EYE WARS - Laser eye surgery centers locked in pricing war to correct our vision

By Karen Buckelew
Daily Record Business Writer

Excerpts from:

Dr. Allan Rutzen has made a living charging relatively high prices. And he plans to continue doing so, despite the fact that he competes in an industry mired in a relentless pricing war.

Rutzen in an ophthalmologist at the University of Maryland's University Laser Vision Center. He and his colleagues pride themselves on their refusal to hawk their increasingly popular service, laser eye surgery, like a commodity, heralding price above all else.

"We contrast ourselves with centers that want to get in as many procedures as possible per day," Rutzen said.

Meanwhile, competitors are filling television and radio waves touting rock-bottom prices and convenient locations - like right next to The Gap in the local shopping mall.

The tenacity of some of the combatants is hardly surprising in light of the potential spoils. The number of people undergoing the most common form of laser eye surgery has soared 1,233 percent during the last five years, and analysts predict annual growth of as much as 50 percent going forward.

Not only does demand clearly exist, but also laser practitioners need not deal with insurance companies in most instances. Almost all patients pay out-of-pocket - music to the ears of physicians accustomed to spending handsomely to simply get paid by a third party bloated with bureaucracy and paperwork.

The question, then, is who will survive: Rutzen and his peers, who believe they are taking the medical high road? Or the companies looking to build dominant market share through aggressive pricing?

IN THE BEGINNING

The primary tool for performing laser eye surgery, the excimer laser, was developed in the 1970's by IBM Corp. for use on microchips. Its first use in refractive eye surgery come in the 1980's.

The original vision-correction procedure is called photorefractive keratectomy, or PRK. In the procedure, the laser is used to ablate or resurface the cornea on its outer surface, better focusing light on the retina to correct vision problems.

In the mid-1990's, PRK was replaced by what is perhaps best known by its acronym, LASIK. In LASIK, which stands for laser assisted in-situ keratomilieusis, a thin corneal flap is created and lifted to allow for the cornea to be reshaped from within.

With LASIK, recovery time is shorter and the results more impressive.

"LASIK has much more desirable results," said Dr. Raj Goyal, an ophthalmologist with the Laser Eye Center of Maryland in Severna Park. "With PRK, people would take up to three months to get their vision sharp. With LASIK, it's within a week, with close to no pain. With PRK, there was a lot of discomfort like you had a scratch on the eye."

When the LASIK procedure received approval from the Food and Drug Administration in 1995, it began to catch on almost immediately.

"It took off basically because of what one of the analysts said was the 'wow factor,'" said Irving Arons, an ophthalmologist consultant with Spectrum Consulting. "You sit in the chair, have the procedure done, get up, look across the room and see the clock. And then you tell all your friends."

There were 105,000 LASIK procedures performed during the first 12 months after the FDA approval was handed down, according to MarketScope, a trade magazine that tracks the industry. During the year 2000, there were 1.4 million procedures, representing a 1,233 percent increase in just five years.

APPETITE FOR SURGERY

The booming interest in laser eye surgery made many doctors hungry to get a piece of the pie, to tap a much-needed line of new revenue.

"You've got people from the business community who see this as a huge industry they can exploit, and doctors who see their revenues decreasing from traditional forms of practice," said Dr. Mark Speaker, the New York regional medical director of TLC (The Laser Center) and a clinical associate professor of ophthalmology at New York Medical College. "There's more opportunity to be entrepreneurial with (LASIK)."

"This surgery is a replacement for eyeglasses and contact lenses, which have always been consumer products and have always been marketed aggressively," explained David Harmon, editor of MarketScope magazine. "It is also an elective procedure. People have to pay for it out of their own discretionary income, so they have to be sold on it. They have to be made aware of it."

Discount centers began popping up, and doctors began competing for the lowest prices.

"Their business plan was one where they wanted to enter the market and do deep discounting to get (larger) market share," the University of Maryland's Rutzen said of the discount centers. "Their plan was to raise prices once they had (the market share), but competition is so steep and forced the price so low, they didn't have the opportunity to make up the losses."

The center at University of Maryland is affiliated with a large, Colorado- based company called ClearVision Laser Centers, which provides the laser and personnel to support the university's physicians. The center charges as little as $900 per eye, while some discount centers have taken it as low as $500.