Exclusive Date: June 12, 2013
What if you raise your fees and patients leave you?
Fear of losing patients is one of the main reasons optometrists don't raise their fees. But will they really leave you? Or will an unfounded fear cause you to undervalue your services and earn less than optimum profit?
As you evaluate your fees, there are many factors to consider, including your local economy, local demographics, participation with insurance, and cost of doing business, but based on my experience with many practices, ODs frequently set fees extremely low. I don't call for ODs to overcharge, but just charge fairly based on the true value of the service and the costs of business operations.
There are other reasons ODs are afraid to raise fees, so let's look at those first.
Insurance plans make fees irrelevant
When optometrists tell me they don't bother to raise fees because vision plans are so dominant in their practice that it would make no difference, I always give the same response: then why not raise them? These doctors have less reason than most to keep fees too low. After all, if patients have services or products covered by a vision plan, they really won't care what the fee is.
There are some good reasons to raise fees even with a high percentage of patients on insurance plans.
If I raise fees, it will just hurt private pay
- Many items are purchased without vision plans. These may be non-covered services, multiple products or services and products that are not timed to qualify for coverage. We must grant large discounts to vision plans that we participate with, so it is very important to make a strong profit when non-covered items are purchased.
- Some of the items purchased with vision plans have a co-payment or overage that is based on the usual fee. Some vision plans have the patient pay a percentage of the usual price for some items. Contact lens fitting often pays an allowance and the patient covers the balance. Frame overages are often calculated based on the usual retail price. Shouldn't you maximize these co-payments by setting your fees higher?
- Consumers often judge the quality of services and products based on price. This is especially true with highly technical services that people can't easily judge. Higher fees create a perception of a better practice, even if the patient does not pay that fee out of pocket.
If your fees are currently undervalued for the services and products you deliver, then raising them is perfectly fair. Set your market philosophy to be the best practice in terms of your exams, your products and your customer service; then set your fees appropriately. Patents who do not have insurance realize they must pay high fees for health care. Many people who do not have a vision plan have some form of medical insurance and the eye exam may be covered. If the patient has no insurance at all, they may be eligible for Medicaid or they may soon qualify for insurance under the Affordable Care Act.
Ability to test the market
One of the big advantages of running a small business is that you can try new strategies and change policies quickly. You can test your market by raising fees and if there is a huge adverse reaction by patients, you can simply change the fees back. How much damage can you do in two weeks?
The reality is that when optometrists typically raise fees, no one notices. Patients don't remember what it was last year. Most of it is covered by a third party anyway. Patients love you and your staff and they are not going anywhere. And patients realize that you provide a very high level service and product.
What if patients leave you over higher fees?
I've taken a long time to get to the theme of this article as reflected in the title, so let's get to it. Consider these points if you raise fees and your staff comes to you and tells you they are noticing patients asking for their spectacle Rx and not ordering glasses.
- How many are really leaving? Two patients in a row does not make a trend. You need to really dig into this issue and be very scientific about your analysis. You should be tracking your spectacle Rx retention rate (the inverse of the walkout rate) and ideally, you should know that rate before you raise fees so you can monitor the change.
- Is it a random bounce? The fee schedule is very important, so bear with me if I belabor this point. Analyze any reported patient loss very thoroughly.
- Which type of patient is leaving and why? Are you losing only private pay patients? Do you offer them a time of service prompt pay discount? Do they know that is available?
- Are you making more money anyway? It is quite possible that you could lose a small percentage of patients and still increase net income. That is still a great outcome: see fewer patients and make more income.
- Do you have less expensive options for patients that are still very desirable? I had an OD client who raised his frame price mark-up formula, but he had not yet ordered new lower priced frames. He found there was a void in his inventory at the low price point of $90 to $180. There are some excellent value lines at low wholesale prices that work great in this price point and offer excellent profit margins. He beefed up his selection in that range and everything was fine.
- Are staff members on board with a fee increase? This can be a big problem because if staff don't support a concept, it may not go over well. Staff members often have a good heart and they feel like patients are family. They may sincerely feel that a fee increase will hurt the patients they care for. With all due respect, the staff may not get it. They may not see the whole picture, including the big discounts mandated by vision plans, the rising practice expenses, and the relatively small profit at the end of the month. They may need more loyalty to the practice and less to the public.
- In fairness to staff, it is up to the practice owner to communicate the business side. You must lead them to participating in the business aspects of the practice and make generating a profit part of their job description.
Be sure to train your staff to start by offering every patient the best eye care services and products, but be able to gracefully move to the second best option if price becomes a factor.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week