PBSC Recommendations that Will Lead Pacific Cataract and Laser Institute Review Please correct action plan one and two. Provide the missing timeline in act

PBSC Recommendations that Will Lead Pacific Cataract and Laser Institute Review Please correct action plan one and two. Provide the missing timeline in action plan two( black bars), Correct the number if needed, and explain the tables. please find the information for timeline and the numbers in the case study CASE
Pacific Cataract
17
and Laser Institute:
Competing in
the LASIK Eye
Surgery Market
Dr. Mark Everett, clinic coordinator and optometric physician
(OP) of the Pacific Cataract and Laser Institute (PCLI) office in
Spokane, Washington, looked at the ad that Vancouver, Canadabased Lexington Laser Vision (LLV) had been running in the
Spokane papers and shook his head. This was not the first ad
This case was prepared by John J. Lawrence and Linda J. Morris, University of
ldaho, for the sole purpose of providing material for class discussion. It is not
intended to illustrate either effective or ineffective handling of a managerial situation. The authors thank Dr. Mark Everett for his cooperation and assistance with
this project. The authors also thank the anonymous Case Research Journal reviewers and the anonymous North American Case Research Association 2000 annual
meeting reviewers for their valuable input and suggestions.
Copyright © 2002 by the Case Research Journal and John J. Lawrence and Linda
J. Morris.
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nor the only clinic advertising low-priced LASIK eye surgeries. Dr. Everett just
could not believe that doctors would advertise and sell laser eye surgery based on
low price as if it were a stereo or a used car. The fact that they were advertising
based on price was bad enough, but the price they were promoting – $900 for
both eyes – was ridiculous. PCLI and its cooperating optometric physicians would
not even cover their variable cost if they performed the surgery at that price.
A typical PCLI customer paid between $1,750 and $2,000 per eye for corrective
laser surgery. Although Dr. Everett knew that firms in Canada had several inherent
cost advantages, including a favorable exchange rate and regulatory environment,
he could not understand how they could undercut PCLI’s price so much without
compromising service quality.
PCLI was a privately held company that operated a total of 11 clinics throughout the northwestern United States and provided a range of medical and surgical
eye treatments including laser vision correction. Responding to the challenge of
the Canadian competitors was one of the points that would be discussed when
Dr. Everett and the other clinic coordinators and surgeons who ran PCLI met
next month to discuss policies and strategy. Dr. Everett strongly believed that
the organization’s success was based on surgical excellence and compassioned
concern for its patients and the doctors who referred them. PCLI strived to provide the ultimate in patient care and consideration. Dr. Everett had joined PCLI
in 1993 in large part because of how impressed he had been at how PCLI treated
its patients, and he remained committed to this patient-focused value.
He was concerned, however, about his organization’s ability to attract laser
vision correction patients. He knew that many prospective PCLI customers would
be swayed by the low prices and would travel to Canada to have the procedure
performed, especially because most medical insurance programs covered only
a small portion of the cost of this procedure. Dr. Everett believed strongly that
PCLI achieved better results and provided a higher quality service experience
than the clinics in Canada offering low-priced LASIK procedures. He also felt
PCLI did a much better job of helping potential customers determine which
of several procedures, if any, best met the customers’ long-term vision needs.
Dr. Everett wondered what PCLI should do to win over these potential customers –
both for the good of the customers and for the good of PCLI.
Pacific Cataract and Laser Institute
Pacific Cataract and Laser Institute (PCLI) was founded in 1985 by Dr. Robert Ford
and specialized in medical and surgical eye treatment. The company was headquartered in Chehalis, Washington, and operated clinics in Washington, Oregon,
Idaho, and Alaska. (Exhibit 17/1 shows a map of PCLI locations.) In addition to
laser vision correction, PCLI provided cataract surgery, glaucoma consultation
and surgery, corneal transplants, retinal care and surgery, and eyelid surgery.
