Episode #281: Top 10 Questions from RIDA Members Part 2
Being a dental practice owner makes you an entrepreneur. To be a successful entrepreneur, you need to have control over your practice fees. That’s how you will earn sufficient profits for the amount of effort you and your team put in to treat patients. If you set your fees too high, patients will not come to your practice. If you set your fees too low, you will not earn the profits you deserve for all the work that you do; you will be working hard for too little! In this episode, Gary and Naren discuss the best way to set your fees. Give this episode a listen and earn an ideal amount of profits!
N: Welcome to the 164th episode of the less insurance dependence podcast show. The official podcast of the reducing insurance dependence academy. www.rid.academy – this is Naren, your cohost. Today’s topic is the best way to set your fees. Before we get into the topic, I have a quick announcement to make. We have the thriving dentist master class coming up – just later in the week on December 8th, 7 to 10 pm eastern time. 7 to 10 pm eastern time – grow your practice 10 percent or more every year. It is a 3 hour of CE – Garry goes into very specific strategies you can implement if you want 2022 to be your best year. By growing it at least 10 percent or more. If you are interested in growth – this is a master class you must check out. We have limited seats, and you are listening to it literally six days before the event, so if there are seats available, go to the website thriving dentist.com/master class and sign up. Now, this particular topic, the best way to set your fees – is a great topic, Gary, because you know I have been an entrepreneur for close to 20 years you know and I know if you want to be successful as an entrepreneur as a business owner you need to have control over your fees. How much you charge – because it has a lot to do with the profits that round up making. If you charge too much, you won’t have clients, but at the same time, if you charge too little – you know you are going to end up working for nothing or working for free or losing money. So it is a great topic; now, socially after Covid, I have noticed literally every single business we go to, restaurants, hotels, even airlines – are charging a lot more than they used to. I think it is because their costs have gone up, their employee costs have gone up, their products and services costs have gone up – but you know I have a lot of friends who are dentists and clients who are a dentist, and many of my clients, on the other hand, are not increasing their fees – like the rest of the economy is, and the downside of that is – their margins g down meaning their profits go down, so I am really looking forward to this conversation Garry about this being the best way to set your fees.
G: You know, Naren, I am as well – you know, it is kind of interesting being in this amazing profession for over 40 years now. And I remember in the earlier days, in my career in the 1980s and the 1990s, there was a lot of discussion amongst dentists about fees. A lot of discussions – you could go to national dental conferences, you could go to Chicago midwinter meetings, and there would be a speaker on the accounting side usually – like our friends at the ADCPA might be giving a course about the – some concepts related to how to set your fees. Someone like Art Lieberman would be invited to speak at major conferences, and Art would share concepts of how to set your fees and that little conversation in dentistry has largely evaporated that conversation does not happen anymore, and there is a reason why that does not happen. Well, first of all, when they acknowledge is that – you know we are not allowed to; in a public forum – to suggest that fees should be, in fact, from a governmental perspective that would be considered price-fixing. So we are not allowed to do that. In fact are some serious consequences to doing that. However, we can teach concepts about some things to keep in mind as you are determining your fees. But that whole conversation has literally evaporated in our profession – for one reason. Most dentists don’t set their own fees! They allow the insurance companies to set their fees. You know Naren, by some estimates, over 95 percent of dentists in the United States have a heavily PPO-dependent practice model. Over 95 percent have a heavily dependent. They are changing, and we are making you know a grassroots effort to change that (laughs)
G: As evident recently by our Rida Summit. The Rida – the reducing insurance dependency academy summit that we held in November. We were seeing a grassroots effort upfront and afoot to change that. But really, the discussion of fees in our profession has largely evaporated because it is irrelevant. For most of I, 95% of the dentists with their practice model is heavily PPO dependent practice model. Tar is no reason to set your fee – because you let the insurance company sets your fees. Now think about that for just a minute. You know if you can step back and look at this non emotionally, which I will acknowledge for our listeners. Very hard to do because our emotions are wrapped up in this – and it is very hard to do to step back and try to look at this objectively. But I think what I am about to share with you, I hope, will strike a narrative. Doctors, why in the world would you allow another entity to set your fees? Why would you allow that? Because of that entity, the insurance companies – are not acknowledging your costs of doing business. They are not saying – wait for a minute, doctor, you have invested in a massive amount of continuous education. You have state-of-the-art technology; maybe you have CAD/CAM dentistry. Maybe you have CBCT to provide 3D imaging from implants. And you have a massive amount of investment, and because of that, we are going to give you higher fees, because your cost of doing business is a little bit higher. They don’t do any of that – in fact, they set their fees arbitrarily, based on one criterion! The dental insurance company’s profit margin! (Laughs) and so they are in direct opposition to your goals with your fees. So why in the world would you let them set that? And that is what many dentists have done, and because this has been going on for a long Tim now, Naren, many dentists have not raised their UCR fees because they deem it as irrelevant? Because so few of their patients actually have – don’t have insurance that they see it – well, if I raise it is only going to affect this small percent, this very small percent of our practice. You know, Naren, when we look at our mutual clients, we look at what percent of the practice is PPO; the majority of dentists out there have a large percentage of their patients as PPO – 70 percent, 75 percent, 80 percent, 85 percent. We see 90 percent of the practice. So that doctor has 90 percent PPO. That only 10 percent are not tied to that, and then if h or she raises those fees, they introduce another polemic – another dilemma for the dentist. If you raise those fees, then basically what you are doing I am talking about those fees of service patients – they are subsidizing, those 10 percent of your patients are subsiding the other 90 percent that you proceed to take abysmally off of for fees, and for many dentists that feels unfair – that makes since Naren?
