Refractive surgery relies heavily on capital equipment such as lasers and diagnostic devices. This equipment is extremely sophisticated and makes it possible to perform accurate, safe surgery time after time. The Refractive Surgery Alliance (RSA) position is that all refractive surgeons should have access to the most current technology and that all patients deserve the very best treatments available.
- Capital Expense vs. Operator’s Lease
Unfortunately, the current model for capital equipment acquisition is outdated, making it expensive and sometimes prohibitive for surgeons to always have the latest technologies. This is inhibiting the growth of refractive surgery. The RSA is committed to changing the financial model for capital equipment so that having the best technology is affordable.
In the current model, most practices purchase surgical equipment and lasers as a capital expenditure (“Capex”). Practices that purchase equipment are financially incented to keep the equipment as long as possible, to take advantage of depreciation. This can delay practices from upgrading to new models, keeping older equipment in service after new models have been released.
The RSA believes that the Capex model for equipment acquisition should change to a leasing model. Why? Because technology changes rapidly, and new equipment is generally better. Switching to an operator’s lease model will create better alignment between the practice and their patient’s interests.
An operator’s lease for capital equipment is similar to a lease on a car. Lease it, use it, and trade it in for the new model after the lease term expires. If refractive lasers and other expensive equipment were leased rather than purchased then patients will be more confident that their surgeon has the latest and best equipment.
The objection to a capital lease is that it can be more expensive over time. The RSA believes that the slight cost consideration is more than offset by producing the very best possible results.
- Click Fees
Another capital equipment concern is the persistence of “click fees” which charge the surgeon a per-use fee – generally between $150 and $250 per eye – for each use of the refractive lasers. Click fees cause equipment costs to rise with each use, which can discourage use of the lasers for small but bothersome refractive errors. Abolishing click fees will encourage laser use, by lowering the per-procedure cost of the laser with increased utilization.
The RSA would like to see click fees replaced by building a realistic cost structure into the lease payment.
Click fees originated as part of the “Pillar Point” lawsuit settlement after a patent dispute in the mid-1990’s. The fees were justified as a royalty payment to the original patent holders. Most if not all of those patents have now expired, yet the manufacturers of the lasers continue to demand click fees for every case.
The RSA position is that continuing to charge click fees is misguided. Click fees effectively add a tax to each use of the laser. As a result, many procedures that could be offered are not offered, especially in the context of small corrections after cataract surgery and for refractive enhancements after refractive surgery.
Manufacturers like click fees because they provide an ongoing revenue stream long after the laser is sold. Estimates of the average total revenue to the manufacturers per refractive surgery (excimer) laser is upward of $2.5 Million. The RSA is not opposed to manufacturers making a profit. In fact, refractive surgery relies on innovation, and innovation can only occur in a healthy, profitable industry. If $2.5 Million is the price needed to maintain a healthy innovation environment, so be it. However, the RSA position is simply that click fees should be abandoned, because they prevent the benefits of refractive surgery from being offered freely to every patient.
The RSA proposal is to structure the lease payments to include a reasonable lifetime revenue stream that includes both the capital equipment ongoing revenues. The impact of this approach will be very positive:
- • Practices will update their equipment more often to always have the latest technologies;
- • Manufacturers will be able to plan and control the new-technology cycles. The current Capex model makes it difficult to place new technologies because practices may keep their lasers for 6 to 8 years. Leasing will overcome this barrier and will encourage more investment in innovation.
- • Surgeons will be more likely to use their lasers, extending the reach of refractive surgery to new patients;
- • Patients will have the assurance that their surgery will be done with the latest equipment.
Click fees have to go. The RSA is working with manufacturers to put an end to click fees so that more patients can benefit from refractive surgery.