January is the month most dentists and practice owners assess “last year”, and make resolutions regarding the upcoming year to improve their practice’s performance. The single most important driver of profit is charging the right fee for the services delivered.
BUT because the discussion of fees between dentist “practice owners” is considered price fixing, the pricing of services is often ignored. Most dentists would like to know what fees their peers are charging. That is what a fee survey is all about.
Several groups have developed such a list (including Henry Schein) which is “sold” to dentists. Most dentists do not know what to do with it other than to arbitrarily raise a couple of noticeably “low fees”. Most dentists do not know how to use the information to thoroughly analyze and reset their fees. The answer is “fee balancing”.
“Fee balancing” is comparing an individual practice’s fees with area fees and determining where the subject practice’s fees rank on a percentile basis. The goal is to identify fees which are below the area ranking (percentiles) and adjust (balance) those fees accordingly. The process starts by reviewing the 60th to 80th percentile for each fee, and then raising the practice fee to the desired percentile. Increasing all fees to that same percentile is what “fee balancing” is all about.
Every dentist has several procedures that they perform a thousand times each year. However, if your fee for a procedure is in the 30th percentile it means only 30% of the fees charged are at or below this amount while 70% of fees (charged by others) are higher. Extending this example, the practice’s adult prophy fee is $80, which is in the 30th percentile. If the 60th percentile fee for that procedure is $90, raising the prophy fee to the 60th percentile ($10 or a 12.5% increase over the 30th percentile fee), multiplied by 1,000 annual prophys, yields $10,000 in additional annual revenue for this one procedure.
Practices also routinely perform other procedures that, while they are only performed 20-30 times per year, have fees at the 80th-90th percentile. The problem is they simply do not do a sufficient number of procedures to have any impact on the bottom line. Henry Schein Dental (HSD) has developed the Henry Schein Practice Analysis (HSPA) to provide the analysis required for proper and maximal fee balancing. While the HSPA is also useful for identifying many other available areas for practice enhancements, the fee analysis of the HSPA is the most valuable component. Henry Schein Dental has conducted thousands of HSPAs, using the Dentrix database of millions of submitted fees. They are compiled on a daily basis, nationwide, to determine the various percentiles in any given market.
Balancing fees using the HSPA has resulted in an average annual revenue increase from 8% to 15%+. For a practice with annual gross receipts of $600,000, this translates to $48,000-$90,000 annual revenue increase – all profit. Resetting fees to the higher percentiles represents “annual recurring” revenue. Assuming only an 8% revenue increase, not balancing fees over a ten-year period represents $480,000 in lost revenue.
While increasing profit is alone worth making the effort, charging higher fees also impacts short and long-term transition planning. Practice values are driven by revenue and profit. Therefore, any revenue increase will also increase the value of the practice. Even for those doctors considering a near future sale, a practice with higher fees is more desirable and easier to sell at a higher price than one with lower fees.
The point of this discussion is that for a host of reasons, fee schedules should be reviewed and updated annually. Using fee balancing as a means of “scientifically” adjusting fees is the best method currently available.
One final note: some doctors tell us because they are a heavy contracted PPO practice, they cannot raise fees. However, even if 50% of the practice is PPO driven, the practice owner is still looking at the other 50% revenue potential for the remaining fee-for-service/traditional dental insurance patients. Fee balancing is still strongly advised as the best means of increasing fees.
As previously mentioned, this fee balancing is available as part of Henry Schein Dental’s Practice Analysis (HSPA). If you have not had a recent HSPA (HSPAs should be updated annually), please visit http://HSPA.ADSflorida.com if your practice is located in Florida, and www.henryscheinppt.com/hspa for the rest of the country, to request one.
The Henry Schein Dental investment for the HSPA is $239. If you contact us at the URL above to secure your analysis, for the next 30 days, Henry Schein Dental is offering Henry Schein Professional Practice Transitions customers a $40 merchandise certificate with each HSPA ordered. Call today, each month you delay is costing thousands of dollars in lost revenue.
800-988-5674 • HenryScheinPPT.com
