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How Often Should You Raise Your Fees?

Over time, you may find that you need to modify your fees based upon patient feedback, equipment and supply prices or overhead costs. Routinely raising fees by 3-5% every 10 months has many advantages. When implementing this adjustment, raising every fee by the same percentage across the board is beneficial. I would suggest not wasting time and energy attempting to adjust each fee separately, perceiving possible negative reactions from patients and insurance companies. These perceptions are usually much worse than reality. The adjustments typically go unnoticed by patients, but serve to add significantly to your bottom line.
 
Raising your fees every 10 months gives you an additional fee increase every five years above what a typical yearly increase would provide. Set a reminder on your scheduling software when your next fee increase should occur. Since it is very difficult to institute large fee increases to make up for lost time, doctors who do not raise their fees annually commit themselves to greater overhead percentage and lower profits for the remainder of their careers.
 
It is commonly recommended to raise your fees 5% across the board in order to keep pace with inflation. This fee increase helps defray the costs of investing in new technology for your office and rising payroll expenses. On average, operating costs for the typical practice are advancing at a rate of 3-4% annually. In order to maintain or improve profitability, practice fees must be raised above that level.
 
Being mindful of the economy at large, go easy on fee increases in times of economic downturn. A 3% increase will normally keep pace with inflation during these periods, as overall growth and spending will wane. Though some practitioners will continue to operate with apparent immunity to any recession, most will find practice volume to slow in accordance. The goal is to take the patients along for the long haul, so absorb some of the recessionary pain with them while striving to keep them in your operatories.
 
If you practice in a state which allows resubmission of your fee schedule to Delta on a yearly basis, by all means take advantage of this. I have my office manager keep a note in the software alerting her to the day in which we are able to do this each year. Therefore, every twelve months to the day we submit our fee schedule to Delta reflecting the new, higher fees for the codes we use in our practice. Although Delta does not regularly grant us the full value of the increases we appeal, Delta is required to enter our new fees into its database as those of a provider in our zip code. This ultimately raises the level of approved fees in our area, as Delta bases its fee schedule on a percentile of the overall fees submitted for each zip code.
 
In determining your fees, do not underestimate the value of the efforts you have made to create a unique dental environment for your patients. They value that, and therefore, so should you. You are taking pains to provide high quality care and a comfortable encounter. It takes time to provide exceptional clinical care and service. Low fees and high volume encroach upon that time. Being rewarded for your efforts will allow you and your business to continue to satisfy your patients’ desires and expectations for the best dental experience available.

Dec 21, 2011 | 5 comments | View Post

Asking New Patients for Credit Card Confirmation

Another seemingly controversial way our practice may stand out from others is that we require a credit card number on file in order for a new patient to book an initial appointment. This may seem to fly in the face of the traditional philosophy of treating the new patient like royalty in your practice, which I happen to agree with by the way. The problem comes when you leave yourself exposed to the whims of someone whom you have never met and with whom you have yet to establish a relationship of trust. Every provider has been burned by this individual far too many times. Even when good intentions are in mind, it is unfortunately too easy for a well-meaning new client to fail an appointment when no inherent consequences are in place.

In our practice, it works as follows when a new patient calls to schedule the initial visit. The receptionist warmly greets the caller and answers all questions, including those regarding insurance benefit information. The central imperative here is to establish a welcoming relationship up front. When this has been achieved optimally, the new patient typically has no problem answering a couple of questions from us before the call ends. We politely explain to the patient that all new patient appointments need to be secured with a credit card number, which we will never charge unless the patient fails the appointment altogether. Though many of my friends and colleagues fear that by adopting this strategy they may chase away potential customers, we have found that this is simply not the case. Less than half of one percent of patients ever balks at this approach, and those that do are likely cognizant that they cannot trust themselves to show up at the appointment as scheduled. Personally, I do not want those risk laden clients in my practice anyway. They are simply weeding themselves out of the patient population.

