Tuesday, May 1, 2001

The days of deeply discounted prices for laser eye surgery are over.

The industry once in a price war to grab as many eyes as possible is now in the midst of a shakeout, with the lowest-priced discounters closing up shop or filing for bankruptcy.

Lasik Vision, a Canadian-based laser eye center chain best known for offering laser surgery for $499 an eye, filed for bankruptcy last month.

“The reason Lasik Vision went bankrupt was not a poor quality of care, it was because they had a bad business model,” said Dave Harmon, president of Market Scope, a market research firm that publishes reports on the refractive surgery industry.

Lasik Vision slashed its price so low it wasn’t making any money and expected to make up for it in the number of procedures, industry officials said.

Despite Lasik Vision’s financial troubles, the $2.1 billion industry is still expected to grow this year, but at a slower pace, industry officials said.

The laser eye surgery boom began tapering off during the third and fourth quarters of last year after experiencing a 50 percent annual growth over 1999. The previous three years, the industry’s numbers had doubled.

“Volumes are definitely slowing because of the economy, but it has not been dramatic,” said Dr. Robert A. Samit, president and chief executive of Millennium Laser Eye Centers, based in Washington. “I predict this year we’ll be off a few percentage points.”

The procedure, which can correct nearsightedness and farsightedness, uses a blade to cut a flap on the outer layer of the cornea and a laser to reshape the inner layer to correct the patient’s vision. Last year it was performed on 1.42 million eyes or about 835,000 people. (Some people need surgery on only one eye.) The industry is expected to grow by about 27 percent in 2001, Mr. Harmon said.

“The industry is still so young,” said John A. Stiles, director of investor relations at Laser Vision Centers Inc., based in St. Louis. “We think there’s a lot of growth there.”

Most insurance plans will not cover the procedure because it is elective.

“I’m amazed that the business continues to be as strong as it is,” said Thomas Wilson, chief executive of LCA Vision, which owns LasikPlus. “Common sense would say elective surgery is going to be the first thing to go when consumer confidence is down.”

There are a handful of eye care centers that charge below $500 per eye, but the majority of the lowest-priced procedures available hover around $750 per eye, Mr. Harmon said. Currently the average cost per eye is about $1,700, while some cost as much as $2,750 an eye.

Mr. Harmon expects the lowest price to increase this year, making the surgery’s cost range from $999 an eye to $2,000 an eye.

Cincinnati-based LCA Vision had a 100 percent increase in procedures at its LasikPlus centers during the first quarter of 2001 compared with the same period a year ago.

LasikPlus, which has 33 centers in the United States including three in Alexandria, Tysons Corner and Rockville, dropped its price to $499 per eye to match its Lasik Vision competitor.

But the eye care center didn’t stop there. LasikPlus offered patients a choice between the $499 per eye procedure or a more-expensive, newer laser treatment that would cost about $500 more.

“How can you make money at $499 an eye? The answer is you can’t,” said LasikPlus’ Mr. Wilson. “We figured ways to get additional revenues.”

“When you offer people something of value, they are willing to pay for it,” he said.

Laser Vision Centers, which has a location in Baltimore, averages about $1,500 to $1,700 an eye, depending on what the surgeon charges.

“The discounters didn’t destroy the industry,” said Mr. Stiles of Laser Vision Center, which does not have its own bricks-and-mortar centers but rather signs up doctors who already have offices. “It was just a setback.”

Laser Vision Centers took in $88 million in revenue in fiscal 2000, performing 108,000 procedures. For the first nine months of fiscal 2001, the company has $69 million in revenue and has performed 97,397 procedures.

Industry officials say the laser eye surgery industry will continue to change and will likely see mergers and acquisitions.

Millennium Laser Eye Centers’ Dr. Samit expects more consolidation based on the number of potential acquisition candidates who have contacted him.

“We’re always talking to smaller players … who want us to take them over,” Dr. Samit said.

Millennium, which has four locations in Tysons Corner, Washington, Columbia, Md., and Sunrise, Fla., charges between $2,000 and $3,800 for both eyes.

“A lot of the private companies could be acquisition candidates for someone in the industry,” Mr. Stiles said. “Some of the discounters are not good candidates. The last thing we want to do is send the message that you can come in … cause problems … and then be rewarded for it.”

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