Wholesalers, meet your future. His name is David Finley and he’s the optical manager for Dixie Eye Center, a multi-disciplinary group practice in St. George, Utah. The practice, a one-location ambulatory surgery center/eyecare clinic/optical dispensary owned by Ronald Snow, MD, has had its own full-service lens processing facility on-site for 10 years, and now processes more than 95 percent of the lenses it dispenses in-house. While it may be over-stating the issue—after all, the vast majority of three Os still send most of their surfacing and finishing work to wholesale labs—Dixie’s story is symbolic of the questions raised by 20/20’s annual Wholesale Lab Usage Survey (page 62). As the survey reports, lab usage among independents has declined over the past year and one reason may be the continued proliferation of multi-disciplinary group practices like Dixie.
“From day one, when Dr. Snow was first putting ideas together on how he wanted this practice to run, he wanted a full-service lab on-site,” recalls Finley, who came to Dixie in 1989, just a few years after the practice opened. “All of the other dispensaries in town finished on-site and even that was rare at the time. Dr. Snow wanted be a step ahead.”
Surfacing set Dixie apart because the cost of installing a full-service lab is a barrier to entry for most traditional optical/eyecare locations. Initially, Dixie’s surfacing lab cost more than $125,000, including supplies and inventory. A recent upgrade cost roughly $150,000.
But group practices are attracted to full-service processing because they can better bear the costs associated with installing an in-house lab than a smaller solo-practitioner. Dixie, for instance, generates more than $500,000 a year in revenue. And, when you consider the practice’s revenues from surgery and other services, you see just how much it can spend. “Originally, our accountant told us it would take three years to recoup our initial investment,” Finley recalls. “We did it in 15 months.”
That’s because the on-site lab is processing almost all of the dispensary’s eyewear orders, according to Finley. “Basically, everything but glass, certain slab-offs and specific branded product that requires the use of specific licensed labs,” he says. In all, Dixie’s lab processes 20 to 25 lens orders per day, with product from Essilor, AO Sola, X-Cel and Younger, and it sends the work it can’t do to a wholesale lab. Finley’s techs work with almost all materials (except glass) and even process polarized lenses, a challenge because polarizing film can get damaged during surfacing.
Thanks to the recent upgrade, the surfacing lab now runs on an SGX Generator and Step One Blocker from Gerber Coburn. In the finishing area, Dixie uses a Kappa edger, also from Gerber Coburn. The in-house lab applies its own hard coatings, thanks to Gerber Coburn’s Stratum coater.
“We’re doing so much more poly now because our new edger works well for that,” Finley says. “And the other day we did a +8.00D -9.00D. We wouldn’t have even considered doing an Rx like that with our old equipment. The nice thing about the new technology is that it gives you so much more capability. And having the lab in-house, we were able to get that tough job to the patient right away.”
In recent years, wholesale labs have touted ancillary services—beyond the scope of lens processing—in an effort to buck any trend toward in-house processing at the dispensary level. When asked if he feels he’s missing out on services such as lens product information or technical support by processing lenses in-house Finley says, “we have wholesale capability.” Like any wholesale lab, he claims, the dispensary gets its product information and technical support directly from industry manufacturers. “We get the same level of service,” he adds.
Before independent three Os rush pell-mell into in-office processing, however, Finley suggests using some restraint. While he “finds no negatives” with going full-service, he does emphasize the need for dispensers to conduct a thorough evaluation of their business before doing so. This evaluation should include definitive answers to the following questions:
How many jobs does your dispensary order per day? “But that’s kind of misleading,” Finley says. “You should actually figure out how many different kinds of jobs you order in a day. In other words, if you’re doing mostly simple single-vision work, you don’t need an in-office lab. Let your wholesaler handle that work. It’s not profitable enough to cover the costs of the equipment. The more complex jobs pay for the in-house lab—progressives, poly, whatever. Lens blanks aren’t smart enough to know they’re supposed to be more expensive for certain jobs.”
Can your staff handle it? “You have to ask yourself, ‘How many people can I afford to hire for the lab? Can my existing staff do it? Do I need to have them trained in processing?,’” Finley explains. “Also, you need staff continuity. If you have a lot of turnover, having a lab won’t work. You’ll be training new people all the time. We actually don’t save that much money by surfacing because we have three people working here who wouldn’t be here if it weren’t for the surfacing lab. But service is what we’re focused on. Not everyone has the same goals.”
How much does your dispensary spend on wholesale lab services? “Compare that to the costs of the equipment,” Finley advises. “If you’re not spending a lot of money on lab costs, including shipping, installing an in-office lab might not be worth it.”
Do your patients want/need faster service? “Patients want fast service, but they also want quality and things they can’t get anywhere else,” Finley says. “Don’t only think about turnaround. If your place is profitable and you have a lot of competition in your area, having an in-house lab can be a big plus.”
Every dispensary has different answers for the above questions. But Finley senses more and more dispensers are finding that installing some level of in-office processing is the right way to go. He’s not surprised that 20/20’s survey shows a decline in usage of wholesale labs among independents.
“I’d hate to be in the wholesale business right now,” he explains. “No offense. I think the labs do a great job. But I think new surfacing technology has a lot of people looking at in-house surfacing as an alternative to mounting lab bills because the technology makes it doable. The labs have done a great job over the years re-positioning themselves and expanding their services. I think they’re going to have to do a lot more if they want to stay in business.”
A word to the wise.