Fee secrets from well-managed practices (Proceedings)

Not only does your fee schedule reflect your medical standard of care and target client demographic, it also represents the value of your services and products. And the most important thing you can do to relay that value to clients is to communicate that value to your team members – every day. Your staff plays a crucial role in enhancing client visits, and if your team doesn't believe in the value of your services, neither will clients. Shannon Nakamura, practice manager of Feather and Fur Animal Hospital in Honolulu, Hawaii, explains her expectations this way: "I want our staff to always ask clients whether they have questions, and then listen to what they say. By doing so, we personalize the plan and create recognition of the value of their pet's care."

Why take this trouble? Because if clients don't believe they've received value for the price paid, they'll go to another practice. However, if you consistently exceed clients' expectations, they'll follow your medical recommendations and accept the cost of your services. If a client seems hesitant or asks questions, it doesn't mean they won't follow your recommendations. They simply want to understand the treatment plan before proceeding.

When you make a point to deliver clear, consistent messages, you remove the obstacles that stand between your patients and the care they need and deserve. So look at everything you do from your clients' perspective, then look for opportunities to exceed expectations.

Top three ways to price products and services

To set fees appropriately means you must understand the value clients put on your services and generate enough revenue to cover your expenses and reinvest in the practice. The following pricing strategies will help take the guess work out of fees.

1. Price highly shopped services competitively. For price-sensitive services such as vaccinations and elective surgeries, use a competitive price strategy. Consider the service you offer and compare that with the service levels offered by other practices in your area. Find out if the same services come with a similar level of customer care and value at another practice. Also consider the number of doctors, practice hours, facility and community reputation associated with the other practices. How do the fees they charge for price-sensitive services compare to yours? A community survey is an excellent continuing education tool that will provide much of this market research. (See "How to Conduct a Community Survey", Figure 1)

Figure 1 – how to conduct a community survey

2. Price inventory items based on cost. Here's how to use a cost-based pricing strategy: For a standard dispensed medication, add an average markup of 150 percent to the cost of the medicine, including sales tax and shipping. Also include a dispensing fee of $9 to $13. Compare this total to the amount of your minimum prescription fee. Then charge the client the higher amount of the two choices. Dispensing fees and minimum prescription charges will vary based on the economics of your community.

     • Mark up heartworm and flea control products 100 percent, along with oncology medications. If you have drugs that remain on the shelf for three or more months, use a 200 percent to 275 percent markup to cover your additional carrying costs. Here's an example for a product that costs you $20:

     • Note: Cost savings on bulk drug purchases are retained by the practice, not passed on to the client, since you're incurring the costs of maintaining inventory.

3. Price doctors' services based on value. For services that involve the doctors' time and knowledge, use a value-based pricing strategy. Value-based services include lab procedures, diagnostic imaging, hospitalization, dentistry, and nonelective surgeries. Use the fees listed in Benchmarks 2011 – A Study of Well-Managed Practices and AAHA's Veterinary Fee Reference (75th percentile column) as a guide for pricing value-based services. Your value-based fees can be higher than any other practice in a community, as long as clients receive the value they expect for the price. (See "Comparing your value-based fees", Figure 2)

Figure 2 – comparing your value-based fees

Review fees quarterly and implement increases as needed. If fees are below what published resources indicate they should be, if you've experienced increases in expenses that must be covered, or if your practice expands or enhances the care provided, fees should be increased. Monitor the quality of your client service and patient care to ensure that both reflect your fee structure, and vice versa,

After making a decision about fee changes, announce the changes in a staff meeting. It's important to get all of your doctors and staff members on board with the increases. Emphasize the medical benefit of raising fees – it gives you the resources necessary to continue to elevate patient care – and focus on how to provide the value your clients desire with the greatest efficiency.

Six strategies for getting practice fees right

Here are some ideas and recommendations to assist with your pricing decisions.

1. Value your time, knowledge, and skills. The first step in setting fees is recognizing the value clients receive from your services. A doctor's exam is the most valuable service you provide, so always charge appropriately for it. Also, delegate tasks to our staff that don't require a doctor's license – this frees up more of your time to practice medicine and to create the vision for the hospital. Lead by example. Make a conscious decision to value your time, and your staff will follow suit.

2. Ensure all staff members understand and believe in the value of your services. Emphasize customer service during staff meetings. Cross-train your staff to perform the different tasks involved in caring for patients. "Cross-training makes our team more aware of the effort and resources that go into the services we provide," says Dr. Darren Williams, owner of Mayde Creek Animal Health Center in Katy, Texas. "Our entire staff becomes partners with the doctors and the pet owners, which enhances their own perception of value."

3. Communicate the value of your services. Every client encounter is an opportunity to affirm the value of your services. To do so, everyone in your practice must deliver a consistent message to clients. Clients will act on your recommendation if all staff members communicate complex medical information in easily understandable language. To minimize "information overload" during appointments, focus on two or three areas of importance with the client and schedule a second appointment for other necessary care.

4. Understand your clients' perception of value. If clients don't always accept and act on your medical recommendations, a communication gap may exist between your staff and clients. How can you identify the problem? Try these continuing education exercises:

     • Video tape your outpatient appointments (with permission of course). View the tape and evaluate the doctor's and technician's presentation style, message, and body language. Observe the client's body language for signs of confusion or understanding. Is the client receiving a clear and specific recommendation? Does the client have time to make a decision? Is he or she encouraged to say yes to necessary healthcare? Discuss the results with the entire team to create awareness and develop an action plan you can incorporate into daily practice. Conduct this exercise on a regular basis to note improvement.

     • Conduct a reverse community survey. A pet owner's first impression over the phone is a lasting one and often determines if the caller becomes a client. Ask employees to call other practices acting as potential clients and then to rate their experience. This is an effective way to reach them about the importance of impressions (See "How to Conduct a Community Survey", Figure 1). Use the same strategy in reverse – ask friends, family or colleagues to call your practice using the same form and have them rate the phone call. Would they seek your services based on how the call was handled? Share the results during a staff meeting and discuss opportunities to improve callers' impression of your practice.

5. Use discounts sparingly. Providing regular discounts on your services sends the message to clients and staff that you doubt the value of your services. Be selective with your discounts and keep the total discount at 10 percent or less. Reflect the full price less the discount on the invoice to be sure clients recognize the value received.

6. Capture all charges. A fee schedule is useless if you fail to charge for the care provided. For outpatient appointments, use travel sheets to identify all the services you and your team provide during an appointment. As the client checks out, compare the travel sheet to the invoice to verify that all charges are billed. For hospitalized patients, use treatment sheets to record services provided. Enter charges every day rather than waiting until the pet is discharged. To avoid missing charges, use a highlighter to mark each service on the treatment sheet once it's entered into the computer.