Are Your Fees Too Low?

by DRBECK

I saw a survey the other day asking dentists about the treatment of TMJ syndrome (Temporomandibular joint disorder)

Now you may or may not treat that particular condition … but the thing that surprised me was when the survey asked how much each respondent charged for their TMJ treatment.  The answer ranged from $500 to $40,000.

How could one dentist charge $500 and another dentist charge 80 TIMES as much for the same procedure?

Obviously much can be explained by the severity of the condition.  And we have no idea of the range of services included in those prices.

But I think there’s a lesson here for all of us: There is much more leeway in pricing than most of us realize.

Let’s take a look at how the typical dentist prices his services.

We usually ask ourselves: How do I keep fees competitive in my area? How much room do I have to raise my prices?

All of us, no matter what services we have in our offices, should be asking these questions on a regular basis.

How you answer can either ‘make you or break’ your practice. You may be the best dentist and the most well-liked person in a 30-mile radius, but if you fail to set your prices correctly your business will suffer … and so will your quality of life.

I have found that most practices set their fees either based on insurance schedules or local competition. Neither of these is a smart way to do business. Let me explain…

-   Insurance Schedules.  Insurance companies are notorious for cutting what they will pay down to the lowest possible fee schedule. If you are setting your fees to match an insurance company’s schedule, your fees are much too low.

-   Local Competition.  The other common way to set your fee schedule is by finding out what your competitors charge and trying to beat them with lower prices.

This is the wrong way to set your fees unless you are a non-profit clinic. What if your competitors are much lower than they should be? What if they still have the original prices they opened with 20 years ago?  It is important to know what your local market is charging, but not so you can undercut their fees.

You want to know the range of your competitor’s prices so you can set yours near the high end. That’s right, you don’t want to be the lowest in your area, but the highest.

What other professional service is praised for their low fees? How about sending your mother to the cheapest surgeon? Would you use the cheapest attorney to represent you in a court case? Do you want the bargain CPA representing you before the IRS?

Here’s a case scenario. The highest price for a particular service in your area is $55, the lowest is $35 and the average is $45. What are your fees going to be for that service? At least $55. But there’s not enough information here to effectively price your services.  Additional questions must be answered like:

-   what other services will you be doing on an average visit

-   how much will you be charging for these other visits

-   how much time will be spent doing all the services a typical patient needs

-   how many people do you have on staff and how much do you pay them

-   what is your overhead

-   and most importantly, how good is your marketing?

If your marketing is good, you can charge a higher fee because you have plenty of new patients coming in. One person leaving because they are “shopping for a deal” won’t affect your business if you’ve got 30 more new patients waiting to get in this week. And this is fair, as prices are mostly based on supply and demand.

There is only one exception to this rule of being at the top of your market’s price range.

When you make a special offer, don’t quote the most expensive exam and x-rays in town. This will only deter people from responding to the ad.

Without seeing your office, meeting you and your staff, having their problem explained to them, etc., prices will speak loudly. So be sure to give them a good special offer to come, but make sure they understand it is a special price and this isn’t what all your fees will be like in the future.

{ 2 comments… read them below or add one }

brian zarikta December 7, 2011 at 11:40 am

the company that we are competing with for new patients has launched a campaign for discounts in initial visits of 40% with similar discounts on restorative work. how do i compete with that with a 65% overhead.

December 7, 2011 at 4:13 pm

Hi Doc. A 65% overhead is high! Regarding the company giving 40% discounts, they are surely making it up with future care from the patient. They give a discount on the first visit, usually for exam and x-rays, then the patient continues to come back for cleanings and dental work at full price. Have you ever tried doing a special offer for new patients?

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