Shared by: Miles Bodzin, DC www.CashPractice.com Are Your Fees Too Low? September 23, 2003 Here is the latest issue of Dr. Bodzin's Nuts & Bolts of Cash Practice Newsletter. I hope you enjoy it and learn something new. If you have any questions, feel free to contact me by Email. ------------------------------------------------------------------------ A Logan College chiropractic student recently wrote me asking... "I will be graduating chiropractic school soon and was wondering what I should charge. I would like to have a cash practice." ------------------------------------------------------------------------ Here's how I answered him. When providing care on a cash basis you have to be grounded in your principles. You have to be able to look someone in the eye and tell them exactly what they need. You also have to be able to let that person walk out the door if they don't want what you offer. They have to want it more than you and you have to "care less" if they choose it. What I mean is, you have to be so grounded in what you offer that if they don't want it, you're just saying to yourself - next! In other words - you cannot be pushy and you cannot "sell them" on the idea of chiropractic. Your job will be to show them the power of chiropractic and invite them to be a part of it. It is up to them to decide. I will repeat. DO NOT BE PUSHY. (#1 mistake of new docs). Regarding fees, I can't tell you what to charge (not legal). However I can tell you the right and wrong way to figure it out. ------------------------------------------------------------------------ "Dr. Miles, this is the missing link that I've been looking for. I will bring in almost $6,000 in revenue for the same work... A nice 50% increase... These were the easiest closes I have had in 18 years of practice. That certainly makes me feel a whole lot better with my future. I definitely recommend your Cash Practice Calculator." - William Moyal, D.C. Miami, Fl ------------------------------------------------------------------------ The wrong way is to come up with an arbitrary amount like $90-100 per visit. You may be setting it too high or too low (although I doubt that). The right way. Figure out how much it costs you to deliver an adjustment. To do so follow this formula for a given period of time. Total Overhead / Total work hours / (# of Adj per hour) = Cost to deliver an adjustment. For example, in a year: $150,000 per year of overhead / 1040 hrs per year of work / 12 visits per hour = $12.00 per visit (This is your cost to deliver each adjustment). This cost to deliver is your overhead on a per visit basis. Now it's easy to determine your percent of overhead. If you only collect an average of $20 per visit, your overhead is 60% (too high). Instead of calculating your percent overhead as a result of how you set up your fees, set your fees as a result of a predetermined level of overhead. In other words, as Stephen Covey author of the 7 Habits of Highly Effective People says, "start with the end in mind". The goal overhead should be 30- 40%. If your overhead is to be 40% (or less), then take (Cost to deliver an adjustment) / 40% = (target collected per visit). For example, $12 / 40% = $30. In this example, a target of $30 per visit has to be the minimum average collected per visit (regardless of the type of plan). Any less and you're off target. At least once a year (I recommend every three months), recalculate your cost to deliver an adjustment and repeat this exercise. You may discover that your cost has gone up or down. If it's gone down, then you have a higher profit :-). If its gone up, then you need to readjust your fees. Next you have to determine what type of plans to offer. I suggest using a set number of visits over a set period of time. You total the patient cost of care (on a per visit amount) and discount it by set percentage. You then offer several options for paying. Either (1) monthly, (2) a third down with the balance paid monthly or (3) prepay. I suggest offering an added discount, like 5-10% additional savings for the second and third options. This works best. Make sure the average collected per visit is above the target you calculated. Another option is to offer a set number of visits for a set price. For example, 12 visits for $397 (set any way you want, just make sure the ave collected per visit is above your target). This is not recommended for new patients. I primarily use this type of plan for established patients who cannot stick to a set schedule. As a side note. Stay away from unlimited care for a fixed fee. You lose money and it's not legal. If all this sounds confusing, let me know. I have developed a program that lets you input the numbers and it creates a customized cash plan for you to use with your patients. It's awesome!!! Right now your focus should be on graduating and passing Part 4 boards. Once you do, then consider joining the Nuts & Bolts of Cash Practice and you will be able to quickly get up and running. I hope this was helpful. If you need any further assistance, just let me know. Yours in excellent service, Miles Bodzin, DC www.CashPractice.com