It was the buzz of the mid-90's, the boom of the late '90's, the price war of 2000 and the bust of 2001. It's the refractive surgery procedure known as LASIK, and as market observers tell us, it's been quite a ride.

"In a period of just a few years, we've performed millions of LASIK procedures in North America. You could never call this a failure," says Guy Kezirian, MD, of SurgiVision Consultants, Paradise Valley, Ariz. "Yet, the acceptance parallels that of a new drug. First the media embraces it as a ?miracle cure.' Then, after more patients receive the procedure, there is some disillusionment, and then ever-increasing attention is paid to complications."

Dr. Kezirian notes that this year, LASIK was impacted by several substantial challenges, including a weakening economy, disillusionment with the procedure and technology in general (i.e., the dot.com failures), and the Sept. 11 terrorist attacks. "It adds up to extreme caution in consumer spending," he says. "All truly elective or cosmetic procedures are being postponed."

Another consultant, John Pinto of San Diego, puts it even more bluntly: "It's a situation of recession exacerbated by war."

The bottom line for LASIK providers is a sharp drop in case volume. Mr. Pinto estimates that in the second quarter of 2001, case numbers had decreased by 15 percent to 60 percent of first quarter volumes, with the biggest impact felt by high volume urban practices. Since Sept. 11, cases slowed to a trickle, or shut down.

"We are seeing some rebuilding of case numbers now, but LASIK will be going through ?the eye of the needle' for a while," Mr. Pinto predicts.

What happened?
A closer look at the refractive surgery market reveals that it was headed for some kind of correction, regardless of economic conditions and the terrorist attacks. The first clear sign of it came later in 2000, when some aggressive LASIK providers cut fees and advertised heavily.

At that time, several LASIK chains advertised prices of about $1,000 per eye, with "introductory offers" as low as $499 per eye at newly-opened centers. Market Scope, a St. Louis-based research company, reported that fees dropped to an average of $1,650 per eye from $3,000 per eye. The discounters' idea was to expand the market by attracting patients who could not afford the higher price, and to drive out of the LASIK market providers who were unwilling to cut fees.

The strategy failed in several ways:
By April 2001, Lasik Vision, the primary discounter, went bankrupt. Other laser chains have experienced drastic drops in revenue and stock prices.

After several years of dramatic growth, the number of LASIK procedures performed in 2001 are expected to outpace 2000 by an anemic eight percent, according to Market Scope's David Harmon.

The percentage of LASIK procedures performed by independent surgeons has remained the same or increased, Mr. Harmon says.

"It's interesting to note that the move toward lower pricing did not produce a corresponding surge in patient demand. In our view, this serves as evidence that a trade-off exists between quality and price," notes David Therkelsen, analyst with Dain Rauscher Wessels, and author of "Riding the Next Wave: 2001 Refractive Surgery Update and Outlook."

Some market observers believe the price-cutting greatly confused prospective patients. Once advertised at a lower price, LASIK began to be perceived as a commodity item, rather than a surgical procedure.

The discounters changed the attitudes of the general population. LASIK began to be perceived as a commodity, with no real attention to the experience of the surgeon or the differences in lasers being used. At the same time, patients know there are differences in outcomes, and some of them are uncomfortable with paying ?the cheapest' price for surgery. The resulting confusion has contributed to the current 50 percent drop in case volume," says Jeffery J. Machat, MD, founder and National Medical Director for TLC, a laser chain that resisted discounting fees.

Another lasting effect seems to be price compression. Average LASIK fees for the first half of 2001 were $1,628 per eye- even lower than the average fee when discounting first hit.

"We're seeing a wide variance in surgeon's fees," notes Mr. Harmon, "with many of them offering tiered prices ranging from $499 per eye to $1,500 per eye. The reality is that few patients are paying the lowest prices, or even $1,000 per eye. Most are paying $1,500 per eye. But the high-end fees of over $2,000 per eye are gone- those surgeons have brought their prices down to $1,800 per eye."

But Mr. Harmon feels that price compression would likely have occurred even without the price wars of 2000 and early 2001.

"We reached a point in the market where people were balking at $2,500 per eye. Prices were bound to fall to reach a comfort level," he notes.

Other observers feel the LASIK market was reacting to another force: negative publicity.

"In one week, there were three major consumer articles that had negative things to say about LASIK. Patients started thinking, ?I'd better hold off on this and do some research'," says Glenn Hagele, executive director of the Council for Refractive Surgery Quality Assurance.

"I'd say the bad press alone softened the market by five to seven percent," estimates Mr. Pinto. "Reporting on adverse outcomes is more alluring than reporting on small technical advances that may move this market forward."

And there has been the increasing notoriety of Surgical Eyes Foundation, which operates a website (www.surgicaleyes.org) devoted to LASIK complications and side effects. Ron Link, executive director and founder of Surgical Eyes Foundation, says more than 1,400 LASIK patients have reported undesirable side effects and complications to the website; he knows of at least 30 cases with serious complications.

"Litigating LASIK malpractice cases is becoming a legal subspecialty. It's not because there are that many cases, but because these cases attract media attention," notes Dr. Kezirian.

What now?
At the same time, LASIK's supporters are quick to point out that its overall success rate and safety record will most likely prevail.

