Pacific cataract and laser institute case study

CASE 17 Pacific Cataract 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, Canada-based Lexington Laser Vision (LLV) had been running in the Spokane papers and shook his head. This was not the first ad 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 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.

Exhibit 17/1: Map Showing PCLI Clinic Locations (Clinics designated by a♦; Anchorage, Alaska, clinic not shown)

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.

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 artificial 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 efficient, 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.

* 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.

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). The epithelium naturally regenerated itself, although eye medication was required for 3 to 4 months after the procedure.