Your Fees: Are You Charging Enough?
Many O.D.s need to raise their fees. If you do, the following tips will help.
By Jerry Hayes, O.D.
The beginning of a new year is always a good time to review your fees with an eye to making selected increases regarding your private pay patients. Two signs that you might need to raise some prices are:
1. When your net drops below the national average of 31%
2. You have tight cash flow, (i.e., not enough money in your checkbook to pay your bills on time).
Here's my advice on facing your fears and raising your fees.
Impact your bottom line
Just increasing your fees isn't a panacea for a poorly managed practice, but it can work magic on your bottom line. Here's why:
Let's say you saw 1,500 patients at an average of $300 each for a gross of $450,000 and a net of $150,000 in 2002. If you do nothing but raise your fees by five percent and see the same number of patients in 2003, your gross will grow to $472,500 and, assuming your overhead stays the same, your net will increase to $172,500. So for only a five-percent increase in fees, you can generate a 15-percent increase in take-home pay. That's a pretty good deal!
Don't fear rejection
If it's that easy -- and it really is, why doesn't every optometrist in the country raise his fees right now? The answer, of course, is a deep-seated fear of rejection. Every
O.D. wants to make more money, but nobody wants to lose patients -- especially because of high fees.
I was hurt 20 years ago when a patient told me she was going to get her glasses elsewhere because "it was cheaper." But my experience doing fee comparisons for O.D.s in their local markets over the last decade has convinced me that these fears are largely unfounded.
Many clients start out thinking that their fees are high for their area, but it doesn't take them long to realize that they're leaving money on the table when they see how much other O.D.s charge.
Attract the value seekers
While about 20 percent of the public is price conscious and a few people always look for the finest regardless of cost, the vast majority of consumers are value conscious. This group cares about price, but they'll pay more for something they want as long as they feel that they're getting their money's worth.
Unless you want to build your practice on a low-cost strategy, these value seekers are the private-pay group you want to appeal to. For that reason, you have to be careful about what your fees say about you in your marketplace.
The lower your fees are relative to your local competition, the more price-sensitive consumers you'll attract as patients. Therefore, if your goal is to build a high-end practice, not only do you have to charge an amount that allows you to provide a high level of service in terms of a good location; an attractive, well-equipped office; and an attentive staff. You also have to make sure you charge enough so you don't appeal to too many price shoppers.
Don't worry, just do it
You're going to lose patients anyway for numerous reasons such as death or relocation. Don't be afraid that charging a little more is going to chase away all your patients. You'll be fine as long as you provide a high level of service and make people feel like they're getting value out of your office.
A frequent writer and speaker on practice
management issues, Dr. Hayes is the founder and director of Hayes
Consulting. You can reach him at (800) 588-9636 or JHAYES@HAYESCONSULTING.NET.
Optometric Management, Issue: January 2003