Dr. Ford founded PCLI on the principle that doctors must go beyond science and
technology to practice the art of healing through the Christian principles of love,
kindness, and compassion. The organization had defined eight core values that
were based on these principles. These core values, shown in Exhibit 17/2, guided
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765
Exhibit 17/1: Map Showing PCLI Clinic Locations (Clinics designated by a♦; Anchorage,
Alaska, clinic not shown)
PCLI’s decision making as it attempted to fulfill its stated mission of providing
the best possible “co-managed” services to the profession of optometry.
Co-management involved PCLI working closely with a patient’s optometrists,
or OD (for doctor of optometry). In co-managed eye care, family ODs were the
primary care eye doctors who diagnosed, treated, and managed certain diseases
of the eye that did not require surgery. When surgery was needed, the family
OD referred patients to ophthalmologists (e.g., PCLI’s eye surgeons) for specialized treatment and surgery. Successful co-management, according to PCLI,
depended upon a relationship of mutual trust and respect built through shared
learning, constant communication and commitment to providing quality patient
care. PCLI’s co-management arrangements did not restrict ODs to work with
just PCLI, although PCLI sought out ODs who would use PCLI as their primary
surgery partner and who shared PCLI’s values. Many ODs did work exclusively
with PCLI unless a specific patient requested otherwise. PCLI – Spokane had
developed a network of 150 family ODs in its region.
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Exhibit 17/2: Pacific Cataract and Laser Institute’s Core Values
• We believe patients’ families and friends provide important support, and we encourage them to
be as involved as possible in our care of their loved ones.
• We believe patients and their families have a right to honest and forthright medical information
presented in a manner they can understand.
• We believe that a calm, caring, and cheerful environment minimizes patient stress and the need
for artifcial sedation.
• We believe that all our actions should be guided by integrity, honesty, and courage.
• We believe that true success comes from doing the right things for the right reasons.
• We believe that effcient, quality eye care is provided best by professionals practicing at the
highest level of their expertise.
• We believe that communicating openly and sharing knowledge with our optometric colleagues
is crucial to providing outstanding patient care.
• We believe that the ultimate measure of our success is the complete satisfaction of the doctors
who entrust us with the care of their patients.
PCLI operated its 11 clinics in a very coordinated manner. It had seven surgeons that specialized in the various forms of eye surgery. These surgeons, each
accompanied by several surgical assistants, traveled from center to center to
perform specific surgeries. The company owned two aircraft that were used to
fly the surgical teams between the centers. Each clinic had a resident optometric
physician who served as that clinic’s coordinator and essentially managed the
day-to-day operations of the clinic. Each clinic also employed its own office support staff. PCLI’s main office in Chehalis, Washington, also employed patient
counselors who worked with the referring family ODs for scheduling the patient’s
surgery and a finance team to help patients with medical insurance claims and
any financing arrangements (which were made through third-party sources).
Dr. Everett was the Spokane clinic’s resident optometric physician and managed the day-to-day activities of that clinic. Actual surgeries were performed
in the Spokane clinic only one or two days a week, depending upon demand
and the surgeons’ availability.
Laser Eye Surgery and LASIK
Laser eye surgery was performed on the eye to create better focus and lessen
the patient’s dependence on glasses and contact lenses. Excimer lasers were the
main means of performing this type of surgery. Although research on the excimer
laser began in 1973, it was not until 1985 that excimer lasers were introduced to
the ophthalmology community in the United States. The FDA approved the use
of excimer lasers for photorefractive keratectomy (PRK) in October 1995 for the
purpose of correcting nearsightedness. PRK entailed using computer-controlled
beams of laser light to permanently resculpt the curvature of the eye by selectively
removing a small portion on the outer top surface of the cornea (called epithelium).
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LASER EYE SURGERY AND LASIK
767
The epithelium naturally regenerated itself, although eye medication was required
for 3 to 4 months after the procedure.
