I’m often baffled at the way most orthodontists set their fees. They ask around and see what other colleagues are charging and they set their fees somewhere in that range. It’s not the worst way to set fees but it’s really dangerous. The problem with trying to price-match a competitor’s fees is that you have no idea what their overhead costs are, how much they pay assistants, how efficient they are with clinical treatment, what share of chair time goes to clear aligners versus fixed appliances, adults versus kids, etc.
Setting the right fees for your services is crucial for the success of your practice. You need to balance the cost of delivering high-quality care with the need to make a reasonable profit. So, instead of asking around and picking a number out of thin air, there are four critical factors that you must consider in addition to a competitive analysis.
I joke with members and say, “You only factor in all overhead costs when setting your fees if you and your family like to eat.” If you don’t make at least 40% profit on every case type, you’ll lose money and never make it up in volume. Overhead costs include the cost of rent, equipment, payroll, supplies, and other expenses associated with running your practice. By understanding and factoring in these costs, you can set fees that will allow you to cover your expenses and still make at least 40% profit. You can use my fee calculator, a popular tool to help you better understand how many case starts per day you need to achieve in order to hit your goals as a practice.
Don’t shoot the messenger. You must consider the geographic location of your practice when setting your fees. In areas with higher costs of living, the fees for orthodontic services may be higher than in areas with a lower cost of living. You should also consider the level of competition in your area, as this will also affect the fees you charge. I have members in Los Angeles charging $3,995 for comprehensive orthodontics and I have doctors in rural Arkansas charging $6,995 so please don’t assume a lower cost of living always means a lower case fee. Competition is the name of the game here, so please think long and hard about where you open your practice and what will be required of you if you want to achieve a specific revenue and net income goal if you’re on the same block with ten competitors.
Complexity of Treatment:
This is one of the biggest mistakes I see in orthodontics. You must consider the complexity of the treatment when setting your fees. Adult treatment needs to be at least $2,000 more than adolescent treatment, but too many orthodontists charge the same amount and lose money on all their adult cases. More complex cases that require longer treatment times or specialized procedures require higher fees. Period. Full stop.
Insurance Reimbursement Rates:
If you participate in PPO or other insurance programs, please, please, please take the time to fully understand the insurance reimbursement rates for your services when setting your fees. Understanding the insurance reimbursement rates for different procedures can help you set fees that are fair and reasonable for both their patients and their practice. Use FairHealthConsumer.org to check your fees. I’m often surprised the number of times a member’s fees are too low, based on usual and customary reimbursement for their region.
Setting fees as an orthodontist can be a challenging task, but it’s one of the most important things you’ll do each year. By considering factors such as overhead costs, geographic location, level of experience or unique services provided, complexity of treatment, and insurance reimbursement rates, you can set fees that are fair and reasonable for both your patients and your practice. By following best practices such as conducting market research, communicating clearly with patients, and providing payment options, you can ensure that your fees are competitive, transparent, and easy for patients to understand and afford.
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