Any business needs a viable and appropriate fees structure to operate commercially successfully. But what factors go into setting up a fees structure that will help the bottom line? What is a suitable structure that will keep the patients walking in the door, meet the costs of running the practice and help everyone on the team earn a fair living? Setting up the right charges for your services is an important matter, one that many practice owners aren’t informed enough to justifiably do. We need a fair fee structure in order to be able to optimize patient care, make sure we are using the finest materials, the best equipment and to ensure that we have highly trained and competent team members on our team. Following is all the information you require to set up a fair fees structure for your practice:
The Buffer Factor
Having a buffer in place within the fees structure allows us to rectify any mistakes that we make, without it costing the patient more money or costing you the patient itself! There will be days when things wouldn’t go as planned or a treatment wouldn’t work as it was expected to. In times like that, it is extremely important to have a fees structure that would help support the additional costs of those patients in order to retain the patient. The buffer will help preserve the good will of the patient and absorb the additional cost without majorly affecting the bottom line. Buffer also gives us the opportunity to provide some fees relief to patients who are genuinely in need of some help.
Fees for Branding
Your fees should reflect the image of your business. It needs to assist in creating the brand you have envisioned for your practice. For instance, if you plan on opening up a boutique practice, catering to patients looking for a 5-star experience, your fees structure needs to reflect the same. You cannot be offering 30% discounts on referrals or teeth whitening for free with a lengthier procedure. You need to know your target customers, your patient base, the brand you wish to create and then structure a fees that reflects all those ideologies. A family-oriented brand needs to have a family-oriented price structure whereas a premium brand needs to have a premium price structure.
Factors Affecting the Fees Structure
A lot of factors affect the fees structure. For instance, if you are offering a premium service, then you will need to provide an environment and incentives that will be costlier than compared to a family-oriented structure. From interiors to furnishings to equipment, everything will need to be of premium quality, hence, affecting your operational costs. There are other variables too that affect the price structure. It includes your rates of charge or charges put to you from suppliers. These include the consumables, like rent and other input costs including interest rates, consumer price index, inflation and staff costs. You need to calculate all these costs and then create a profit margin on top in order to maintain a successful practice. You need to focus on your profit margins in order to successfully operate. Practice owners usually make the mistake of not reviewing their fees often enough, or worse, not even knowing the costs of operating their business. In such scenarios, they aren’t even sure of the bottom line, they don’t even know where the problems lie and how to fix the fees structure in order to make a profit. As a practice owner, you need to be aware of the operational costs, review them periodically and then revise the fees structure accordingly in order to maintain the profit margin.
Preferred Provider Status
Another common problem that occurs is single point sensitivity where you may need to follow the predetermined fees structure. This is usually the case with being part of a preferred provider program. There is nothing wrong with being a part of the program, it is just that it could limit your opportunities for reviewing your fees structure from time to time. The best way to tackle this problem is to not completely rely on preferred provider status to generate sales per say. Don’t just rely on health insurance companies to send patients to you. It is never good business to rely on a single source for generating business, in this case relying on preferred providers to send in patients. By solely relying on preferred provider, you run the risk of them ratcheting down the rebates. It might or might not happen, but it is never a good idea to put yourself on the risk for the same. Also, practice owners who are part of the preferred provider status sometimes get lazy regarding marketing. Of course not all do, but some just get too comfortable with a steady stream of income to truly invest in their business. It is important to continue to attract and build a patient flow outside of those preferred provider relationships.
Tips and Tricks for Increasing Fees and Discounts
So when do you increase your fees without risking losing your patients? And how often do you offer discounts? Answer to both of these is subjective depending on various factors including your own ideologies, preferences and even economic conditions. However, experts are of the opinion that you should increase your fees in small increments. And there is a fair chance, based on vast experience, that the patients would even notice! Once you have reviewed the costs of business, which you should do every six months at least, increase the fees in order to maintain the profit margin. And in the highly unlikely case that a patient does directly ask you about the increase in fees, let them know that you strive to provide the best possible care using the highest quality of materials and expertise; and it was no longer possible with the previous fees structure. As for discounts, again, this is a very personal preference. You could, or could not offer discounts based on your brand and structure. I, personally, am not a big fan of discounts and I hardly ever openly offer them. I may offer discounts, though I prefer calling them courtesy adjustments, to a patient during a one on one interaction where I’d feel they could really use some. But never would I use it as a tactic to attract more patients. Again, this is a personal choice based on the type of business and brand you are trying to build for yourself. But if you would like to build a credible family-oriented business or a premium practice, then having the term ‘discount dentist’ associated with it wouldn’t help with branding your business as such. There you go! Everything you needed to know about creating a viable fees structure for your practice. Do make it a habit of reviewing your fees regularly, at least annually, but preferably every six months and focus on making small changes incrementally. Doing so would help maintain a successfully operating practice in the long run!
P.S. Whenever you’re ready …. here are 4 ways I can help you grow your dental practice:
1. Grab a free chapter from my book “Retention – How to Plug the #1 Profit Leak in Your Dental Practice”
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3. Attend a Practice Max Intensive live event
Our 2 day immersive events provide access to the latest entrepreneurial thinking and actionable strategies to drive your practice forward. You’ll leave with a game plan to take your results to the next level. If you’d like to join us, just send me a message with the word “Event and I’ll get you all the details! – Click here
4. Work with me and my team privately
If you’d like to work directly with me and my team to take your profit from 6 figures to 7 figures …. just send me a message with the word “Private”… tell me a little about your practice and what you would like to work on together, and I’ll get you all the details! – Click here