Many practices have not raised fees in a significant way for many years. That could be due to a tough economy or to a general fear that if we raise fees, we may lose some of our valuable private pay patients. Competition is fierce for most eye care providers (ECPs). In spite of those concerns, optometrists routinely tell me the last time they raised their fees, nobody noticed. My experience shows me that patients are quite loyal to their doctor and not that sensitive to price.
Raising fees is one of the fastest ways to increase practice net income. You can decide if you want to use that increased cash flow to invest in your practice or take it as personal income.
What about insurance plans?
Many ODs scoff at the concept of raising fees because they have so many patients with vision plans or medical insurance that they think it won’t make any difference. That is not true. Raising fees actually helps you to increase your profit on patients who have vision plans, because invariably, patients buy some services and products that are not covered. Besides that, if your practice is so heavily dominated by insurance, why not raise your fees? After all, patients won’t mind one bit since they all have insurance.
When you raise your fees, the perception of your practice by the public and by your patients goes up. People judge the value and quality of your services by the fee.
How to determine fees
Most ECPs set their fees and prices by calling the other practices in town and finding out what they charge. It is quite useful to know the price range in a marketplace if you are selling a commodity, like a gallon of gasoline or a pound of sugar. But eye care is not a commodity and most ECPs set their fees way too low. Should you set your fees too low just because all the other providers under-value their services?
I would prefer that you do some market research and find the true value of your products and services. You may have to experiment with various prices to see what price point causes a drop in sales or complaints. The good news is that a short experiment with higher prices can reveal quite a lot and really can’t do any lasting harm to your practice.
Most ECPs would like to use a mark-up formula to help set fees, but it is really not that simple. It is often more intuitive and to some extent it is based on what the traffic will bear.
Your practice positioning
As you set your fees, be sure to consider the demographics of your local market area. Is the median household income level high, low or in between? Additionally, what is your market strategy for your practice? Consider that first. Is your practice designed to be high-end with advanced services? Are you trying to appeal to the budget conscious blue collar family? Any of these can be a good business model, but be true to your goals.
Services and products to review
When we discuss setting fees, we must consider wide range of products and services. You may be out of date on many or all of the following:
Exam and procedure fees. Consider using the Medicare approved fees as a good starting point. Many doctors go slightly higher than those. Many ODs feel they need to discount those fees for routine exams that are paid out of pocket. You may not charge different fees for the same service, but you can offer a time of service discount for cash payment and you can use S-codes for routine exams and charge less that your fee for medical exams.
Contact lens service fees. Many ODs set these fees way too low in my opinion. I would have one fee for a contact lens evaluation, which is charged in addition to the comprehensive eye exam fee because you perform additional testing on contact lens patients. A contact lens evaluation fee is charged if there is no change in the lens fit. I include corneal topography and that increases the fee quite a bit. For contact lens fittings and refittings, I would have different fee levels based on the complexity of the lens design. A fitting generally includes a follow-up visit, so that means the fitting fee must be much higher than an intermediate office visit fee.
Contact lens products. With Unilateral Pricing Policy (UPP), we are now able to compete with any vendor and no one can sell the products for less. You are allowed to charge more than the UPP price, but I find a big advantage in saying that we charge the lowest possible price for this product. For lenses that are not yet on UPP, you should set prices fairly competitively with large online retailers.
Frames. A mark-up formula works well so that your staff can always set the price properly as new frames come in, but the old 3X mark-up is really not sufficient anymore. Be sure to have a good selection of low priced frames as well for the budget conscious patients.
Lenses. This category of product may be the trickiest to price correctly. To a large extent, it is what the traffic will bear, especially for premium products. The mark-ups are not linear. Some items can have a 10X mark-up while some lens add-on features might only be 3X. Remember that there are many dispensing services built into the price of eyeglasses, so the pricing must be higher than most retail products.
I advise you to gather all your fee schedules and price lists and review them. Raise the prices you feel are too low and just tell your staff what the new prices are, effective immediately. Staff members can get a bit worried about fee increases, but just plow forward and it will work out better than they think. If any patient indicates he was recently quoted a lower fee, your staff can honor that without question. Most people will not notice.