VSP - The Rabbi and the Beggar

In a recent letter to VSP providers, VSP says:

a) It's a competitive market (duh!)

b) They've lost some business to "retail friendly plans" (read EyeMed)

c) To compete, they're dictating some changesin reimbursements (ie: you're going to suffer)

VSP's solution is to increase the discount on 2nd pair sales for eyewear purchases on the same day as an exam from 20% to 30%; Move more contacts to tiered pricing; and eliminate the $2 case fee and the patient supplied frame fee.

Oh...the good news is that they did promise to allow you to provide in-office finishing for select programs beginning in early 2010 (no details).  Perhaps VSP is reading my blog:)

What VSP is really saying here is that, because they want their premium income to rise and they're challenged to sell against a price competitor, Providers are, once again, going to take it in the shorts. 

What's interesting is that these changes appear to have little impact on VSP premium pricing.  They're modifications that will be perceived by employers and consumers as enhancements but which seemingly carry little cost toVSP...they come from the Provider. 

VSP, if you're really worried about competition, why not simply reduce your employer 401k contribution from an outrageous 15% of payroll to the more standard 3%.  Based on just that action, my simple math indicates that you could roll back premiums to employers by about 2%.  Then, add in the $75,000 company cars for management and all the other outrageous benefits that you give your employees and I'll bet you could roll back premiums by as much as 5% WITHOUT TAKING A DIME FROM YOUR UNDERPAID AND UNAPPRECIATED PROVIDERS. 

This reminds me of the scene from Fiddler on the Roof in which the beggar is shouting "alms for the poor" and the rabbi hands him one Kopeck.  The beggar says, in response, "but Rabbi, last week you gave me two Kopecks"  The rabbi retorts "I had a bad week"...to which the beggar responds, "so you had a bad week, why should I suffer!"

VSP, it's time for you to suffer along with your Providers.  Tighten your belt, just as you have continually forced belt-tightening on your Providers.  It's time to share in the pain instead of operating like Fat Cats and living off the largesse of your Providers.

Comments

[Eliud Thorn]

When considering like industries, comparable positions and experience, total compensation is merely competitive. Salaries are not competitive (not close to IBM), but they compete for employees with the entire package. I don't think it reasonable to compare compensation of employees of Providers with that of VSP employees. A market research analyst, for example, is not likely to be employed by a Provider – nor is a data storage engineer. I think such a comparison would not tell much at all.

Again, I'm not saying providers are not underpaid. I just don't think the EE compensation is exceptional overall.

[Al Cleinman]

With all due respect, somehow I find it dificult to consider VSP's employee compensation as "merely competetive." As just one measure, VSP's 401k contribution at 15% is almost twice that of IBM. Then consider the $4million in automobiles on VSPs balance sheet as well as $50million+ in deferred compensation and post retirement health benefits that include health, dental, vision and Rx drug.

Further, tell that to the 200,000+/- employees of VSP's Providers who generally receive very, very modest benefits if any at all. Indeed, perhaps VSP might do a study comparing its benefit package and wage structure with that of its Providers (the folks whose product VSP sells). NOW THAT WOULD BE TELLING.

[Eliud Thorn]

Total employee compensation, considering salary, bonuses, benefits, and retirement contributions, is merely competitive at VSP. Not a rebuttal to your overall message, just an added piece of info to consider.

[Lisa Weiss]

Thanks for your comments Al. I have had a few sleepless nights trying to figure out a way around this..i.e.. making money despite these unfortunate new policies from VSP (presented in the guise of "helping us")

Considering that too much of my practice is VSP, I am at a loss for what I can do. I just feel helpless to their whims! Any ideas from anyone on how to survive this latest development would be greatly appreciated.

I will say that for my office, offering a non-covered service such as Vision Therapy has really been a help to the office. Also, in my area, I still have difficulty with second pair sales. I know that VSP is forcing me to discount my second pairs, but maybe it will work to my advantage and I will actually sell second pairs. I hope this might make up for not getting fully paid for my contact lens evaluations under the new fixed pricing...good luck!

[Gil Weber, MBA]

Al, what you've said is right on target. Sadly, I think it's predictable that this is just the beginning of provider-UN-friendly actions by VSP.

Back on April 11th of **last year** I published a widely circulated Op-Ed piece in anticipation of the Supreme Court's final slap-down of VSP over its tax-exemption litigation. I postulated on future actions VSP might undertake and said,

"Assuming the decisions stand and there is no reversal, it seems reasonable to postulate that the loss of tax-exempt status may cause VSP to consider some changes to its business model. If VSP must now pay considerable taxes, then recovering that lost 'profit' and maintaining or growing its present market-dominating position might be attempted in one or more of several ways including: 1) by raising the rates charged to health plans, employer groups, unions, etc. -- a difficult undertaking given the unrelenting competitive pressure from EyeMed, Davis Vision, and others or, 2) reducing the fees paid to the providers of patient care (i.e., you!) or, 3) by pushing even harder into expanding its book of business as middleman-administrator of medical eye care services or, 4) by adding new charges to the doctors for certain goods and services.

"And it’s easy to come up with a list of new doctor-funded revenue streams VSP could consider. It might choose to start assessing an annual participation fee for each doctor, or a credentialing fee for the dispensary. VSP might elect to tie the use of Altair frames to continued participation. It might decide to charge a processing fee per claim, or it could put into place proprietary claims submission software, mandate its use, and then charge some sort of fee to panel doctors.

"I have no knowledge that these or other possibilities are under consideration at this time. But going forward if VSP is unsuccessful in its appeal, nothing should surprise given how the loss of tax-exempt status suddenly changes the game."

And so now we're starting to see the fallout resulting from a couple of years of setbacks for the 800-lb. gorilla. Not only did it lose in the courts, but now it's also losing in the marketplace. As you said so precisely, "Providers are, once again, going to take it in the shorts."

No action -- no matter how unfavorable to practitioners -- should surprise anyone at this point.

Optometry's friend? Yeah, right.

Just my opinion, of course.