Since hanging up my surgical gloves in 2003, I’ve worked as a coach, covering the length and breadth of the country, and one thing continues to surprise me. In all corners of the UK, with the possible exception of London’s West End, private practice fees are really very similar.
I have a theory that Principals must be consulting with some centralised (government run) fee-advising agency, responsible for keeping the lid on private dental fees! What really surprises me is that the fees bear so little relationship to the actual practice’s costs which, unlike fees, vary wildly in different practices.
Fee setting appears to be a black art and when I question Principals on how they arrived at their fee scale, very few of them seem to really know. On reflection, I think this must be how it happens:
They:
- Ask colleagues what they charge
- Mystery shop their competitors’ fees
- Believe what dentists say about their fees in the bar at conferences
- Choose an hourly rate that sounds ‘about right’ (say, £150-£250/hour)
- Create a fee scale – many use the old NHS item of service list – by applying the hourly rate to how long they estimate the treatment will take.
- Sometimes create an aide memoire; before computer software became ubiquitous in surgeries, a laminated card, now more likely to be software driven. This is a set of treatment times, from 5 minutes to 3 hours, in 5 minute intervals, which multiplies the hourly rate by the time allocated to achieve a fee, with the addition of a lab bill where appropriate…
This is the ‘Solicitor model’, who often charge an hourly rate divided by 6-minute increments of time. Their practice hourly rate often varies dependent on the skill set and the seniority of the solicitor you hire. I believe this method is inappropriate for a dental practice and here’s why:
- Some treatment items are delivered at no fee or at a low fee.
- Some treatment items require more skill and more skilled chair-side support than others.
- Some treatment items require more costly materials than others.
- It is impossible to charge for every 6 minute segment of a 7.5 hour clinical day.
- On an hourly rate basis, some fees appear (to the patients) to be expensive and some fees appear to be not high enough.
So, here are my suggestions on how to set your fees in a way that truly reflects your costs and the profits you wish to make.
First of all you must:
1. Understand exactly what differentiates your practice from the others You and all of your team need to be able to explain this in language that every new patient will understand. It is not enough to promise “personalised dental care in modern, clean and relaxed surroundings. State-of-the-art equipment, the latest techniques and outstanding customer service to bring you dental care of the very highest standard.”
The true value of your practice lies in this differentiation from your competition and it is this differentiation that will help determine the right level of your fees. 2. Be able to describe in detail the sort of patients you wish to attract What do they want from a practice like yours and how much will they pay for these services? How do they assess the quality of what you and your team provide? This will not be about your crown margins but the quality of their experience in your practice.
3. Understand your business model You will have to know:
1. How much profit you wish to make. 2. How much your practice costs to run. 3. How much turnover your practice has to achieve in order to create your planned profit.
Once you know what your turnover objective is you can start to attribute a share of this turnover to each of your fee earners, to include: Yourself, Associates, Therapists, Hygienists etc. Consider, how many patients each fee earner looks after and how many new patients your practice attracts. Also, are there new services you believe your patients might welcome and buy?
4. Understand what position in the market place your practice occupies It helps to consider how retailers position their businesses, for example, consider these four well known retailers: Harvey Nichols, Selfridges, John Lewis and Debenhams. Where do they sit in the market place in relation to each other and how do their environments and client journeys differ? Their pricing will reflect this.
Do you wish your dental practice to appear: Boutique, Expensive, Middle of the road or Inexpensive? Where do your local competitors sit, what do they charge and how do you want to position yourself in respect to them?
5. Once you have considered how your Differentiation, Prospective Patients, Business Model and Market Place Positioning affects your pricing, then:
- Set a base hourly rate that truly reflects your costs. In my experience, your fixed costs will be in the region of £350/£500 per surgery per day.
- Consider setting a higher hourly rate for advanced treatments.
- Use these hourly rates to calculate a mathematical fee for every treatment based on time. Add a lab fee if required.
- Adjust every fee to reflect the demand and the value perceived by the patient for each treatment. Some fees will adjust downwards, some fees upwards. This will calculate the actual fee charged for one item of treatment.
- If you supply more than one of these items (three fillings, two crowns etc) calculate the fee by multiplying the number of items by the actual fee.
- Don’t discount by more than 5% to reflect the saving in time.
- Understand that these high hourly rate items will merely compensate you for the hours in the day when you will under-achieve your hourly rate.
- Sell items of treatment, not time.
- Know what your margin (profit) is on every service.
- Assess whether this will achieve your profit target?
In summary, there is a world of difference between the fees you charge and the perceived value they represent to your patients. With this in mind, your fees and the value they represent have to be congruent. It is fine to charge high fees if you are confident that your patients will consider them good value. Even low fees, if charged for poor treatment or in a poor environment or accompanied by a poor client journey, can still represent poor value to patients. The worst-case scenario can be when a practice charges high fees, supplies high quality clinical dentistry, but for reasons of poor environment or poor customer service their patients still perceive the fees as representing low value.
As you know, your patients will ultimately judge the value of what you and your team do by using a completely different set of criteria to those you might apply! In my experience, private dental fees have hardly moved upwards at all during the last decade, whereas inflation has been increasing the real cost of providing dentistry on the high street. This alone will significantly reduce your profits.
Isn’t it time you set your fees in such a way that genuinely serves both you and your patients?
Simon Hocken Director of Coaching, Breathe Business
For more guidance on setting fees and other proven ways to grow your practice, contact the Breathe team on 0845 299 7209 orinfo@nowbreathe.co.uk