While the development of LASIK made vision correction attractive to consumers, another set of factors was making it popular with eye surgeons. Managed care and Medicare cost controls were pushing down the cost of other eye procedures, particularly cataract surgery, the bread-and-butter of ophthalmologists.
"We had a period of doom and gloom in ophthalmology," Rowen said. " `Oh, they're cutting cataracts. Oh, they're cutting cataracts.' It's cut, cut, cut. Then, this laser comes along, and you go, `Hello!' "
As LASIK bloomed over the past three years, two publicly traded chains, LCA and TLC Laser Centers, took a lion's share of the business. Eye doctors with individual practices rented laser time at centers or hospitals. Some eventually bought their own lasers (the machines cost about half a million dollars, and the laser-makers collect a $260 royalty fee for each zap) and began marketing their services.
LCA was the first chain in the Baltimore market. Almost as soon as the Food and Drug Administration approved use of the lasers, LCA signed a deal with Greater Baltimore Medical Center. Its center opened on the GBMC campus early in 1996.
The LCA center prospered, and it opened a second in Annapolis. LCA's chief surgeon, Dr. Anthony J. Kameen, established a strong reputation, one that persisted even as more doctors started doing laser correction.
"Tony got in first. You can't catch up to Tony," Rowen said. "He set himself in a separate league." Kameen is now closing in on his 10,000th eye, which he expects to do sometime next month.
The dynamic changes
Then, at the beginning of this year, LCA's rival, TLC, the largest of the laser chains, decided to open in Towson as well.
When TLC comes into a market, it lines up a network of optometrists to provide referrals; the optometrists, in return, are paid a fee for pre-operative and follow-up care, according to Stephen Kilmer, director of investor relations for Ontario-based TLC.
Then, Kilmer continued, "If there's already a surgeon who dominates that market, we'll approach them to come with us. They'll have the choice of either coming with us or competing with us."
Kameen chose to join TLC. LCA had a problem.
"All of a sudden, they went from leading the market with the busiest surgeon to not having busy surgeons and having two centers," said Harmon, the analyst and newsletter publisher. "The answer they came up with was to cut the price."
Kameen "was our No. 1 user," said Rapp, the LCA financial chief. "We said, `How can we get our center up to profitability again?' Everybody wanted to know about price sensitivity, so we said, `Let's try it.' "
About the time Kameen opened the TLC center in July, LCA rebranded itself as LasikPlus, and started advertising the $2,995 price.
The bold pricing threw the market into further confusion.
Stock analysts warned of a possible national "price war," and the share prices of the laser center companies and manufacturers dropped. The price war doesn't seem to have developed, said David Therkelsen of Dain Rauscher Wessels, but the stocks haven't rebounded.
"The market wants some clarification on what profitability will turn out to be for the center companies," he said, "and that will take a couple of quarters."
Discounts not everywhere
Some centers, including TLC, resolutely stuck to prices at $5,000 and above. "It takes more than one player to be in a war," said Kilmer.
Dr. Morton F. Goldberg, chief of the Wilmer Eye Institute at Johns Hopkins, fastidiously avoids terms like "discount" or "sticker price," much as he would avoid a contaminated scalpel. "We feel the level of expertise our specialists offer justifies the professional fee," he said. "People know our price and are seeking the world's best surgeons. We are busier than ever."
On the other hand, Baltimore Laser Eye Center opened in Pikesville, trumpeting its lowest price guarantee. "It's in response to the dramatic market change," said Bob Brodney, chief operating officer of the Washington and Baltimore Laser Centers.
"Our fee is $3,450. It was $5,000, but it's been reduced for several weeks now," said Joyce Covington, marketing director for the Parris-Castoro Eye Center, a surgeon-owned laser center in Bel Air. "We do want our volume to grow."
Others started negotiating on a patient-by-patient basis.
"What you see is a lot of panic. You see one person drop their price, then several moderate-volume guys get scared," said Sewell Gelbard, president of QVS Technology Group, an Illinois firm he describes as "a refractive marketing and business development company."
While LasikPlus is reporting success, other centers, including the higher-priced ones, say their volume is up as well, as all the advertising increases awareness of the procedures.
"We find it helps us," said TLC's Kilmer. "Even the price advertisement helps us. People hear an ad, then go to their primary eye provider, and he says, `Go to TLC.' "