Another benefit to securing credit card information prior to the initial appointment is that it tends to instill a sense of value in the time set aside for the client. We let our patients know that we do not double block their time slot and that this appointment period is being specifically allotted to them. In dentistry, time is more valuable than material costs or any other, because staff costs and other fixed overhead is wrapped up in it. When patients do not receive any goods or services, they may surmise that no real cost is assumed by the proprietor. By requesting credit card information on file, patients are alerted to the fact that in the business of dentistry, time is money. Be sure to check into the laws in your area regarding the storage of credit card information when implementing this practice protocol and take steps to ensure credit card information is stored securely.

Dec 15, 2011 | 2 comments | View Post

What’s Your Dental Office Collection Percentage?

303/365 Catchup
Creative Commons License photo credit: thebarrowboy

All dentists should be acutely aware of the collection percentage in their dental practice and review it on a monthly basis.  The collection percentage in my dental office in an average month will hover around 99%.  We very rarely send patients to collections because we work hard to calculate accurate co-pays and collect payments at the time of service.  I would estimate that less than .01% of my patients ultimately require collection proceedings.  This ratio stands in stark contrast to a practice in which I once associated.  In this practice, it seemed that nearly every other account went to collections.  It was so common that the office manager once informed me that many of their patients simply pay the collection agency and then schedule another appointment.  My experience with these types of accounts, however, has been that once a patient goes to collections, the patient chooses another dentist to dole services.

 

Interested to learn what the specific collection percentage in this practice was, I inquired this data of the office manager.  She seemed knocked off balance initially, though my intent was merely one of curiosity and not one of judgment.  She quickly filled the void in the air with the response, “Around 93%.”  I thought she may not have been certain about that number, but that it had sounded good to her and a collection percentage about which a dental practice should be proud.  I would caution you not to be so pleased with a collection percentage of that order in your practice.  It would behoove us all as business owners to have the number that accurately reflects our true collection percentage at the ready in our minds as well.

 

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Let’s look at an example of what not collecting that 7% of produced income would do to our bottom lines if our collection percentage was at that seemingly respectable level of 93%. As the math will bear out, a 7% neglect in collections will in reality amount to a 17.5% reduction in your take home pay.  Now let me ask you, would any of your employees come to work for nearly 18% less money per year?  If so, they are likely being paid way too much.

 

In this hypothetical example, let’s set our yearly production at $500,000.  We’ll assume a reputable overhead percentage of 60%, though I am convinced that you can have an outstanding practice with an overhead closer to 50% without too many changes.  Dentistry’s Business Secrets outlines in greater detail the various means by which to achieve The Low Overhead Practice.  In our example, your take home pay after overhead of 60% will be $200,000 per year.  This, of course, is assuming you collect 100% of that which you produce.  When collections are off by the purported 7%, the bottom line take home pay is automatically reduced by $35,000, or, 7% of the $500,000 you produced.  Therefore, your salary is no longer $200,000 but $165,000.  That $35,000 you left on the table is equal to 17.5% of your original salary after overhead.

 

This brings me to the topic of free money.  I look at that $35,000 of failed collections as free money.  Since we all realize how hard the job of dentistry is, we know that this money does not truly come for free.  The fact is you have earned it.  I want to see you keep it!  This was a big reason for why I wrote Dentistry’s Business Secrets in the first place; to help you collect and keep your hard-earned money.

 

Another way to view the money we lose when we fail to collect what we produce is in the amount of labor necessary to regain this lost income.  If we collect the extra 7% we discussed, we get to keep 100% of that $35,000.  This money is not subject to overhead expenses, because overhead is calculated as the ratio of expenses/production.  Lost collections is not an overhead expense per se, it is in addition to overhead.  In order to receive that full $35,000 in our paychecks, we would need to produce $87,500 more than if we simply collected it from our patients and the insurance companies who owe it to us.   This is simply because whatever we produce is subjected to overhead expenses and what we collect is not.

 

Obviously, the greater the production value in your practice, the more negatively failing to collect will affect your bottom line.  In turn, the harder you will need to work in order to produce the money lost to insufficient collection techniques.  Take heart though, there are tried and true methods that can be easily implemented into one’s practice to ensure collection numbers closely approximating 100%.  You have earned it, so it stands to reason that you should be able to receive it and then do with it as you so choose.

Dec 13, 2011 | 2 comments | View Post