Is it Time to Raise Fees?
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
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
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
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.
Does 2011 = Salary Increases?
“I dread the new year coming. My staff members are expecting a salary increase because I have given them one every year since the office opened 9 years ago. What should I do this year?”
Let’s review the seven categories of your practice’s P&L that comprise the expenses that are evaluated from a practice management standpoint:
As you know, a healthy overhead for a general family practice is 55-60% of net collections for the year. If you were over 60% for the past 12 months, the first recommendation would be - no raises this year. However, before carving that in stone, I would suggest that we evaluate each of your categories first. Here is why:
Let’s say that your Facility Costs are 8% instead of 5% because you lease the building back to yourself and you have over-inflated the rent compared to the area. To be more realistic, check to see what it would really cost you to lease a nice space in the same general area with the same square footage. Would that put you closer to the 5% goal?
Review your dental/small equipment supplies. Did you purchase some small equipment that can’t be depreciated but will last for several years, and you won’t have that expense again for some time, such as hand instruments? Are your lab costs too high because you are having too many crown failures, creating “redo’s” and running up your lab fees with no revenue to offset it? If it is the lab, change labs. If it is the type of crowns that you are using, consider changing crowns to increase success. Did your office supply expenses soar this year because you changed your logo and had to reprint all your stationery? You won’t incur that expense next year.
You can see where these points are leading you - if your total overhead is over 60%… determine why.
Salary Overhead Goals
It all depends on the above-mentioned categories that were too high. Calculate an estimated overhead for the next 12 months and factor out the extraneous expenses that you incurred last year that you won’t have this year. At the same time, be fair and consider any expenses that you may have for the New Year that you didn’t have last year. If your new estimated overhead puts you below or equal to 60% of net revenue, I would vote “yes” to the salary increase!
What About Benefits?
If your benefits are more than 5%, I can surmise that you are paying too much in medical benefits, offering too many vacation days that you can’t afford, or contributing to a retirement plan that you can’t afford. Now I have to vote “no” to the salary increase.
But They Are Great Employees!
Establish your 2011 collection goals to reflect a decrease of their benefit expenses to 5% or less. Meet them half way and offer to increase their salary in 6 months if they are meeting or exceeding the new collection goals. At the end of the year, if they are still meeting and exceeding the goals, increase their salaries again to bring their total wages and benefit package to no more than 27% of collections.
Maybe it is the Holiday Season and I am feeling generous. At the same time, I also see how hard your team members are working to continue to help you have a successful and profitable practice while at the same time giving quality service and care to your patients. Outstanding performance should be rewarded in conjunction with a financially healthy practice.
My best to you and your team in 2011. I hope for you all good health and prosperity for the upcoming year.
Dentistry is the Best Investment for your Total Health
Soon it will be a new year and a new opportunity to improve our health and well being. As dental professionals, we will continue to deliver our messages of quality dental care in the hopes that patients will want our services. Dentists across the country have lost production due to the downturn of the economy and the slow recession recovery. Staying positive and focused can be challenging. Spend more time with the patients that come in to your practice, as they are the ones that believe in caring for their teeth. Take a close look at the message you are sending when marketing your practice. People are spending, but with more discretion. Stressing the long term value of quality dentistry is the way to convince patients that even though there is an initial outgo, the value is there over time. The following is a message written to encourage patients to make a choice for dental care. Consider this message when talking to your patients about saving their teeth.
In case anyone is waiting to make more money or save more money to pay for needed dental care, please give me a minute or two of your time. Long gone are the days when the condition of your teeth was separate from the health of the rest of your body, and entire mouths of healthy teeth were removed because it was “fashionable” to have false teeth. People looked very old at 45 from collapsed faces and from poor diets of soft foods, due to not being able to chew well. It is believed now that healthy teeth and supporting bone or “gums” are necessary to have a long and happy life, because the relationship of gum disease and heart disease is well documented with oral bacteria found in the heart. You can choose whether to keep or lose your teeth; our mission is to help you keep them for your lifetime.
Postponing dental examinations and preventive cleanings because of the cost involved is not prudent, because dental care is not elective any more than a mammogram or a colonoscopy. Please consider the following before opting to avoid the dentist:
The average cost of a porcelain fused to gold crown or a full gold crown is about $1200. Major dental insurance companies will replace this crown in 5 to 10 years if there are open margins, decay, fracture or pain from using that crown. To illustrate long term value, divide 5 years into $1200 and you get $240 a year or $20 a month cost over time. This is less than the cost of a gym membership, lunch for two, dry cleaning two jackets or fancy coffee for the week.
Now that is for five years - but a well made, well maintained crown should last 20 years or more, so the costs go down enormously. Add to the value of postponing aging by preventing sagging of the face caused by tooth loss, and don’t forget being able to chew food that improves your health. I have two crowns that are twenty-two years old and going strong, do you think I care what I paid for them when considering what they have given me over the years? Next time you walk away without making an appointment to save a tooth, consider the long term value to your health and your pocketbook.
Health is usually at the top of everyone’s list, but it is up to the profession of dentistry to promote the connection between healthy mouths and healthy bodies. Make it your New Year’s resolution to continue to improve communication with your patients so that they choose dentistry first. Want help with conveying the message? Sign up today for McKenzie Management’s Treatment Acceptance Course and learn more and better ways to communicate.
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