Reader’s Forum:
Pricing Frames Profitably in a Managed Care Environment
By Jay Binkowitz
In ROB Issue 1, Jay Binkowitz presented three pricing strategies for profitably pricing frames under three managed care plans. Readers then raised interesting questions and issues on how to best price frames for profit within a managed care environment. Some comments are found in Tell Us What You Think. Other readers responded directly to the author Jay Binkowitz. They have agreed to have their letters appear here and the author responds (italics). Please send further commentary. –ROB Editors
Case Study #1: Minimum List Pricing (MLP)
Dear Jay,
I am a little confused. Let’s say your MLP is $169. Up to what price wholesale frame is priced at $169?
JAY: If you use a three-times mark up then it would work like this: All frames with a cost of $56 or less would be marked $169.
Q: And above that minimum priced frame, how do you mark that up? If $15, to $? Wholesale frame is $169: How do you price the $60 wholesale frame?
JAY: All frames that cost $57 or above are marked as follows.
$57 x 3 = $171 then I round up to the 9. So my final price is $179. Note: This does not apply to plano sunwear.
Thanks for the letter!–Jay
Case Study #2: Developing a Formula for MLP
Dear Jay,
I just read your article and I’m evaluating my frame pricing and trying to come up with a new formula. This was timely and a very interesting article to me. How do you determine your MLP? is there a formula for that?
JAY: Tell me a little about your practice and I will help you find your MLP:
Type of community:
Far south suburban Chicago., servicing Kankakee, Bradley, and Bourbonnais, Illinois, plus surrounding areas. County population is 108,000, and we pull patients from the entire county. Average home price $143,812. average family income $57,338.
Average age of your patient:
Tough to say average age. See more kids 1 to 9 last year because kindergarten exams are mandatory in Illinois. That skews the average. I see 40 to 49 year olds the most, and my associate sees 50 to 59 the most.
Most expensive frame lines you carry:
Gucci, Ralph Lauren, Tura
Professional fees:
New exam $75, CL evaluation $35
Do you take VSP, Eyemed or Davis?
Medicare, VSP and Eyemed
Progressive lenses of choice:
Varilux Comfort and Definity Short
Average frame & lens sale:
Single vision $270, PAL $450 (that’s basic frame and lenses, premium frames with multiple lens options obviously much higher)
Number of patients you see each week:
115 (two doctors)
When was the last time you updated your dispensary look / furniture?
Just repainted entire office last fall and added new cabinets, countertops, and dispensing tables. Also updated decor and installed 42″ flat screen with iport media in the waiting room. The frame boards were not changed. They are box boards with fluorescent lights inside.
Retail environment:
Office is located in a professional center of 15 offices, which include dentists, chiropractor, lawyers, CPA, financial advisor, insurance agent. I own my 2000-sq. foot unit.
JAY: I do not think you are a low-end practice, but based upon your best product lines you are not a high-end or niche practice, either. That puts you somewhere in the middle. Tying in the rest of the info you sent me leads me to think that a safe number would be either $169 or $179 for your MLP. The true magic of implementing a new philosophy in your practice is in understanding that it can be fine tuned as you go. But I think this will be a safe place for you to start. Hope this helps!
