What is great clinical dentistry really worth? What’s it worth to you? Equally important, what’s it worth to your patients? One of the single most important factors directly influencing your level of financial success (or stress) is your fee structure. For purposes of sanity, enjoyment of your chosen profession, and bottom line profitability, I’ll assume that you’ve accepted the fact that to truly prosper, you set your fees. Insurance companies don’t. If you are beyond the insurance nightmare, or at least considering moving away from the stranglehold, read on. What we’re about to explore could be just the “gem” to fully fund your retirement plan, and then some!
THE KODAK STUDY
Although I’m quite certain that most dentists have heard about the Kodak Accounting Study, very few I’ve asked understand it. Kodak offers us an enormous gem; let’s take advantage of their gift! The study pointed out the huge advantage of a relatively conservative price increase in businesses where overhead is high. Certainly dentistry qualifies! Although there are still practices here and there with overhead at or below 50%, they are the rare exception, certainly not the norm. In fact, overhead as a percentage of gross continues to rise, with ever-increasing cost of staff, materials, lab services, facility, etc. It’s not at all uncommon to have a dental practice with overhead at 65% to 70%. In fact, there are many whose costs have risen well beyond, and would welcome the day if their overhead dropped back down to 70%. Whether you find yourself in the 60% to 75% range or beyond, this study applies to you. The higher your overhead, the more profound an effect you’ll get from applying this information.
PROFESSIONAL SERVICES OFFERING STATISTICAL ANALYSIS
There are professional services offering a scientific analysis not only of your local colleagues’ fees, but many other useful factors as well. One such service is Dr. Charles Blair’s profitability/revenue enhancement service [(704) 424-9780]. They will show you a breakdown, fee by fee, of how your fees compare with those of your local colleagues, by percentile. Some of the easiest profitable corrections you can make are to search out and raise those fees that are below normal for your own practice, ie, if your overall fees fall between the 80th and 83rd percentile, you might run across one service you’re performing at the 70th percentile. If so, even if you weren’t to increase your fees overall, a simple “correction” of this fee (up to the 83rd percentile) is absolutely in order.
EXCELLENT STATISTICAL ANALYSIS VERSUS PATIENTS’ PERCEIVED VALUE
What’s the difference between statistical analysis and patients’ perception of value? It could be dramatic enough to send one or more kids to college, and then some! A professional analysis is likely a great start. It will certainly allow you to make many corrections, maximize your patients’ insurance benefits based upon proper coding of services (there have been many changes), and give you an accurate assessment of where your fees stand in relation to your colleagues. The trouble with all of the above is that neither the insurance companies nor your local colleagues should be setting your fees! In fact, you may be in a situation where your patients perceive a far higher value than you’re charging for!
Businesses use price point testing to allow the market to tell them just what to charge for overall optimal results.
PRICE POINTS—WHAT ARE THEY?
The next time you attend the theater, have some fun (or not, depending upon what you paid). Before they dim the lights and raise the curtain, take a poll of everyone in your row or section. Find out what each one paid for their seats. Same theater, same production, same seats, on the same night, yet you’ll likely find a variety of answers to your query! In fact, the dramatic swing in price paid may shock you. Though I wasn’t taking a survey, this actually happened to me years ago at the theater! It was a good wake-up call for me. It made me realize that it’s as much the rule as an exception, that five different people could pay five different prices for the same goods or services—with no differences other than the price.
PRICE POINT TESTING IN DENTAL PRACTICE: ASK YOUR MARKET!
At my “Maximum Profit Ultimate Cosmetic Practice-Building Seminar” in Las Vegas, I introduced a profitability exercise brand new to dentistry: price point testing, which allows your market to clearly tell you what your services are worth. Start with one of your highest fee services responsible for the largest percentage of your gross collections. Take, for example, the all-porcelain crown. Whatever your fee, I’ll suggest that you compare the results of offering this crown at $200 and $400 more than your current fee. If you are presently charging $800, then that’s your “A” fee. Your “B” fee will be $1,000, and your “C” fee $1,200. The test will be to determine your market’s (patients’) response to various fee levels. Note: direct response marketers have said for years that fees ending in “7” test better than any other number. Maybe it just sounds less arbitrary! Whatever the reason, I’d take the $800 fee and make it $797 and so on. The test must eliminate as many variables as possible. For instance, if you were to test price “A” all this month, price “B” next month, and price “C” the following month, market flux and overall shifts in the economy could impact the results without your knowing it. You might also experience variance in times of the year or seasons.
Starting Monday morning, put a couple of 3×5 cards into your pocket, and carry them with you for the duration of the test. Divide each card into three columns and label the top of the columns with the price point tests: “$800,” “$1,000,” and “1,200.” Make a mark for each patient you treat in the appropriate column. The test is simple, but the potential upside for your profitability is enormous. Continue your test until you’ve offered at least 20 of each fee. Of course, the larger your sample the more statistically significant your results. Wait at least 2 weeks following the fee rotation test to evaluate the results. Any patient having scheduled the crown by the 2 weeks posttest date is considered to have been a positive result.
Dentistry is an incredible profession offering increasingly wonderful services to our patients. Yet it’s far more the norm than not to hear older dentists wondering what they’ll do about retirement. The small number of dentists able to retire to anywhere near the lifestyle they’ve previously enjoyed is unacceptable and something we have the ability to change. Sensitivity to patients’ needs, especially those less fortunate, is certainly a consideration. However, you will find yourself far more able to help those people deserving of your pro bono assistance once you’ve allowed your market to tell you what they perceive to be the true value of your services.
Dr. Orent is a management consultant and practicing dentist, and a founding member of the American Academy of Cosmetic Dentistry, for which he has served as president of the New England Chapter. Dr. Orent lectures internationally with “1000 Gems Seminars,” has been a guest lecturer at Tufts University School of Dental Medicine, University of Nevada, Las Vegas, Brigham Young University, Illinois State University, New York University, New Jersey Dental School, and is a member of the faculty at Boston University Graduate School of Dentistry. He has lectured to dentists in four countries and at state and national meetings in 46 of the 50 United States, and has authored four books and numerous articles on aesthetic dentistry, practice management, TMJ, and extreme customer service. He practices aesthetic dentistry in Framingham, Mass.
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