We get this question often enough from new clients. Ideally you would raise fees a bit every year to keep up with inflation, which (depending on how you look at it) would be anywhere from the low 2% to 3% range.
If you want to keep an eye on inflation, you can have a look at the Consumer Price Index from the Bureau of Labor and Statistics. Essentially, this is a grouping of goods & services which are tracked year by year to gauge inflation. The increase in price for these types of items are averaged out and voila you have an inflation percentage.
For example, the inflation rate for 2019 year to date is 1.8%. In 2018, it was 2.4% and in 2017 it was 2.1%. And again, keep in mind that this is an average and can be deceptive because certain things went up in price more than others, and some items tracked even got cheaper.
For a dental office looking at increasing fees every year, a pretty safe and acceptable for years in the dental industry, is about 3%.
So, of course, when I’m asked, “Should I raise my fees?” the first thing I’d do is find out the last time they were raised. If you did at the beginning of the year – then probably not – with a qualifier, I’ll talk about later in this article.
Now, if you haven’t been regularly increasing fees – you should start!
(Related: Who’s Running This Place?)
RAISING YOUR FEES ANNUALLY
As far as how you go about doing this, it’s pretty simple: Take your fee schedule and raise each procedure by 3%! Round off uneven numbers up or down – i.e. an $83.22 prophy doesn’t exactly roll off the tongue. $83 or $84 is much easier to deal with!
Work out your fee increase for the coming year in November and December the year prior. Why? Well, the average dental fee schedule is pretty large – there are a ton of CDT codes. So, you want to make sure that this isn’t something you leave to the last minute. It’s also good to cover what these new fees will be with your staff sometime in about a month prior to the fee change – especially the Financial and Treatment Coordinators. This gives them time to get familiar with them.
RAISING FEES – WHEN YOU HAVEN’T DONE A FEE INCREASE FOR SOME TIME
If you haven’t done a fee increase in years, things become a little trickier.
You don’t want to all of a sudden unleash a 20% fee increase on your patients – you’ll end up with upsets.
In cases like this, I’d recommend two things:
- Get an idea of how your fees measure up for your area. Use one of the national dental fee surveys. I personally like the one issued by the National Dental Advisory Service.
This gives you a picture of fees by CDT code and by zip code. They rank them from low to high from the 40th or 50th percentile and up. Now, I’d do this even if you’ve been raising your fees regularly – or using some arbitrary means of setting fees – i.e. trying to undercut the corporate chain down the street! If you find yourself in the 40-50% range you may have a problem. And this can get pretty bad.
(Related: Should the Doctor Discuss Fees?)
It’s not uncommon for one of our Client Managers to find a new client virtually losing money on a procedure due to how low they are charging. To be more specific, I remember sitting with a client from a major metropolitan area many years back who purchased their practice a year prior. The prior owner hadn’t raised fees for years.
We couldn’t figure out why his Hygiene salaries were so high with relation to Hygiene Production. There were little to no cancellations or openings. Looking closer, we found his Hygiene fees to be horribly low. His fee didn’t even make it onto the NDAS fee chart at the lowest percentage. We checked (this was 2002) and his periodic oral exam fee was lower than Dr. Winteregg’s in 1984. And Dr. Winteregg practiced in a rural area – this doctor was in a major metro area! This explains it and he needed to ratchet things up.
So, whether you’ve been increasing or not – check your fees. Personally, I’d recommend at the lowest the 60th percentile – but prefer 70th. You could also push it between 70th and 80th.
But again – if your fees are really low, how can you raise them without creating “sticker shock” with your patients? You could:
- You could take a bigger jump each year with higher price procedures until you “catch up” E.g. crowns, endo, implants, etc. If you’re due for a 10-15% increase due to low fees or failure to raise them, you might give these a 5-7% increase each year until you get to where you should be. With smaller more frequently performed procedures – such as Hygiene fees, you could give these a small incremental increase every six months or so.
The key is to work it around and see what works best in your office – you have to be comfortable with what you’re doing. The rationale behind this approach is if my prophy is $2-3% higher – i.e. $83 vs. $79 last time – no big deal. Next time it’s $86. That’s OK too. If I go from $79 to $95 in one visit – that might be a bit much. A crown jumping from $850 to $900 or $925 is not as big of a deal even though it’s more money because I’m (hopefully) not getting a crown done every six months!
Again, how you do this really depends on your situation. And if you have any questions, you’re always free to email me at firstname.lastname@example.org
The other issue that will affect your fees is managed care.
Let’s say you have a lot of PPOs, and the average PPO write-off is 30%. Well, for every 1/3rd for the practice that is PPO, you have effectively done a fee decrease of 10%. Dr. Winteregg did a big study on this and put together a formula showing how many patients you could afford to LOSE while still maintaining the same level of profit if you raised your fees by 10% or more!
(Related: Managed Care Myths)
And while you don’t want to lose patients, if you handle it right, you’d lose a lot less than you might think. The point Greg wanted to make was if you bring in a bunch of reduced-fee plans, you just end up working harder for less. For more info on this and for a FREE download of the spreadsheet with these calculations for your practice, visit www.raisemyfees.com
If you have a considerable amount of managed care and you want to start moving out of these plans, I also recommend that you have a strategy first.
The last thing you want to do if 50 or 60% of your practice is from one or more PPOs, is just dump them all at once. That can become devastating to your business unless you have a plan to:
- Retain as many of these patients as possible and
- Drive in a ton of new patients.
We have figured out how to do this. If you want to know more, I’d recommend the MGE New Patient Workshop. You can find out more about it at www.newpatients.net. At the New patient Workshop, we can show you how to get a steady stream of new patients into your practice so you can continue to expand, and you don’t feel like you’re at mercy to the insurance companies.
I hope all of this helps! Again, if you have any questions, feel free to email me at email@example.com. Or you can give us a call at: (800) 640-1140.