N: Absolutely, Gary, it makes total since, I think what you are saying is just to kind of, I was just listening and kind of taking it all in – what you are saying is to be a thriving business whatever business you are in, you need to control your fees. The fact that many many dentist majorities of them, like in the number that you quoted are 90 percent of them, have given up on having any control
N: 95 percent of them have given up having any control of their fees. This is a pretty bad place to be. In other words, you are working harder for less. Basically, the cost of living is going up, your team members rea not going to pay or work for salaries that were paid 20 years ago – 10 years ago, r even six months ago you know things have changed.
G: Yeah, you are absolutely right, and you know you think about that for just a minute and what the insurance fee model is, is a race to the bottom. How can you make that lousy fee schedule work – well, you can make it work by using the cheapest métiers, the cheapest team members
G: Forget the nice furniture in the waiting room, have folding chairs.
N: And then what do you think, what happens to the cheapest equipment or team members, it is going to break they are going to quit they are not going to do a great job! It is a race to the bottom!
G: Race to the bottom!
N: And by the way, that is not a race you want to win – because in fact that is not a practice you doctor, wound enjoy working in
N: This is why I think there is so much depression and all these kinds of mental health issues because you don’t wake up and say thank God it is Monday – you wake up and say, oh man, it is another salt mine!
Another day at the salt mine – you know when you allow an entity that is in polar opposite goals – their goals are to drive your fees down, not up. But down – then you are participating in a race to the bottom. And that is not a race that you want to win, so let’s talk about what should go into setting your fees, of course ultimately in a – in a fast market economy, ultimately the consumers will determine, you know to some degree – what your fees are. But Naren, let’s use restaurants for just a minute. Naren, there are restaurants that charge 5 dollars for a hamburger. There are restaurants that charge 12 dollars for a hamburger, and I am not embarrassed to say that I have been to restaurants that charge 25 dollars for a hamburger, and ostensibly it is the same meal, right? But a very different quality and different feel.
N: Right, and people pay for that – we work really hard for our money, and we choose where we want to spend it.
G: Yeah, I remember one time, I was on a trip on the pacific coast highway in central California – beautiful, beautiful, beautiful trip that coast lien is just incredible. And there is a restaurant called Le Puente in Big Surf California, and it has perhaps the greatest view of any restaurant that I have ever dined in, and you know I remember looking at the menu
– there was a 25 dollar hamburger, and I remember thinking, you know what, it is worth every bit of this! Laughs
N: At least on the view, and so – you know obviously as a business owner you want to be sensitive, to consumers. You want to charge a fair fare. I will share a really interesting concept about fees; it was actually I learned it from Dr. Pankey from Dr. Alder Pankey – and he said that a fair fee is the one that the dentist agrees to accept, and the patient agrees to pay – without either of them having regrets.
N: Now, unfortunately, that is not very – well, what number is that? (laughs)
G: You know
N: accept, and the patient is willing to pay – without either of them having regrets. Like right now, I go to restaurants, and I pay more, but I don’t have any regrets. I am sure you do the same thing
N: And you understand the cost has gone up – and as a consumer, you don’t want that restaurant to go bankrupt by not increasing their fees, because you like that resultant and you go there every week or once a month, and you want them to do well.
N: So I think people are okay with paying more fees, I think that is just my opinion, do you agree with that as long as it is fair and it is – yeah
G: As long as this is fair, and if you are delivering a quality product or service, then they are willing to pay that. Now that is not to say that you don’t have some consumers out there that do rice shopping. But one thing that is kind of interesting is that amongst consumers dental fees, are largely not; there is not a lot of awareness as to what the average fee is.
