industry is that optical labs that used to thrive now fnd themselves merely surviving. "I've been in this business for 41 years and this is the worst I've ever seen it," says Jim Misco, Group Director of Optical Synergies, an Illinois-based independent optical lab buying group and the largest in the U.S. "Managed vision care is driving a wedge between the lab and its customers, as well as between the ECP and their patients. If a patient has certain managed vision care plans, the ECP has to use the care provider's frames and labs, and their patients get fewer choices. Whenever there was a challenge in the industry, we competed. Now we don't even get a chance to play, to step up to the plate and take a swing. We aren't allowed to compete." The impact in today's market has been seismic. According to Misco, some labs have seen almost 20% of their business disappear practically overnight. "If you lose that much business, your IBITDA (Income Before Interest, Taxes, Deprecia- tion, and Amortization; in other words: profts) is pretty much gone," he says, and the repercus- sions are dire. "On average, 13% of all employees in the labs we surveyed have been laid off. They can't walk down the street and work at another lab, because they all had to do the same. They have to leave the industry." Misco continues, "32% of the labs had to cut benefts and 75% of the labs surveyed reduced hours for their employees. Some lab owners cut their own salaries just to avoid these outcomes." Meanwhile, the big players have vertical integration down to a Members of the Optical Synergies buying group at its annual meeting which took place this year in February. "The most important brand every laboratory has is its own." –Kurt Gardner, IOTA Alternative Revenue Streams Can Boost the Bottom Line In today's marketplace, optical labs need to do more than process lens jobs to be profitable.