CWA Financial Planner David Forbess explains when, why and how to start the process of adjusting fees and billing.
It’s a new year and the first quarter is the best time for your team to review fees and billing. We recommend an annual review of all practice fees, billing and down payment structures to keep your practice financially healthy.
Fees can be a touchy subject
Of course, raising fees can be a delicate matter. Loyal patients may become defensive, it can seem to create more work or confusion for your staff, and synching your fees with insurance payment structures is always a challenge. Especially as more dental practices are joining preferred provider organizations (PPO), managing fees is becoming more complex.
But it’s needed – every year – for your practice to keep pace with inflation and realize its financial potential. As a baseline, your fees should be increased 3% annually for inflation, then customized to the specific needs and goals of your practice for the year.
One size does not fit all
Fine-tuning your fees to your practice goals – and your brand – is both an art and a science for your practice leaders and your CWA financial planner. As such, there isn’t much of a template or fast checklist. It’s all about adjusting fees based on your unique client base, market conditions, service offerings and goals.
However, it is an important process for every practice, no matter the size or number of practicing doctors. Adjusting fees annually is a significant factor in keeping your practice healthy whether your gross receipts are less than $1 million in a one-doctor practice, or well into the millions with several doctors practicing. Some ideas to keep in mind as you begin:
-Make sure your fees reflect the type of practice you are branding. If your practice offers premium services don’t settle for discount pricing.
-Leverage your specific financial data. National averages are helpful as a benchmark but your actual rent, salaries, gross profit, etc. should be reviewed when adjusting fees.
-If you offer Invisalign® services, make sure these fees are higher than your current full case fee, to cover lab expenses associated with Invisalign.
-Invest the time and effort to make smart, informed decisions.
Should you lower your down payment structure?
The quick answer: not necessarily. Although it is logical to assume that lowering the financial barrier to entry would help patients manage their costs and complete their treatment plan, this doesn’t seem to have a big impact on most practices.
Our orthodontic practice clients lowered down payments in 2015 to an average of $834, vs. the average $921 in 2014. However, their conversion rates only dropped 2%, to an average of 69% in 2015, vs an average rate of 71% conversions in 2014.*
Certainly, there may be other compelling reasons to lower down payments for extended services you offer, either case by case or across the board, but increasing your treatment completion conversion rate is not one.
Patients are thinking lease vs. buy
Like today’s consumers focusing more on monthly auto lease payments versus buying and financing a new car, dental patients are becoming more concerned with a manageable monthly payment vs the size of their overall bill.
So, as you review and adjust your fees, consider offering a third-party financing option. Our CWA orthodontic practice clients that offer third-party financing have seen their accounts receivable drop by an average of 24%.*
Comparing third-party financing options
When looking at third-party financing vendors, it’s important to compare apples to apples. Two key comparison points:
-Compare the required costs each vendor will charge the doctor. This is important so you can judge the exact financial impact of offering the service.
-Compare each vendor’s interest rate structure that will be charged to your patients. Some vendors charge very high rates of interest; consider the impact on your patients.
Next Steps with Your CWA Planner
Contact your CWA financial planner and start the process. Your planner can help you with specific insights into revising fees for your practice goals and needs, and help you map out the next steps to get it done.
*According to CWA 2015 Orthodontic Practice Comparison Report