"LASIK works and it will stand the test of time," says Dr. Machat. "It's been a miracle for many patients, and it will be a miracle for many more."

Even for patients of the fee discounters, LASIK has been a safe and succesful procedure. Dan Z. Reinstein, MD, once the chief medical officer of discounter LASIK Vision, presented a study of 21,000 randomly selected LASIK procedures performed at 1,500 Lasik Vision centers last year. Among mild myopes, 95.5 percent achieved uncorrected vision of 20/25 or better, and 89 percent of moderate myopes achieved very good uncorrected vision. The complication rate was very low, with one mild myope and two to three moderate myopes in 1,000 experiencing complications.

"We had a very high standard of care and well-thought-out surgical training and safety programs. The tragedy is that [Lasik Vision] didn't last long enough to hone in on why our surgical outcomes were so good. It was the business side -not the medical side-which failed," says Dr. Reinstein.

He believes that as prices stabilize, they will become less confusing to patients. Dr. Reinstein also predicts that fewer surgeons will gravitate toward refractive surgery, and this is a good thing.

"A strange thing was happening in the profession of ophthalmology. I saw a level of animosity and dirty tricks that is unusual in any branch of medicine. Refractive surgery was becoming a cash cow. I think now, with prices stabilizing at a reasonable level, refractive surgery will become a decent subspecialty, like retina," Dr. Reinstein says.

Several industry observers believe that the current market slowdown will shake out LASIK providers, leaving only the most experienced surgeons in most areas. Right now, in any market of 1 million people, about five surgeons divide up an $8 million pie, Mr. Pinto says.

"The higher-volume LASIK surgeons were doing 300 to 500 cases a month. If their practices drop by half, they are still doing 150 to 250 cases. But for those surgeons who were doing 25 cases a month, a 50 percent drop makes LASIK not worth doing," Mr. Pinto explains.

The Rockville Center, NY practice of Eric Donnenfeld, MD, is an example of how larger refractive surgeons are making it through these tough times. Dr. Donnenfeld's cases were decreasing in 2001, but then "took a nosedive" after Sept. 11. At this time, his caseload has recovered to 250 cases a month.

"To most people, that sounds like a lot of cases but I had been doing 500 to 600 cases a month. We have enough cases to keep going and weather the recession, and that's what we'll do," he says.

Dr. Donnenfeld notices a change in the patients he's seeing. At one point, many patients were shopping for the lowest price, and expecting an easy procedure with very little risk. Now he's seeing patients who are looking for the very best surgeon, and for whom price is not an issue.

"These patients are knowledgeable, and they are demanding. It's more work for the surgeons, but better for the LASIK market. These patients have a more realistic idea of what this procedure can offer," he says.

What it means for you
Analysts say that by the end of 2001, US surgeons will have performed 1.4 to 1.5 million LASIK procedures, which is about 300,000 fewer than predicted at the beginning of the year. Although this represents a market contraction, experts are bullish on the LASIK market once the US economy recovers.

"Those 300,000 procedures aren't going away; they are just being postponed. Next year, they may be having LASIK, along with many others," notes Mr. Harmon.

Dr. Kezirian believes that a pace of 2.5 million procedures a year is possible to reach sometime between 2002 and 2004. To participate in that market, however, LASIK providers will have to survive.

"This is a typical business cycle. Those who emerge will be stronger, leaner and better equipped," Dr. Kezirian says.

For facilities that already offer LASIK, experts recommend three steps:

Take the time to retool. Are you offering the latest LASIK technology? Dr. Machat notes that wavefront technology will offer customized procedures and the ability to correct LASIK-induced vision problems.

Reassess your surgeon affiliations. With fewer cases being concentrated into fewer hands, make sure you are working with those "top five" LASIK doctors in your area. If you aren't, it may be worthwhile to initiate a relationship, even as a satellite center.

Beef up your service. This includes service to customers and to doctors. Do a patient satisfaction survey of previous LASIK patients to pinpoint areas to improve. Create a patient tracking system so you can report outcomes to surgeons.

Here's what experts recommend for facilities that aren't offering LASIK now:
Don't dive in now. The market is contracting, and you want to stay clear. "The barriers to entry are higher, and so are the risks," notes industry consultant Ken Taylor, OD, of Marblehead, Mass.

Keep an eye on the technology. Wavefront measurement and other refinements will make LASIK outcomes even better for more people. Once the economy recovers, you may want to make the investment in LASIK, but experts say you should only invest in the "best and the latest." In addition, researchers are developing alternatives to LASIK that may open up the refractive market to even more patients.

Talk to your cataract surgeons. If you have ophthalmologists bringing a number of cataract procedures to your ASC, you might plan to add LASIK for their convenience. "Quite a few surgeons are going to one place to do cataract, and another to do LASIK. A ?one-stop shop' might be a real service," suggests Dr. Donnenfeld.

Even with all the current bad news about LASIK, industry observers remain optimistic about the refractive surgery market. They point out that it has passed through its "early adopter" stage, when only the more adventuresome or visually challenged patients will try it. Observers predict that mainstream America will accept LASIK as a proven and reliable option for vision correction, just as soon as the economy rebounds.

"Going forward, we believe the industry is positioned to deliver solid growth," says Mr. Therkelsen. "The next phase of growth will present even larger opportunities for those able to adjust most effectively."