DCA Capital in the News

April 1, 2007
The Sacramento Bee

Eyes on growth
$54 million in new funding fuels eye-care firm

By Gilbert Chan -- Bee Staff Writer

The vision care industry's top dog prowls just minutes from Rick Corbett's doorstep, something that could intimidate a CEO other than Corbett.

Corbett, however, sees it as a motivator, a rallying cry for his company: "We're a little like the little engine that could."

The thing is, Corbett's Superior Vision Services Inc. wouldn't be considered all that little in any other town. It boasts 100 employees, nearly $100 million in annual revenue and 1.1 million members nationally.

In Rancho Cordova, though, crosstown competitor Vision Service Plan booked $2.4 billion in revenue last year, employed 2,000 people, served 48 million clients and has built a reputation as one of the best places to work in the nation year after year.

"I try not to focus on my competition. What I focus on is on how we can do better every year," said Corbett, president and chief executive of Superior Vision.
For the past decade, the company has followed an Avis-like "we try harder" strategy to grow the business in the very long shadow cast by Vision Service Plan.

Corbett figures that running a relatively flat organization has its advantages against the bigger players, especially when trying to carve out a niche in a competitive $28.6 billion-a-year U.S. eye-care industry.

"It makes us pretty nimble. We're able to adjust course a lot faster than our competitors," Corbett said.

With new investors emerging last month with $54.2 million in capital and debt financing, Superior Vision is poised to chart a faster course to expand and capture a bigger piece of the vision-care market. In the next five years, the company wants to double in size as well as increase its network of ophthalmologists, optometrists and retail outlets to 40,000 from 33,000 by 2009.

"They have a lot of room to double, triple or quadruple their revenue," said Curt Rocca, founder and partner of DCA Capital Partners of Roseville, one of the new investors. "They're expanding their sales and marketing efforts. California is a marketplace that has a significant upside opportunity."

Indeed, about 40 percent of Superior Vision's membership is in Texas and North Carolina, states where the company won key contracts early on.

Experts say an aging population along with more adults and children spending time behind computer screens translates into greater business opportunities in the future.

In the past decade, eye-care spending for everything from exams to contact lenses has doubled to $28.6 billion in 2006. Last year's revenue grew 8.9 percent over 2005, according to the Vision Council of America and Jobson Optical Research.

Studies indicate that 59 percent of the population requires vision correction but only 29 percent of nongovernment workers have vision coverage through their employers.

Moreover, vision insurance was used by only half of the 69 million U.S. consumers who purchased eyeglass frames last year, the Vision Council reports.

Historically, vision benefits take a back seat to medical and dental coverage. Although vision plans haven't been as aggressive about marketing their benefits as the dental care industry, the segment promises huge growth potential, said Steve Ingram, executive director of the National Association of Vision Care Plans.

He and health benefits consultant John Bagley of Hewitt Associates said vision care has strong appeal with employers and employees. It offers a value for the price -- typically $3.50 to $8 a month -- to cover annual eye exams, prescription glasses and in some cases refractive surgery.

"For employers, you can get a lot of mileage with employees by offering that," Bagley said.

Still, vision remains low on the benefits priority list for many employers, especially for those grappling with rising health care costs. Vision plans, too, have to deal with dominance of VSP, a company with an eye on the international market.

"It's hard to get new business in the vision area," said Dean Hatfield, a benefits consultant with Watson Wyatt in San Francisco. "Once you put in a vision plan -- as long as everything is running smoothly -- you're not going to bid it out. The only way you gain that opportunity (to bid) is to have something unique."

For Superior Vision, the major selling point has been a diverse network of eye-care providers and retailers.

"Some of our competitors require that, wherever you have your exam, you must purchase the eyewear there," Corbett said. Superior Vision members can visit an ophthalmologist or optometrist for an exam and fill prescriptions at retail outlets such as Wal-Mart or LensCrafters without paying extra. "We offer more retail choices than any vision plan in the country."

Corbett said his research indicates 52 percent of consumers prefer to see a medical doctor for an eye exam while 48 percent want to buy their glasses from a retailer, which are open weekends and have longer business hours.

"Superior is one of the easiest plans to administer," said Randy Brown, a Gold River optometrist. "It makes it easier for the patients." With fewer headaches and less paperwork, Brown said, "it's better for us financially."

Considered a young player in the industry, Superior Vision was founded in 1993 when a Bakersfield ophthalmologist, Dr. Charles Fritch, started developing and marketing a new eye-care benefit plan.

After two years of negotiations, Superior Vision reached an agreement with Northwestern National Life Insurance Co. to launch a nationwide vision plan. The deal called for the insurer, a unit of Minneapolis-based ReliaStar Financial Corp., to take an equity stake in the company, which set up its headquarters in Costa Mesa.

The carrier soon signed up 6,000 ophthalmologists and 4,000 optometrists and expanded its network to 50 states. Revenue reached $5 million in the early years.
Corbett, former president of the life insurance subsidiary at Foundation Health Corp., took over as Superior Vision's chief executive 11 years ago and was charged with turning around a foundering operation. He later relocated it to Rancho Cordova.

"It was losing money in 1996. I knew it was going to take time to build it correctly," Corbett said. "It took me about three years to get the thing on track."

Corbett narrowed the company's marketing efforts and tightened quality and cost controls by bringing claims processing and customer service operations in-house. The privately held company is profitable, Corbett said, but he declined to share specifics.

The big breakthrough came in 1997 after the company secured the contract for the University of Texas, a sprawling education system with about 50 branch locations across the state.

"We were able to put together a network that was more diverse and larger than our competition by quite a bit," Corbett said. "We did everything we could to make sure we were delivering the service that we promised."

The university account boosted the company's credentials and opened the way for other contracts in Texas. Two years later, Superior Vision signed up the state of North Carolina.

"When you're a startup company you have limited resources. You have to pick your spots," Corbett said. Today, Superior Vision serves a host of universities in Kentucky, Mississippi and North Carolina. Other clients include Delta Air Lines retirees, Coors Brewing Co. and the states of Kansas and Oklahoma.

Corbett relishes the David vs. Goliath challenge of taking on new markets, including the East Coast. "This is the most fun I have had ... in my career," he said.

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