A question I often hear is, “I thought VSP lost their not-for-profit status?” In today’s installment, I will try to clear this question up and then talk about a new and emerging force in our industry, private equity and venture capital.
Here is the VSP Global mission statement:
“VSP Global is a community benefit based not-for-profit that was established to provide access to cost-effective, high-quality eye care and eyewear to as many in the community as possible. We help people see, and our community is the global community.”
VSP has been a voluntary not-for-profit vision care plan since its inception. It has always been about bringing together a high-quality panel of doctors with a community of patients who need high-quality, cost-effective eye care. The not-for-profit structure is very important because, as the bylaws state, “No director, officer, or any private individual shall be entitled to share in the distribution of any corporate assets or in any surplus. Such surplus, if any, shall be used by the Corporation to pursue …the promotion of social welfare by improving and expanding services.” In other words, surpluses are reinvested in the system to provide additional cost-effective, high-quality eye care for additional community benefit.
Most, if not all of VSP’s competitors work under an entirely different system, wherein, a major goal is to provide return on investment for stockholders and other investors. And now, as I am sure you have seen, large investments from sources outside our industry have been pouring into the eye care industry. Private equity investment seeks to take an existing company and restructure it to optimize financial performance. Venture capital investment seeks to cause a disruptive optimization of individuals to impact the bottom line. If we apply these principles to our industry, both private equity and venture capital seek to buy low and sell high and are focused on a quick return on investment. That means that patients become consumers and doctors become components with profits being the main goal.
It is safe to say that a rapid infusion of cash can quickly enable an entity to become a disruptive competitive force. Seemingly overnight, the focus can move from doctor and patient centric to profit centric. It is also safe to say that the health and welfare of doctors and their practices may be threatened by such activity, particularly if they do not have organizational support and a plan to compete. In fact, I would go so far as to say that a strong managed care ‘ecosystem’ is the secret sauce for the individual practice, providing stability, support, and financial buffer. VSP is certainly focused on providing patients and opportunity to provide service.
As I See It, VSP’s focus is on providing cost-effective, high-quality eye care. The goal is to connect doctors and patients in a mutually beneficial delivery of care. Surpluses are reinvested in the system to provide stability and stimulus for additional community benefit. VSP’s not for profit structure makes certain that the community, the patients, and the doctors are considered with every strategic decision and effort and is in stark contrast to many competitors who have a for profit organizational structure and investors to answer to.