FTC Moves to Overturn Eye-Care Industry Curbs

In a move aimed at reducing the cost of eye care and eyeglasses, the Federal Trade Commission voted 4 to 1 Wednesday to overturn state regulations that restrict the business activities of optometrists, including a California rule that limits the opening of branch offices.

The decision, which still must be drafted into final language, was seen as a major victory for eye-care chains, which have made large inroads against the nation’s approximately 19,000 independent optometrists. “This is very significant,” said Marc Ferrara, editor of Optical Index, a trade magazine for the eye-care industry. “The big chains will benefit the most.”

Richard F. Kelly, an FTC assistant director in charge of vision service industry practices, said, “The survey evidence . . . showed there were costs being imposed by these restrictions but not any benefits for the citizens in those states who have those restrictions.”

As a result, Kelly said, fewer consumers “can afford care in the first place.”

The American Optometric Assn. quickly voiced its opposition to the ruling, saying it will result in lower quality eye care. “The emphasis will be on big business rather than the individual doctor-patient relationship,” said Thomas E. Eichhorst, legal counsel for the association.

“The studies that the FTC relied on (to reach the decision) are old and flawed,” he said. Recent studies, he said, showed “a quality difference between independents and corporate practitioners.”

Eichhorst said the association would go to court to stop the ruling if it seeks to overturn any state regulations.

The FTC staff still must draft the precise language of a new regulation, which is expected to take several months. But Wednesday’s vote apparently would overrule the following state regulations:

- Limits on the number of branch offices that optometrists may own or operate.

- Bans on the practice of optometry in commercial locations, such as shopping malls.

- Prohibitions on optometrists using trade names.

- Restrictions that prevent optometrists from working for corporations, such as drug and department stores and optical chains.

The FTC found that 44 states have at least one of these regulations. In California, regulations that would be voided include those that restrict branch offices and prevent optometrists from working directly for corporations that are not owned or controlled by a licensed optometrist.

The regulations, Kelly said, “impeded the ability of optometrists to become efficient, to spread costs over more than one operation. They have the ability to develop chains, which might be able to save consumers money in what they ultimately charge.”

Kelly said the FTC based its decision on studies conducted in the late 1970s and early ‘80s. “The findings in those studies were and are still valid today,” he said.

Consumer Group

One of those studies was conducted by Consumer Action, a San Francisco group that examined whether higher-cost optometrists provided higher-quality services. “There was no difference at all” between the quality of higher-cost and lower-cost practitioners around the state, said Ken McEldowney, executive director for Consumer Action. “Consumers would be harmed by restricting entry into the market. Nothing has come up since then that would put that in doubt.”

FTC Chairman Daniel Oliver cast the only vote against the ruling. Oliver said that although the state regulations might result in higher costs, he did not believe that the commission had the authority to overrule state laws.

Michael Abbott, executive officer for the California Board of Optometry, which licenses and regulates the state’s approximately 5,500 optometrists, said state regulations require optometrists to be present at least 50% of the time when their offices are open. The rule effectively limits most optometrists to owning only two offices.

Corporations Rule

California regulations also prevent optometrists from working for corporations not owned by optometrists. About 90% of California optometrists are independent practitioners or work as part of an optometric corporation--the equivalent of a medical corporation.

Currently, eye-care chains--which provide optometric exams, frames and lenses, all under one roof--can operate in the state only if they have filed for classification as a health maintenance organization--a costly and time-consuming process, experts say.

“The whole thrust is to make sure that the optometrist retains control over what goes on in his or her professional practice,” Abbott said. The regulations “can be looked at as a professional turf defense,” he said. But the rules are meant to make sure that “a practice does not get out of control for the sake of economics.”

Break for Retailers

Ferrara of Optical Index magazine said the FTC ruling “would allow retailers to get into California and employ optometrists.”

“It does not mean bad news for independent optometrists,” he added. “They might want to use a trade name and employ other optometrists.” He admitted, however, that “most would be faced with intense competition.”

Some independent optometrists in Southern California said they are not concerned by the possible changes in state regulations.

“The chains are oriented more toward volume and discounts,” said John Elman, 43, who has operated his optometric practice in Santa Monica since 1977. “The people who are used to getting quality will come back once they’ve seen (the lack) of quality” at the chains, he predicted.