12.10.10 Issue #457 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 

Is it Time to Raise Fees?
by Sally McKenzie CEO
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According to Kiplinger, consumers are spending again.  The most recent adjusted rate shows a 2.6% increase, the largest since 2006.

Yes, consumers are buying and retailers are charging. Case in point, McDonalds Corp. plans to raise prices next year. It will be the first time in more than a year. Company officials say they are cautiously optimistic about the slowly improving economy. Not to mention the fact that they anticipate commodity prices will be going up next year as well. You can also expect to pay more for your designer duds in 2011 as the price of cotton is predicted to increase too. Certainly during the last several months, many retailers and service providers have been understandably reticent to raise prices, but the tide appears to be shifting.

For dentists, the decision to adjust fee schedules can be agonizing in the best of times. Determining if the time is right to increase fees, particularly if you’ve avoided it for several months because of the economy, is a decision that should be carefully considered.

In most cases, I recommend that fees be adjusted each year - if you have chosen to maintain your current fee schedule the past couple of years, I hope you told your patients. They can’t possibly appreciate what you did for them if you didn’t inform them. That being said, it’s probable that for some dentists, if not many, it’s time to adjust fees. Like other businesses, costs are increasing on many fronts. But, before you make the decision to raise your fees, take time to consider a few key factors.

#1 - Your Market
Many doctors will arbitrarily establish their fees without ever checking what their dental neighbors are doing. Study dental fees in your area and find out where yours stand in comparison. Information on dental fees is available online and through your local dental society. Income and demographic information, which can be extremely helpful in establishing fees, is available through the local chamber of commerce. In addition, a variety of surveys and reports regarding the costs associated with the dental practice are available through the American Dental Association.

Consider the message your fees send current and prospective patients. If your fees are the lowest in the area, are you attracting quality patients that appreciate and value your care, or is your practice a magnet for price shoppers? Similarly, if your fees are the highest, do you want to be known as the most expensive dentist in town? Do you offer a patient experience and results that warrant the higher rate? Are you seeking to work with a smaller patient base?

#2 - Logic, Not Fear, Is Your Guide
Many doctors have not increased their fees in years - long before the recession hit - and they have no system for doing so. Consequently, practice finances are suffering. And doctors have trapped themselves in a financial quagmire, many charging only in the 50th to 60th percentile for their areas. Undercharging patients by as little as 7-8% each year translates into thousands of dollars lost to the practice. Undercharging by 40-50% translates into a serious financial pounding.

The dentist down the street may be charging in the 90th percentile and may be thriving, but many doctors convince themselves that they simply couldn’t charge that because patients will leave or the doctor feels guilty for increasing fees. Yet ours is a culture in which people associate quality with cost. In other words, you get what you pay for, and like it or not, cheap is often equated with low quality.

As compassionate as you may be as a healthcare provider, providing the best care comes at a price. Fee adjustments are a necessary part of running a high quality dental practice. Are you compromising quality for low fees? 

#3 - Establish A Realistic Fee Schedule
Certainly, you need to be responsive to your community, and during serious economic times like those we’ve seen, it’s essential to be sensitive to financial realities facing your patients. That being said, don’t let temporary altruism turn into long-term poor business decisions.

Institute a fee schedule that has a standard for each service. Evaluate the time required for each procedure, the fixed expenses necessary to run the office, variable expenses including supplies and lab fees, and income required per hour to compensate you, the dentist.

Next week, while you’re evaluating fees, it’s time to revisit your financial goals.
Interested in getting your fees evaluated?  Email info@mckenziemgmt.com.

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com. Interested in having Sally speak to your dental society or study club? Click here.

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