Refractive Surgery
Don’t expect a large bounce in refractive procedures in 2010

AT A GLANCE

• The recession caused large companies such as TLC Vision and smaller groups such as the Pacific Laser Eye Centers (PLEC) to file for bankruptcy.
• At the 2009 American Academy of Ophthalmology (AAO) annual meeting in October, estimates were made that only 670,000 procedures were performed in 2009 – the lowest since 1998.
• Several industry experts said they do not expect a strong 2010 in terms of refractive volume.
• There seems to be a couple quarter lag between improving consumer confidence index and unemployment rates and when refractive volume increases.

Physicians and industry believe the refractive market bottomed in 2009, but they are not predicting significant increases this year

“After 12 years of working in it, now I’m out of the refractive market, somewhat,” said Randall F. Fuerst, O.D., Sacramento, Calif. Dr. Fuerst was formerly the CEO of Pacific Laser Eye Centers (PLEC), which had several LASIK centers in northern California, until the company filed for bankruptcy in 2009.
Dr. Fuerst said they were forced into bankruptcy in large part because in September 2008, procedure volumes fell through the floor. “You cut staff where you can, but then you have to make sure the laser payments are made and the enablement cards need to be paid for so you can keep things going,” he said.
And PLEC was hardly the only practice to find the recession too cumbersome to survive. For example, in December 2009, TLC Vision (St. Louis) also filed for bankruptcy. Jim Tiffany, president and COO, TLC, said in a December news release, “This proceeding will enable us to continue providing our surgeons and eye care professionals with the tools, techniques and services they need to deliver high-quality patient care. After evaluating a number of strategic alternatives with our board of directors, we decided that restructuring our debt through court protection was the best way to preserve the value of our business.”
TLC declined to comment on the state of the refractive market for this article.
Limping through 2009 Two economic factors that LCA Vision (Cincinnati) uses to monitor refractive procedure volume are the consumer confidence index and unemployment rates, said Michael Celebrezze, CFO, LCA Vision.
“What we’re finding is that this industry is highly correlated with consumer confidence index, so we really were not surprised to see the industry contract this past year,” Mr. Celebrezze said. “The magnitude of that contraction was hard to predict, and it did so more than we had expected at the beginning of 2009, but now having been able to see how the economy settled in 2009, in hindsight, the volume of procedures ended up around where they would have expected it to be.”
Dr. Fuerst also stated that CCI and unemployment are two of the main driving economic indicators for refractive surgery.
In his Sacramento metro area, many of the jobs are state and federal government positions. Almost all state employees took about a 15% cut in pay with “Furlough Fridays,” and that has sent shock waves around the region.
He said he has spoken with several other physicians who have found themselves in similar situations, and in fact, at the American Academy of Ophthalmology annual meeting in October 2009, estimates were made that only 670,000 procedures were performed in 2009. “It hasn’t been that low since 1998—about two years after LASIK was approved,” Dr. Fuerst said.

Tempering expectations for 2010

On November 25, Market Scope stated, “Following a protracted decline began in 2007, we expect global demand for laser refractive surgery to start improving in 2010 and subsequently return to previous levels and growth. However, much of the growth in the coming years will be driven by increasing demand in rapidly emerging markets, while recovery will be slower in the United States and in Europe.”
Abbott Medical Optics (Santa Ana, Calif.) CEO James R. Mazzo made a similar appraisal in the January 2010 issue of Refractive EyeCare. He said, “while economic indicators now appear somewhat improved, refractive surgery is unlikely to see a dramatic increase in 2010. My sense is that the next two years will be ones of moderate improvement rather than a rapid rebound.”
Mr. Celebrezze added that LCA Vision is planning conservatively for 2010 because their macroeconomic data indicates that while there will be economic recovery this year, the refractive market, which is part of the consumer discretionary spending segment, will be lagging. But if they notice an improvement in performance, they also will be prepared to respond quickly.
These predictions seem to hold some merit, as Dr. Fuerst has seen bad reports for procedure volume already for January.
Talking with a Springfield, Mo., ophthalmologist, he said his procedure volume was down 10% so far in 2010, Dr. Fuerst said. “He was pretty happy because there are a lot of folks who are closing their doors or are seeing dramatic fall offs,” he said.
In his own practice, January has been their busiest refractive volume month with numbers ranging in the 280-310 area because patients would take advantage of flexible spending accounts. During the recession, including this January, that number has dropped into the 70s.
His best guess is that 2010 will be similar to 2009, but he is more optimistic about 2011. “That is more of a best-guess from having been in the market since its outset.”

So if not 2010, then when?

One problem with trying to forecast what 2010 will hold in terms of refractive volume is that his company can only see about 30 days down the road, Mr. Celebrezze said.
Another problem is that there is not much previous data to compare market cycles to because it is a relatively recent market. There seems to be a couple quarter lag between improving CCI and unemployment rates and when refractive volume increases, Mr. Celebrezze said, but the numbers are hard to gauge because of the short history of the LASIK market.
“I don’t have a lot of data on that,” he said. “I have the last recession … there has only been one recession, and this is the second one, so there has only been one recovery.”
Still he remains optimistic about the LASIK market because there is no competing technology to replace it; the research is ongoing to improve the technology; and patient-satisfaction rates are high.
The way LCA Vision views the LASIK market is that it follows the economic cycle. Over a cycle, which began in 2002, 2007 was the peak year, and now 2010 is at or near the bottom.
“I wouldn’t want to say that we immediately are going to jump back to the 2007 level at the peak of the cycle, but I would expect that over the next cycle, I see no reason why we wouldn’t be able to perform at the levels of this cycle,” Mr. Celebrezze said.

Editors’ note: Drs. Fuerst and Celebrezze have no financial interests related to their comments.

Contact information

Celebrezze: 513-792-9292, mcelebrezze@lca.com
Fuerst: 916-726-1818, rfuerst@gmail.com