How to Audit Your Optical Lab Costs and Protect Your Profitability
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What is the main topic discussed in this episode?
Adam Draper This has turned into like a little bit of an official, unofficial mini series here where we've been talking about labs and finishing and insourcing versus outsourcing. And I think you did a really good job of summarizing the NBS at the end of last week's episode. But in the spirit of honoring the time commitment that we've tried to stick to with these episodes, I feel like there was a little bit more that can be said around this topic. So I'll ask you to continue your thought process on this whole concept of analyzing lab usage. And then we'll see where conversation goes from there.
There's a lot more we can discuss on this topic. And I think where I would start is this episode needs to be focused on two lanes. And we should put our mindsets in the labs. You're thinking two lanes. One lane is managed vision care pays the lab bill. ding, ding, ding rebates and the highest rebates, how that all works out, putting things together. And then the other lane that runs parallel is when you pay the lab bill. So that is the space I like to run in is me paying the lab bill. I'm in a state we can opt out, manage vision care so we don't have to use the labs that are quote unquote their labs or that they're partnered with, which allows me to go and find a equivalent lens in categories that functions first and foremost for patient satisfaction, but then second, that I can help to be more profitable by the way I buy it, by the particular lab I go through, and how I perform.
So what we want to talk today for our 20 minutes is when you pay the lab bill. What does that look like? And I think my colleagues get lost, some do, in rebates, rebates, rebates. Rebates are important when you pay the lab bill. But what's most important is what is the net dollars for... not just the progressive, but 80, 90% of your progressives have an AR. So make sure you're factoring in what is the net dollars of a progressive set, a pair with the AR. Because what I'll hear is, well, we got a great deal on progressives eye level, let's say an O-level lens, I'm just going to use dollar figures, arbitrary, but an O-level lens for $100 R-cost. An AR to put an equivalent level at that, we pay $55. So what do you got total for that pair?
I'm paying the lab $155. Okay. I'll look at it and I'll say, oh, well, I'm paying for my progressives for that same equivalent, $110. So I'm actually paying $10 more for that than the person I'm visiting with. My AR is $30, same equivalent. I land on $145 where they land on $155. Now they got a $10 rebate. So that takes them down to $145. And in mine, I happen to get a $15 rebate. So that takes me down to $130. So now I've even made more margin up in how that math problem is done. So I think... Where we need to go in that is knowing your numbers beyond just one or two lenses that you utilize. So the easy way is, okay, what are our most utilized progressive lenses and what's the most utilized AR? Let's get the best pricing on that.
Well, That doesn't necessarily work when you're trying to push to that 20%. Why? Because labs are like managed vision care plans a lot smarter than we are. So they got big boardrooms of really smart people.
Let's not give them too much credit. I'm not giving them too much credit. This isn't their first rodeo. To your point, in all seriousness, they have the data to support.
They got the data. They've got the people hired. They're doing the analytics of where they need it. They are going to be profitable first. So what they know is that, so if you look at a price list, you're overwhelmed with, say there is line items on a price list. Maybe there's 150 line items on a price list. Okay. And five of those line items are back to our other episode where milk is $1.50 for a gallon and a six pack of Diet Coke is $15. So the offset is there and that's the game that the labs play in order for their net profits to actually be greater. They will take a loss leader because they know you're going to most likely use everything within their ecosystem. And then at the end of the day, your discounts aren't near as good as what you think they were because you're not running analytics on every single one of those line items.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:06–7:00
2
What are the two payment ‘lanes’ for lab bills and why does it matter?
7:00–13:59
3
How should practices calculate the true net cost of a lens-plus-AR pair?
13:59–21:00
4
Why is comparing a single discounted lens or rebate insufficient for profitability?
21:00–23:28