How to Price Your Services without Overcharging
This may sound radical, but you should get paid what you deserve. You work hard, you’re an expert at what you do, your clients love you. Why are you charging peanuts?
On the other hand, your clients come to you expecting great service at competitive rates. Even if you provide top quality service, you may end up losing clients if you overcharge them. An unsteady economy has everyone clutching their purse strings just a little closer– including you.
So, how can you strike the right balance between providing your service at affordable rates while also having extra leftover to pay your staff, maintain your equipment, and grow your practice?
Your first step is to read this post. We’re discussing top strategies for finding your perfect price point, and how to avoid overcharging your clients. Let’s get started.
Know Your Overhead
Do you know what it costs to run your practice? This is the place to start to develop a fair fee schedule for all clients.
From paper clips to X-ray machines and every cost in between, you need to know what it takes to keep your practice in practice.
You can either do a self-study or hire a consultant to come in and do the math for you. If you choose to do it yourself, here’s what you need to do:
Save all of your receipts and expenses for the month into an spreadsheet
Create categories for:
- Equipment Leases
- Office Supplies
What Can You Reinvest in Your Practice?
The value you offer doesn’t stop with your professional expertise. It also extends to things like office furniture and a friendly (and knowledgeable) front desk receptionist.
Always make sure that your office meets the standards of your business philosophy, and allot a portion of the money that you make to reinvest in your practice.
But don’t splurge when you have extra. Plan for and build these costs into your overhead.
Instead of making a one-off investment, you may choose to spread that cost over the span of a quarter or year, depending on how often you update.
Armed with this knowledge, determine how much you need to make from every interaction to stay in business.
To do this, you need to determine how many services you’ll provide in a specific year. Mary Pat Whaley of Manage My Practice has some stellar advice for pricing health care services that can also work with any type of therapy practice:
“Calculate what your services really cost. One way is to take the last 12 months of practice expenses and divide them by the work Relative Value Units (wRVUs) you produced over the same period. This will tell you what it costs you to produce each unit of work. Look at it with the physician’s pay included and without the physician’s pay included.”
-Mary Pat Whaley, The Big Idea for 2013: Show Me Your Fees
Emily Berry at American Medical News echoes this advice:
“Your end product should be a list of services each assigned a share of your overhead cost as well as your margin and the actual cost of providing the service. For example, your fee for a flu shot includes a fraction of your rent, your nursing staff’s pay, the office’s electric bill, your liability insurance premium, your own salary and a fraction of the cost of the new x-ray machine you are planning to buy in six months.”
Know What Your Competitors Charge
First thing’s first: collusion is illegal. You can’t get together with a group of your competitors and decide that you will all charge the same fee to your clients.
What you can do is simply ask them what they charge. Knowing what your competitors charge for their services is not illegal. Often times, practices list their fees on their websites, which makes it easy to figure out how you’re doing compared to your colleagues in the area.
When in doubt, check with your legal counsel. The laws change all the time and, although we try to stay up-to-date, our blog is not a substitute for an informed legal opinion.
Create a Uniform Fee Schedule for All Therapists and Clients
Within your practice, strive to create a uniform fee schedule for all physicians and therapists.
Also, remember that patients have the legal right to request a copy of your fee schedule at any time. Keep one uniform fee schedule, not multiple schedules for different groups.
It’s actually illegal to have multiple fee schedules for your clients. You cannot charge one group of clients (let’s say cash payers) one rate while you charge insurance companies a higher rate.
If you’d like to offer a break legally, you can create an “at time of service” discount. With this discount, you will offer a financial break to those who pay during or before the time of service. Technically, this can include insurance companies who also pay at the time or before service is rendered.
Be Transparent with Your Pricing
As mentioned before, it’s imperative to be open about your pricing. But you don’t have to wait for clients to request your fee schedule. You can also proudly display your prices on your website.
Here’s Why You Should Publish Your Fees:
It sets expectations for self-pay patients. A client will understand exactly what the cost for each service is before making an appointment with you. The less surprises you spring on your clients, the better.
It helps you stay competitive. In lieu of and sometimes along with referrals, clients shop around to find the best prices for the service.
Update Fees Schedule Regularly
Your fee schedule is not a one-and-done activity. As your practice grows, you’ll need to reevaluate your fee schedules accordingly. Repeat the steps you took above by taking a detailed look at your overhead and your income.
Definitely update your fee schedule annually, but you may find it beneficial to review it once per quarter.
Remember that this blog cannot replace legal advice. Before creating your fee schedule, consult a lawyer.