By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
July 25, 2018
There are now many alliances for a practice owner to join. Before signing onto one of them, and paying membership fees, here are key points to keep in mind to ensure you make the right decision.
There are four core questions to consider before making your decision to join an alliance. Based on your personal needs, any one of these four may be the most important to you. The four core decision questions are:
1) Which alliance gives me the best discount?
2) Which alliance has the lowest fee?
3) Which alliance has the best value-added package?
4) Which alliance aligns with my political position?
Which alliance gives me the best discount?
In today’s world, if your practice is less than $3-$5 million gross revenue collected, you must use either a buying group or an alliance to get discounts from vendors to manage your cost of goods and overhead.
Your cost of goods as a percentage of gross revenue collected should be around 25 percent. The average for the country is about 30 percent. Your overhead as a percentage of gross revenue collected should be at, or lower, than 10 percent.
Alliances are different from buying groups. Buying groups generally get discounts from all vendors. Alliances have preferred vendors. By using preferred vendors, and not all vendors, alliances are generally able to get better discounts than buying groups.
The key point here is that a discount from a vendor that you do not use does not help you. You need to look at your prescribing patterns and compare it to the preferred vendors of each alliance. Find the alliance that aligns most closely with your prescribing patterns. That is the alliance that’s going to give you the best overall discount based on your prescribing patterns.
Which alliance has the lowest fee?
Alliance fees range from percentages of gross revenue collected to a flat fee to a percentage of your discount. Most alliances will sell their fee to you by telling you how much money you’ll save on your discount and that savings will cover your annual fee.
Rather than just listen to the marketing, translate the fee into real dollars. Calculate the total amount of discount dollars you expect to get. The next step is to subtract the fee dollars from the discount dollars. Now you can compare apples to apples.
Which alliance has the best value-added package?
All of the alliances try to offer value-added packages. This includes services such as: consulting, third-party assistance (e.g.: help getting into third-party insurance alliances), education and support groups. Each practice needs to decide what their greatest need is, and, therefore, which alliance offers the best value-added package for their practice.
Which alliance aligns with my political position?
Some alliances are owned by eyecare vendors. Some of these vendors own companies that are in direct competition with independent eyecare practices. If you are considering one of those vendors, you will need to decide if the other three decision questions trump this one.
Another issue that may come up is that the director of an alliance may be a polarizing figure. In this case you will need to make a decision if you can get past that in order to get to the benefits the alliance has to offer.
Take this week to review your participation (or not) in either a buying group or an alliance. Apply the four questions above to see if you need to make any changes.