Economy takes toll on Lasik surgeries

The number of vision correction surgeries performed by one of the nation's largest Lasik providers continues to plummet, mostly because money is tight and people are buying bread and milk rather than expensive cosmetic or elective surgery, analysts say.

At LCA-Vision Inc., which operates 77 LasikPlus vision correction centers in 33 states, the number of procedures is down by half from a year ago, and the company has slashed advertising, cut staff and suspended dividends.

"It's 99 percent the economy," said analyst Peter Bye, who follows the industry for Jefferies & Co. in New York.

"It's very substitutable," he said of Lasik. "Take the typical customer, a 30-year-old or 35-year-old who has been wearing contacts for 15 years. If money's tight, he says 'I'll do it next year.'"

The Food and Drug Administration heard testimony in April from patients who said they experienced dryness, severe eye pain or blurred vision following Lasik surgery. But Bye didn't think those hearings affected the industry much.

"In the spring, we heard a little bit of a blip, but it didn't escalate," he said.

Lasik was one of the optional expenses that people started to forgo about a year ago, Bye said. And like vision correction, other cosmetic procedures such as botox injections and breast implants have fallen off.

Those industries will revive when the economy rebounds, he predicted, but vision correction "is probably not the first discretionary item that comes back."

"Usually the first to go is last to come back," he said.

Although surgeries at LCA-Vision centers have declined more than the industry overall, the company's balance sheet is sound and the company should be able to wait out the downturn, Bye said.

LCA-Vision said last week its LasikPlus procedures in the past three months were less than half the number during the same period a year ago - 21,484 compared with 44,547.

The company reported a net loss of $4.7 million, or 25 cents a share, compared with profits of $10 million, or 51 cents a share, a year ago.

LCA-Vision, which announced in July that it reached 1 million laser corrections since its founding in 1965, cut staff by 25 percent that same month. In the third quarter, advertising was cut 46 percent from a year ago, to $8.3 million, as tightening discretionary spending became more evident, said CEO Steven Straus.

The company closed one office in Boise, Idaho, after a year of operation, and Straus said the financial performance of all its vision centers would be monitored.

Kevin Ellich, a health services analyst with RBC Capital Markets in Minneapolis, said many people are holding off on all types of surgery.

"People are delaying or forgoing needed medical procedures, not just elective stuff," Ellich said.

"The first things to go are high, out-of-pocket discretionary procedures," he said. "Not many people have $3,000 to $4,000-plus to put into Lasik these days. The cost of consumer staples - milk, eggs - adds up over time."

Other national surgery centers are feeling the pinch, too.

St. Louis-based TLC Vision Corp., which is endorsed by golfer Tiger Woods, announces its third-quarter earnings on Thursday. CEO Jim Wachtman already has said that volume is down but "significantly less" than the industry's mid-40 percent range.

Some independent centers, such as the Cincinnati Eye Institute, which has more than 40 doctors, have fared somewhat better. Dr. Michael Nordlund, the institute's medical director, said third-quarter procedures declined just 13 percent because they treat a wide variety of problems, not just vision correction.

"We have a little different type of patient who comes here," Nordlund said. "Price is less of an issue."

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On the Net:

TLC Vision: http://www.tlcvision.com

LCA-Vision:: http://www.lca-vision.com

LasikPlus: http://www.lasikplus.com

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