In the late 1990s, laser in-situ keratomileusis, or LASIK, replaced PRK as the
preferred method to correct or reduce moderate to high levels of nearsightedness
(i.e., myopia). The procedure required the surgeon to create a flap in the cornea
using a surgical instrument called a microkeratome. This instrument used vacuum
suction to hold and position the cornea and a motorized cutting blade to make the
necessary incision. The surgeon then used an excimer laser to remove a microthin
layer of tissue from the exposed, interior corneal surface (as opposed to removing a thin layer of tissue on the outer surface of the cornea as was the case with
PRK). The excimer laser released a precisely focused beam of low temperature,
invisible light. Each laser pulse removed less than one hundred-thousandth of
an inch. After the cornea had been reshaped, the flap was replaced. The actual
surgical procedure took only about 5 minutes per eye. LASIK surgery allowed
a patient to eliminate the regular use of glasses or contact lenses although many
patients still required reading glasses.
Although LASIK used the same excimer laser that had been approved for other
eye surgeries in the United States by the Ophthalmic Devices Panel of the FDA,
it was not an approved procedure in the United States, but was under study.
LASIK was offered by clinics in the United States, but was considered an “off-label”
use of the laser. “Off label” was a phrase given to medical services and supplies
that had not been thoroughly tested by the FDA, but which the FDA permitted
to be performed and provided by a licensed medical professional. Prescribing
aspirin as a blood thinner to reduce the risk of stroke was another example of
an off-label use of a medical product – the prescribing of aspirin for this purpose
did not have formal FDA approval but was permitted by the FDA.
The LASIK procedure was not without some risks. Complications arose in about
5 percent of all cases, although experienced surgeons had complication rates of
less than 2 percent. According to the American Academy of Ophthalmology,
complications and side effects included irregular astigmatism, resulting in a
decrease in best corrected vision; glare; corneal haze; overcorrection; undercorrection; inability to wear contact lenses; loss of the corneal cap, requiring a corneal
graft; corneal scarring and infection; and in an extremely rare number of cases,
loss of vision. If lasering were not perfect, a patient might develop haze in the
cornea. This could make it impossible to achieve 20/20 vision, even with glasses.
The flap could also heal improperly, causing fuzzy vision. Infections were also
occasionally an issue.
Although PRK and LASIK were the main types of eye surgery currently performed to reduce a patient’s dependence on glasses or contact lenses, there were
new surgical procedures and technologies that were in the test stage that could
receive approval in the United States within the next 3 to 10 years. These included
intraocular lenses that were implanted behind a patient’s cornea, laser thermokeratoplasty (LTK) and conductive keratoplasty (CK) that used heat to reshape the
cornea, and “custom” LASIK technologies that could better measure and correct
the total optics of the eye. These newer methods had the potential to improve
vision even more than LASIK, and some of these new processes also might allow
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additional corrections to be made to the eye as the patient aged. Intraocular lenses
were already widely available in Europe.
LASIK Market Potential
The market potential for LASIK procedures was very significant, and the market
was just beginning to take off. According to officials of the American Academy
of Ophthalmology, over 150 million people wore glasses or contact lenses in the
United States. About 12 million of these people were candidates for current forms
of refractive surgery. As procedures were refined to cover a wider range of vision
conditions, and as the FDA approved new procedures, the number of people who
could have their vision improved surgically was expected to grow to over 60 million.
As many as 1.7 million people in the United States were expected to have some form
of laser eye surgery during 2000, compared to 500,000 in 1999 and 250,000 in 1998.
Laser eye repair was the most frequently performed surgery in all of medicine.
Referrals were increasingly playing a key role in the industry’s growth. Surgeons
estimated that the typical patient referred five friends and that as many as 75
percent of new patients had been referred by a friend. A few employers were
also beginning to offer laser eye surgery benefits through managed care vision
plans. These plans offered discounts from list prices of participating surgeons and
clinics to employees. Vision Service Plan’s (VSP) partners, for example, gave such
discounts and guaranteed a maximum price of $1,800 per eye for VSP members.
The number of people eligible for such benefits was expected to grow significantly
in the coming years. PCLI did not participate in these plans and did not offer
such discounts.
