If you’re like most dentists, you don’t routinely raise dental practice fees. Yet, keeping fees set at one rate for too long ultimately results in both increases in your overhead ratio and diminishing profits. Year after year, this can dramatically hurt your bottom line.
Annually, we offer localized NDAS fee reports to provide a rational basis for setting fees. When we look at dental practices for valuations and transition data, we often find dental practice fees that are far below the area norm. Not only do low fees cost revenue annually on a compounded basis, but they also negatively impact a purchaser of a practice who wants to raise dental practice fees to be in line with local norms as quickly as possible. Unfortunately, a new practice owner is limited in normalizing dental practice fees. If they increase their fees too quickly, they may face a mass exodus of patients.
Consistency in Dental Practice Fees
Our recommendation, for effective dental practice pricing, is to select a fee schedule that accurately reflects the quality of care provided in your practice. All fees for services, once set, should increase at the same time across the board. Many dentists waste time and energy trying to adjust individual procedure fees based on the perception of patients and insurance company reactions.
An increase of at least three percent each year is recommended. If that seems drastic, note that the majority of survey respondents generally report fee increases of up to five percent. If you only try to stay even with Consumer Price Indexes (CPI) currently at one percent, this won’t reflect the specific increases in your expenses which are not tied to CPI and are most likely much higher than one percent.
Avoid Playing “Dental Practice Fee Catch-Up”
It is important to remember that dentists who don’t raise dental practice fees annually will rarely be able to catch up or make up for lost years of no fee increases. It’s never advisable to have a large fee increase in a single year.
Dentists should consider that their primary management goal is to operate their office at optimal capacity doing the type of dentistry they want to do. It’s also important to recognize that economies are cyclical, and just as there have been downturns in the past, all indications are that we’re currently experiencing an economic upswing. Now is the time to comprehensively evaluate how your dental practice is positioned. Your dental practice budget is vital for the ongoing success and health of your business.
At Henry Schein Professional Practice Transitions, Inc. we pride ourselves on being the national leader in dental practice transitions. A subsidiary of Henry Schein, Inc. we provide expert guidance for selling and buying dental practices, assessing partnership associateship opportunities and performing dental practice appraisals and valuations.