The Future of Optometry - Supply


There are more than 55,000 locations currently providing eyecare in the U.S. That’s equivalent to one location for every 3,500 adults in the vision correction population. Most of the population has ready access to eyecare and considerable choice in providers. There are nearly 60,000 licensed eyecare professionals, including 42,900 ODs and 16,700 ophthalmologists. A majority of ODs and nearly all ophthalmologists work in a private practice setting, but an increasing number of ODs are affiliated with retail optical chains.

OD work force to grow, ophthalmologist work force to remain stable.
There have been several work force studies of ODs and ophthalmologists in recent years, including the Jobson estimates presented here. All of the studies agree that, through 2025, the number of ODs will steadily grow, as the number of ophthalmologists remains flat. In 2025, there will be over 48,000 ODs in practice, compared to about 43,000 today. Within both professions, the proportion of women in practice will rise substantially.

It’s clear that the growth rate in professionals, at 1.1 percent, is much lower than the anticipated growth in demand for comprehensive eye exams and medical eyecare services, which is expected to average 1.6 percent annually. This suggests that a supply shortage will develop. But that conclusion does not take into account that many optometrists are not operating at full capacity. This was demonstrated in a 2014 work force study sponsored by the AOA, which showed that average ODs conducted 62 patient visits per week, but estimated that they had the time to engage in 20 additional patient encounters weekly—an excess capacity of 32 percent.

The AOA work force study went on to estimate the supply of ECPs, adjusted for excess OD capacity, and to estimate total eyecare demand adjusted for the effects of the Affordable Care Act. Based on this analysis, it was estimated that there is a current excess supply of full-time ECPs of 12 percent, which will shrink to a 4 percent over-supply by 2025.

The projections indicate that the eyecare market will remain highly competitive, and that ODs will need to satisfy much of the increasing demand for medical eyecare services in the future, as the supply of MDs remains stagnant.

Independent ODs’ market position is improving.
Any SWOT analysis will illustrate that independent ODs will need to adapt to new business models, perhaps ones in which all their revenue is derived from professional services and little or none from product sales. Although the threats to independent ODs appear real enough, there is no evidence that any market share decline or massive shift in independents’ business model are actually happening.

Available market data from The Vision Council’s VisionWatch, based on large, continuing consumer surveys, show that the corrective product and service market share of independents (including ODs, ophthalmologists and the optical stores run by opticians) has actually increased over the past five years. Because ODs account for 75 percent to 80 percent of independent revenue and are unlikely to have lost share to other independents, it’s quite likely that ODs’ share of the corrective market has also increased due to the following factors:

Retail slowdown. Many optical chains face the same problems of other brick-and-mortar retailers in the face of the gradual shift in the U.S. retail market to Amazon and other Internet sellers. Optical departments in stores like Sears, Macy’s and JC Penney’s have suffered a decline in traffic and store closures. Walmart store expansion has slowed to a crawl. These trends are likely to persist.

Early adoption. Independents often are faster to adopt new corrective product technology than are optical chains, who give more focus to lower-cost commodity products to attract price-conscious buyers. Independents have also been more aggressive in expanding medical eyecare services.

Aging America. Demographic and economic trends favor independents because older and more affluent people are more likely to prefer independents.

Though impossible to quantify, the upsurge in practice management education, much of it supported by the growing OD alliances, may have resulted in operational improvements that make independents more competitive.

It is estimated that independent ODs currently have a 44 percent market share of corrective product and service revenue in the U.S. There is no reason to believe that this share is in imminent jeopardy. Consumer surveys show a continuing higher level of satisfaction and loyalty among patients of independent ODs than among optical chain patients. The strength of the doctor-patient relationships is the bedrock of independents’ market position, and is unlikely to be eroded in the near term. Available data indicates that medical eyecare’s share of independent OD revenue is slowly growing, although only a segment of OD practices has fully developed this revenue source.

An important long-range trend within independent OD practices is consolidation. There are fewer and fewer solo OD practices each year. As in all health care fields, this trend is driven by the economies of scale that larger practices can capture and by the increasing administrative burdens imposed by managed care payers. This trend is likely to persist.

Optical chains are well positioned to compete in the digital world.
The overall market position of optical chains has not changed meaningfully over the past two decades, but in the past two years there has been an uptick in chains’ market share, as equity investors have acquired and consolidated independents into local and regional chains. A leading example of this development is the rapid expansion of MyEyeDr.

The primary competitive advantage of chains is that they are superior marketers and merchandisers of eyewear than are independents. Because chains typically earn nothing from the medical eyecare that their affiliated doctors provide, chain management often does little to promote these services. As independent ODs expand their medical eyecare services, they will strengthen patient loyalty and slow or stop defection to chain providers who do not promote these services.

Although internet eyewear purchases have grown rapidly on a small base, it is clear that internet sellers face substantial obstacles to gain a major market share—the principal one being that consumers highly value the personal interaction with and advice of trained professionals as they navigate the complex task of choosing frames and lenses. Nevertheless, as consumers increasingly use the internet to make purchases across the entire spectrum of product categories—both to save money and make shopping easier—it’s likely that internet providers will gradually increase their share of the corrective eyecare market.

Online refraction poses the most disruptive threat to the traditional model of how consumers acquire vision correction products. There are many technology platforms under development to enable online prescription of eyewear and contact lenses, and it seems inevitable that one or more will prove reliable and accurate enough to survive legal challenges. To the extent that the technology works, it is probable that it soon will be adopted by many optical chains to gain a competitive edge. It is easy to envision the day when such technology is used by independent ECPs to accelerate the purchase cycle or to ease excess patient flow in their offices.

Among current developments in this arena are:

Opternative, a Chicago start-up operating in 39 states, has attracted equity capital to expand its system to attract a larger patient base. It is partnering with 1-800 Contacts. It faces a number of legal challenges which have slowed its progress.

Smart Vision Labs is marketing its system to optical retailers as a means to attract new customers.

Warby Parker recently announced an online refraction app, initially available only to existing customers. All these developments should be monitored closely as a means of assessing their ultimate impact on optometric practice.