LASIK at PCLI
The process of providing LASIK surgery to patients at PCLI began with the
partnering OD. The OD provided the patient with information about LASIK and
PCLI, reviewed the treatment options available, and answered any questions
the patient might have concerning LASIK or PCLI. If a patient was interested in
having the surgery performed, the OD performed a pre-exam to make sure the
patient was a suitable candidate for the surgery. Assuming the patient was able
to have the surgery, the OD made an appointment for the patient with PCLI and
forwarded the results of the pre-exam to Dr. Everett. PCLI had a standard surgical fee of $1,400 per eye for LASIK. Each family OD added on additional fees for
pre- and postoperative exams depending on the number of visits per patient and
the OD’s costs. Most of the ODs charged $700 to $1,200, making the total price
of laser surgery to the patient between $3,500 and $4,000. This total price rather
than two separate service fees was presented to the patient.
Once a patient arrived at PCLI, an ophthalmic assistant measured the patient’s
range of vision and took a topographical reading of the eyes. Dr. Everett would
then explain the entire process to the patient, discuss the possible risks, and have
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COMPETITION
769
the patient read and sign an informed consent form. The patient would then
meet the surgeon and have any final questions answered. The meeting with the
surgeon was also intended to reduce any anxiety that the patient might have
regarding the procedure. The surgical procedure itself took less than 15 minutes
to perform. After the surgery was completed, the patient was told to rest his/her
eyes for a few hours and was given dark glasses and eyedrops. The patient was
required to either return to PCLI or to his or her family OD 24 hours after their
surgery for a follow-up exam. Additional follow-up exams were required at
1 week, 1 month, 3 months, 6 months, and 1 year to make sure the eyes healed
properly and to insure that any problems were caught quickly. The patient’s
family OD performed all of these follow-up exams.
Three of PCLI’s seven surgeons specialized in LASIK and related procedures.
The company’s founder, Dr. Robert Ford, had performed over 16,000 LASIK
procedures during his career, more than any other surgeon in the Northwest. His
early training was as a physicist, and he was very interested in and knowledgeable about the laser technology used to perform LASIK procedures. Because of
this interest and understanding, Dr. Ford was an industry innovator and had
developed a number of procedural enhancements that were unique to PCLI.
Dr. Ford had developed an enhanced software calibration system for PCLI’s lasers
that was better than the system provided by the laser manufacturers.
More significantly, Dr. Ford had also developed a system to track eye movements. Using superimposed live and saved computer images of the eye, PCLI
surgeons could achieve improved eye alignment to provide more accurate laser
resculpting of the eye. Dr. Ford was working with Laser Sight, a laser equipment manufacturer developing what PCLI and many others viewed as the next
big technological step in corrective eye surgery – custom LASIK. Custom LASIK
involved developing more detailed corneal maps and then using special software
to convert these maps into a program that would run a spot laser to achieve
theoretically perfect corrections of the cornea. This technology was currently in
clinical trials in an effort to gain FDA approval of the technology, and Dr. Ford
and PCLI were participating in these trials. Although Dr. Ford was on the leading
edge of technology and had vast LASIK surgical experience, very few of PCLI’s
patients were aware of his achievements.
Competition
PCLI in Spokane faced stiff competition from clinics in both the United States
and Canada. There were basically three types of competitors. There were general
ophthalmology practices that also provided LASIK surgeries, surgery centers like
PCLI that provided a range of eye surgeries, and specialized LASIK clinics that
focused solely on LASIK surgeries.
General ophthalmology practices provided a range of services covering a patient’s
basic eye care needs. They performed general eye exams, monitored the health of
patients’ eyes, and wrote prescriptions for glasses and contact lenses. Most general
ophthalmology practices did not perform LASIK surgeries (or any other types
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Exhibit 17/3: Eye Consultant’s Advertisement
of surgeries) because of the high cost of the equipment and the special training
needed to perform the surgery, but a few did. These clinics were able to offer
patients a continuity of care that surgery centers and centers specializing solely
in LASIK surgeries could not. Customers could have all pre- and postoperative
exams performed at the same location by the same doctor. In the Spokane market,
a clinic called Eye Consultants was the most aggressive competitor of this type.
This organization advertised heavily in the local newspaper, promoting an $1,195
per eye price (Exhibit 17/3). The current newspaper promotion invited potential customers to a free LASIK seminar put on by the clinic’s staff, and seminar
attendees who chose to have the procedure qualified for the $1,195 per eye price,
which was a $300 per eye discount from the clinic’s reg…
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