Raising fees

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raising fees
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The topic of raising fees makes some dentists uncomfortable, but business advisers agree it’s a fundamental that must be addressed on an annual basis. By John Burfitt

A wit once stated that raising fees can be a lot like going to the dentist. No-one really enjoys it, but if you put it off for too long, it can end up being far more uncomfortable than it ever needed to be.

For some dentists, determining the fee structure of a practice can be a somewhat emotional—even fearful—experience. There can be worry about betraying customer loyalty, questions about their own worth as a practitioner, and anxiety about potentially losing patients.

It’s something Alex Robertson, associate principal of Brisbane accounting firm Marsh Tincknell, insists needs to be tackled head on, with fees recognised as a key component of what keeps the practice doors open.

“A fee increase should be marked in the calendar every year as an essential must-review task, as far too often it’s something business owners avoid as they’re not sure how to deal with it,” Robertson says. “Then years pass by without any increase ever occurring, where it really must be done annually, either on January 1 or July 1.”

There can be clear signs it’s time to examine the current fee structure. It could be your fees are the lowest in the area, you have no idea what competitors are charging or most obvious of all, the business is falling short on the balance sheets.

The fear of losing patients, particularly in today’s crowded dental marketplace with other practitioners offering a range of deals, is often the reason why fee increases are not addressed. And yet this kind of indecision may continue in spite of new equipment costs, increasing salaries and ongoing operational costs.

Being clear about why a fee increase needs to be implemented as well as confident that your services warrant such a move are very important, Alex Robertson says. He believes most patients base their choice of dentist far more on recommendation and service than finding the cheapest in town, and if fees are too low, it can actually undervalue the good work of the practice.

A fee increase should be marked in the calendar every year as an essential must-review task, as far too often it’s something business owners avoid as they’re not sure how to deal with it.

Alex Robertson, associate principal, Marsh Tincknell Chartered Accountants

“This is a time to look at your core differentiator, of why do patients come to your practice instead of your competitors,” he says. “Practices need to develop other reasons than cost for why patients continue to visit. The fact is, people expect prices to increase each year, so it becomes a matter of how you do this.”

A number of factors must be considered that extend beyond an analysis of the practice operating costs, including what competitors are charging, business costs, the consumer price index and price rises by private insurance companies.

“If your costs are rising and you’re not increasing your fees in alignment with that, the one place it will get felt is in your take-home pay,” Dr Phillip Palmer of Prime Practice consultancy says. “It is a matter of being aware of the impact of that and responding to it.”

Sunshine Coast practitioner Dr Vas Srinivasan uses the annual inflation rate of around 1.8 to two per cent as his guide, with fees increasing 0.5 per cent per quarter. “Doing it this way every three months is well digested by all parties—patients and staff—as well as management,” he says. “Affordability brings in the valuable middle class patrons who are the bread and butter of our model. I do not believe in pricing ourselves out of business.”

And yet, the fear of putting up fees remains. Certainly, you should avoid any drastic increases. For example, introducing an overnight fee hike, say, of 25 per cent is inadvisable. Moreover, the impact of changing fees, and the resulting behaviour of patients, requires close monitoring.

“If you are really concerned about losing patients, then try a small increase of two per cent and see what the reaction is,” Alex Robertson says. “If a five per cent increase means you lose two per cent of customers, then it was a good decision. But if a five per cent increase means you lose 10 per cent of customers, it was a bad decision, unless you were able to reduce overheads. To understand the benefits of price increases and the impact of losing customers, seek advice from your accountant who can model scenarios for you.”

It is a risk that can, however, pay off. There are some who argue the model of fewer patients paying higher fees could be a far easier way for a practice to function.

Many practices attempt to attract everyone, but once you determine your niche and create a patient experience that niche wants, you might well find they happily pay for it at the price you set.

Julie Parker, Julie Parker Practice Success

Melbourne dental consultant Julie Parker of Julie Parker Practice Success believes this model has merit, especially if it might be a good fit for the demographic of the practice area. 

“If the practice finds their patient base dwindles due to a fee increase, they may be better off sticking with it and maintaining that increase, as well as turning their attention to more effectively attracting the patients they are catering to,” she says. 

“Many practices attempt to attract everyone, but once you determine your niche and create a patient experience that niche wants, you might well find they happily pay for it at the price you set.”

It’s a theory Dr Phillip Palmer agrees with, but he adds you need to be confident your practice will have enough patients at the higher fee.

“If you lose more patients than you thought you would, it could be a recipe for disaster down the track,” he says. 

“It’s difficult to reverse in that situation and lower your fees again to try to re-attract another patient base in today’s market.

“It also depends on what fees you increase. If you act strategically and only raise the fees of items that are difficult to compare with other practices, then it should lead to very little problem, ever.”  

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