Important Are Fees?
low prices is not the way to build a high-volume private practice.
a good question in this era of managed care and heavy corporate competition: What
is the most important consideration for private-pay patients when it comes to picking
an eye care provider? Is it price, service, quality or convenience? The point of
this month's column is that while some patients may complain about your fees, charging
low prices is generally not the way to build a high-volume private practice. Here's
The low-price myth exposed
to a variety of consumer surveys, somewhere between 10 to 20% of your prospective
patients will always consider price to be the primary factor when picking a doctor.
But you have to be careful not to let a vocal minority have an excessive influence
on your fees.
reality, the vast majority of consumers don't base their purchase decisions on getting
the cheapest thing available. If they did, upscale restaurants would be empty and
hot dog stands would be packed, Kia would sell more cars than Lexus and wealthy
people would live in trailer parks instead
of luxury homes. Your patients are willing to spend money and a lot of it
with providers that are able to meet their needs and expectations.
Larger practices charge higher
Several years ago,
Hayes Consulting conducted an in-depth financial survey of more than 100 optometric
practices. We took the annual gross income of each practice and divided that by
the number of examinations performed over the course of the year to determine the
average revenue per patient. We then evaluated the revenue per patient in terms
of practice size. Here is what we found:
you can see, the bigger the gross income of the practice, the higher the average
fee per patient charged. Our data doesn't tell us if this is because the bigger
practices charged higher professional
or because they sold more product at higher fees. Either way, one thing is clear
big practices consistently charge more per patient. More importantly, there
is no evidence to indicate charging more presents any deterrent to practice growth.
In fact, the reverse
is usually true because simple math tells us that higher fees lead to higher revenues.
Using the numbers above, if Dr. Moore saw 2,000 patients a year at an average fee
of $268 he would gross $536,000. On the other hand, if Dr. Les saw the same 2,000
patients at an average of $203 each, his gross would be only $406,000.
be clear, I'm not saying you can't be successful with a low- fee, high-volume strategy.
There are a number of large chains and even some individual private practices that
have made a lot of money using a low price approach. But those are exceptions and
it's a difficult strategy to execute for an O.D. who also wants to deliver high
My advice is to
not worry so much about other providers. Charge what you believe to be a reasonable
fee for your services. Focus your energy on providing the highest level of customer
service and patient care in your area. Do that and you won't miss the few
patients who complain about your fees.
Revenue per patient
Medium $300 - $699k
Small $200 - $299k
OF KNOWYOURSTAFF.COM AND HAYES CONSULTING, DR.
HAYES IS A REGULAR CONTRIBUTOR TO OPTOMETRIC
MANAGEMENT MAGAZINE. REACH HIM AT JHAYES@HAYESCONSULTING.COM.
Optometric Management, Issue: June 2005