view from the top

How To Set Your Practice's Fees

Think in terms of the value that your practice provides to patients.

GARY GERBER, O.D.

A doctor recently e-mailed me, wondering whether, given the current economy, making any adjustments to his examination fees — up or down — was advisable.

Setting exam fees (or pricing anything for that matter) is a large, complex and multi-faceted topic, and it's impossible to give accurate, pointed recommendations without doing a very thorough analysis of each practice. That said, here are some general things to consider regarding setting your own practices' fees.

Advice for price shoppers

The way our consulting company has seen most practices set their exam fees is to price shop their competition. After doing so, most doctors choose a fee in the middle of the range they uncover. Fast forward a few years and, lo and behold, these practices are the middle-of-the-bell-curve-earning practices.

Should you set your fees solely based on what your competitors charge, which we recommend you do not do, at least pick a fee on the fringes of the curve — not in the middle.

If you're thinking about “increasing sales,” presumably, that translates to “make more net money.” On the surface, increasing fees is a quick way to do just that, since any fee increase goes straight to your bottom line. Also, increasing fees isn't associated with an increase in labor costs, cost of goods, occupancy costs, etc. Of course, you do run the risk of losing patients if the increase is too high, or more accurately, the increase isn't associated with enough value.

Generally, if you net about 30%, you can increase your fees about 10%, lose 30% of your patients and have no change in absolute net dollars. However, that's a generality. Your practice mileage may vary.

An Audi or Honda?

Regarding value, there's a reason Audi charges $700 a month for a lease, and Honda charges $149. You would think “a car is a car” but it's not — consumers assign a different value equation to an Audi, which enables the car company to successfully charge high prices. My point: You have to consider your value proposition in establishing your examination fees.

Next, if your practice accepts a fair amount of insurance, there is very little risk in raising your fees — and if that's the case, we usually recommend you raise them a lot. This is because few patients will ever pay your actual fees, and you get the benefit of making the patient think: “He must be good, he charges a lot.” Additionally, if you take a lot of insurance, it's usually smart to charge at least what your highest-paying plan reimburses.

You should look at pricing dynamically, and constantly monitor it. You can best accomplish this via patient surveys and assessing whether patients feel they received genuine value from your practice. However, be very careful how you ask, and don't “lead the witness” toward a desired answer. We ask patients to choose one response from a continuum of “Lower than expected” to “higher than expected” when responding to “My examination fee was…”

In general, since roughly 15% of consumers will always complain about pricing, a response rate with less than 15% complaining indicates your fees are likely too low, and you can probably raise them with little risk of patient loss. When significantly more than 15% complain your fees are too high, however, either lower the fees, or increase the value patients are receiving with your current fee. OM