Chapter 16: Setting Your Fee Schedule
Your fee schedule is the single most important factor determining how profitable your dentistry business can be. Set it too low and no matter how hard you work, you can never get ahead. On the other hand, if you set it too high, patients will need to pay more out of pocket. They may leave your practice. More likely, they will simply opt not to have any but the most urgent treatments. So, how do you set your fees? Consider the following factors as you decide what to charge your patients for each procedure.
How Important Is It to Set a Low Price?
Do patients really care how much you charge? Of course, they do want to be able to afford the treatments they need. If your prices are completely out of line with what most dentists charge, patients might switch to another provider. However, within a certain range, the costs you set matter less to them than you might think.
Patients consider many factors when choosing a dentist. Cost is just one of these factors, and often it is the least important one to them. They want to feel comfortable coming to your office. They want to be treated well. They may also choose based on your location and convenience. Often, comparing costs does not occur to patients. They want to know the cost, but often that comes after they have chosen a dentist. So, setting a very low cost may have little or no effect on the number of patients you bring in.
Three Ways to Figure Prices
Dentists can use any of three main ways to determine pricing for their services. First, there is the cost-based method. You simply figure out what your costs of doing business are and set pricing to cover those costs and give you the amount you want above that. The second is based on consumer demand. If the demand is great, you can charge more. Finally, you can charge based on what the competition charges. Most dentists will use more than one of these methods, looking at each factor together with the others to find the ideal price to charge.
Determining Your Maximum Production Capacity
Before you set your fee schedule,consider how much time and energy you want to devote to your practice. How many hours do you want to work? How many procedures do you expect to do each day? Do you want to work as hard as you can, as many hours as you can hold up? Or, do you want to leave time for home, family, friends and leisure activities? You might have to set a trial fee schedule to begin your practice and the alter it later on once you learn from experience how much you can get done each day. Eventually, though, you need to know whether you want to operate at maximum capacity or give yourself more time for work/life balance.
Figure the Hourly Rate You Would Like to Make
You could set a fee schedule and then thinking about how many procedures you need to do to have the income you want. However, it is more realistic to think about how much money you want to make first and adjust your fee schedule accordingly. Break down the annual income you want to make into an hourly rate. Then, be aware of this rate as you calculate the fees you want to charge.
Recommended Fee Schedules
Provinces had recommended fee schedules that you can refer to in determining your fee schedule. You do not have to follow these recommendations. They are simply meant as a general guide for treatment prices within the province. They can be helpful as you consider which services are considered more costly and which are usually more lucrative.
Scientific Fee Analyzers
You can use scientific fee analyzers to calculate the optimal price to charge for dental procedures. Fee calculators use the information from insurance companies to come up with a list of fees charged by dentists within the postal code you enter in the program. The amounts are sorted by postal code and then by the percentile of dentists in that area who charge each given price. This information can be invaluable in calculating reasonable costs to use the competition-based model.
Comparing Treatment Rates
Knowing what other dentists in your postal code area can help you know how to set your own rates. Think in terms of the percentile you want to target. For example, the dentists who charge the most will be in the 95th to 100th percentile. Patients who realize this about their dentists may decide the dentist is overcharging them. Patients whose dentists are at or below the 70th percentile may be very happy with the cost, but the dentist’s business may not survive long. Usually, you want your fees to be above the 70th percentile and no higher than the 95th percentile to get a profitable balance between the best pay and the highest number of patients.
Consider a Fee Menu
A new trend among dentists is to set a fee menu for services patients see as optional or additional to routine procedures. On the fee menu, you divide up common services into different levels of treatment. For example, you might have several different versions of the dental cleaning. The fee menu might have the following options:
- Basic dental cleaning
- Basic cleaning plus scaling
- Cleaning, scaling and extra polishing
- Cleaning and fluoride rinse.
The fee menu can be as ornate as a spa menu or the menu of an upscale restaurant. Having a fee menu helps you give patients what they want and allows people to choose a lesser option if they are low on funds. It is a win/win situation that helps you attract and retain loyal patients.
Most dental clinics raise their fees once per year, either on January 1 or July 1. There may be a bit of a PR component to raising your rates. This is just one of the times you will be thankful you hired a caring, compassionate, calm and intelligent staff. Train them to let patients know about changes to their routine dental hygiene visits at the time they make their appointment.