Sunday, March 11, 2001

Lasik Vision's fortunes dropped with its prices

By Randy Tucker
The Cincinnati Enquirer

        Lasik Vision Corp. introduced unprecedented price competition in the Cincinnati area when it entered the market in May 2000.

        The company, based in Vancouver, British Columbia, offered laser eye treatments for $499 per eye. Until then the market rate for the surgery — in which lasers reshape the corneal surface to correct vision problems — was $1,000 to $2,500 per eye.

        The rock-bottom pricing attracted value-conscious patients to the Lasik Vision USA surgery center, at 8044 Montgomery Road, and put pressure on competing chains and private-practice ophthalmologists to lower prices.

        But less than a year after Lasik Vision's opening here, the price war it started has backfired, analysts say. Its prices were too low to cover costs.

        The U.S. Food and Drug Administration's Lasik web site offers a sober picture of the pros and cons amid the sometimes inflated promises of the highly competitive and fast-growing laser eye-surgery field.
        Federal authorities, having approved the procedure, have little say over the surgery or the surgeons who perform it, and the FDA's role is confined to monitoring problems with the laser equipment.
        “The clinical studies do show there are certain side effects, certain risks,” said Sharon Snider, an FDA spokeswoman. She said manufacturers are required to include the possible side effects in labels.
        “That's all available to anyone who's considering the procedure,” she said. So far, she said, the agency has detected no unexpected glitches with the technology.
        The problems for Lasik Vision come at a time when it and similar companies are being buffeted by a slowing economy. The type of surgery they offer often isn't covered by insurance — so potential patients worried about the future may be waiting for better times before undergoing the procedure.

        In addition, federal agencies are receiving growing complaints about the procedure, also making consumers reluctant.

        David Harmon, president of Market Scope, a St. Louis company that tracks corrective laser eye-surgery procedures and companies, said Lasik's low-price strategy and the high overhead associated with its opening of 25 U.S. centers drained its resources.

        “They came to the U.S. with the $499 price with the assumption that the volume of people signing up for surgeries would be dramatically higher than the competition's,” Mr. Harmon said. “What happened is that even though the centers had relatively high volume, it wasn't high enough to cover such things as equipment, advertising and pre- and post-operative care.”

        Apparently, Lasik Vision couldn't pay its surgeons, either. In a news release issued Thursday, Lasik Vision's new parent — ICON Laser Eye Centers Inc. of Windsor, Ontario — said about 75 Lasik Vision doctors were owed back pay totaling $4 million.

Patients go elsewhere
        Many Lasik Vision doctors, including the surgeon at the Kenwood location, walked off the job early last week, complaining that they hadn't been paid since December.

        The work stoppage forced the centers to cancel surgeries and postpone new appointments for at least a month, inconveniencing hundreds of patients, and leading many to seek treatment elsewhere.

        “They called me a half an hour before my appointment on Tuesday and said the doctor was in negotiations, and they had to reschedule,” said Melissa Fox, of Oakley. “They wanted me to wait six to eight weeks. I'm getting married, so I can't wait.”

        Ms. Fox called LCA-Vision Inc.'s LasikPlus vision center — also in Kenwood, but not affiliated with the Canadian company.

        “They got me in the same day I called,” she said.

        Ms. Fox said she also asked Lasik Vision to refund the $500 deposit the company required when she scheduled her surgery.

        “They gave me a toll-free number in Canada to call to make sure the $500 had been credited back to my credit card, but I haven't seen it yet on my statement,” she said.

        The Ohio Attorney General's Office in Columbus has received two complaints against Lasik Vision this year, both claiming the company refused to refund deposits. One complaint has been settled, and the other is pending, a spokeswoman said last week.

        But Ghassan Barazi, ICON's chief operating officer, said all requests for refunds would be honored.

        He also said ICON is close to a settlement with Lasik Vision surgeons, and that the Kenwood center could resume operations as early as Monday.

        “We're hoping the surgeon will be back (in Cincinnati) on Monday, and then we'll start calling patients back and rescheduling appointments,” he said.

        “He may hope that,” said a laughing Dr. Martin Burger, the surgeon in question. Dr. Burger said late Friday night that he had taken a job at another Cincinnati clinic.

        Mr. Barazi did say he was negotiating with other doctors to allow ICON to reopen Monday.

        And despite the setback, Mr. Barazi said ICON has no plans to close Lasik Vision's operation in Kenwood.

Troubles invited takeover
        New patients can expect to pay at least $250 more per eye for laser treatments at the Lasik Vision center when it reopens, although patients with existing appointments will be charged the original price.

        “Our normal price is about $750 an eye, and we plan to stop discounting our normal price,” Mr. Barazi said. “But all previous contracts will be honored.”

        Market Scope's Mr. Harmon said he's not surprised by the price increase.

        He pointed out that the average cost of Lasik surgery in the Unit ed States is about $1,700 per eye, and he thinks most laser eye-surgery centers need to charge close to $1,000 per eye to make a profit.

        “(Lasik Vision) is paying the manufacturers of some of its lasers a $100 royalty every time they perform surgery,” he said. “That takes away a big chunk of their (profit) margin right there.”

        Mr. Harmon said Lasik Vision has never turned a profit in the United States and has reported substantial net losses in each of the past several quarters.

        The company hasn't released a financial report since September.

        The company's troubles left it vulnerable to a hostile takeover by ICON, which made an unsolicited bid of one share of its stock for every two Lasik shares in January.

        The deal was ratified Feb. 1 when Lasik shareholders tendered 48.5 million shares, or 82 percent of the company's outstanding shares, to ICON, Mr. Barazi said.

        Lasik Vision's woes may be severe, but they're not unique. Other laser vision correction providers have struggled recently, too.

        LCA Vision, which is based in Kenwood, describes itself as the No. 1 or the No. 2 provider in 12 of the 15 U.S. markets in which it operates. Still, the company had to cut prices for competition and posted a net loss of $2.4 million, or 5 cents a share, in 2000.


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