N: It is unconscious; they don’t think about it.
G: A possible exception might be a hygiene appointment.
G: Even in that one – it’s pretty obscure if they have insurance that is covered at a hundred percent, so as far as they are concerned, it is free, as far as the consumer thinks.
G: But they rarely are not aware – and you know it is kind of interesting – and I am not suggesting we take advantage of that fact – but the point is that it is a very personal service, and it is not something that you could you know even the average consumer could compare unlike say the cost of an automobile. The cost of the automobile you can do some search on it, you can find out what it is – and in dentistry, the fees are untied, so we look at how – and what is the best way for a doctor to set his or her fees. I think the best way is to take a look and determine where you are in terms of your profit margin in the dental practice. What should your profit margin be and we have always thought about it amongst my client’s practices, and I say I want your practice to be no higher than 60 percent. No higher than 60 percent. And overheads are all necessary expenses to run your practice, with the exception of dentist compensation. So no higher than 60, so if you are strolling to get down to that level, then raise your fees a little bit – and you know maybe we can raise them across the board a certain percentage across the board, and then I recommend to our clients that we raise them at least once a year because of the fact that we have got inflation to say pressure and costs going up every year, you know raise all your fees across the board – a certain percentage – so that you keep pace with the cost of doing business. You know people are aware that the cost of brad is higher today than it was before – the cost of commodities is higher than it was before. So you really want to look at your cost of doing business. Hey, and if you choose to invest in a 160,000 dollar CBCT – 3D imaging – then your fees – a fee increase can you know can allow you to absorb that increase in cost in your practice. And it will happen over time, and it does not happen immediately.
G: It will take some time, and you own to the more number of procedures where you use a CBCT, the more procedures that you do will allow that – will allow you to absorb that cost quicker if we do more procedures, but really it is the best way to set your fees – is index it to your costs of doing business. Naren, if you owned a restaurant, let just hypothetically play this out – we are talking a little bit about restaurants; I know it is totally apples and oranges compared to dentistry.
G: But let’s just stick with it for a minute – if you owned a restraint and let’s say it was a very fine restaurant and you wanted to – you are always trying to increase the quality of the mal and the quality of the experience, right?
G: So let’s say – you were able to source a new vendor for wild Alaska salmon. Let’s say salmon is one of the dishes on your menu, and let’s say you were also able to source some gas-fed beef for your stakes on the menu – and let’s say you were also able to source now local vendor for organic produce. For your salads and your other produce. In your restaurant, and let’s say as a result of identifying three different vendors cost you a little bit more to produce the meals, what are you going to do as a business owner? You are going to raise the menu prices a little bit. Right?
G: Now you are not going to be – you are going to be mindful of it, you are going to be thoughtful about it, but you are going to raise those prices a little bit.
N: The other thing I am going to do being a marketing guy is – I am going to train my waiters to talk about the salmon, talk about this grass-fed beef, talk about this amazing farm we work with – so people like appreciate it- they are like wow this is amazing, so they don’t feel like I am taking advantage of them, they feel like I am so committed to quality that they want to support me.
N: Right? And that is what I want our listeners to do – I want you to index your fees appropriately for your cost of doing business, and I want you to not let the insurance companies set your fees because we know that is a race to the bottom! Now let’s get very pragmatic about this. What are our listeners supposed to do with this information?
G: Well, in a simple since I want to accelerate your plan to resign from PPO plans – you know here we are – finishing up 2021, I hope all of our listeners are margin goals for 2022, and one of the goals I think you know if – this could be a very realistic goal for any of our listeners. By the end of 2022, you cod l have reduced your insurance dependence on the level that you think makes sense in your practice. That could be – you could go all the way – you could be a practice that has the strengths to become completely fee for service now not necessarily the goal for everyone that is why we call it – reducing insurance depends because what we want to do is reduce the amount of PPO in your practice so maybe success could mean going from 16 18 plans down to one or two or maybe you are so encouraged by the results that are happening with those, as you resign from those – that you go all the way and that can happen by the end of 2022, if you stick to the game plan, and if you do all your prep and so I hope that is encouraging everyone because then you can set your fees because then you are not going to be allowing the insurance to set your fees, so really what I think the message is in this particular podcast episode is get off the side liens if you are on the side liens – if you are on the bleachers thinking about this you know, it is time to – the coach is going to put you in the game! Get in the game (laughs), and because we have seen such success and one of the ways we measure success is what percent of your existing, in-network paints you keep when you go out of network and what we are seeing is the number is astoundingly successful. Our clients are keeping between 85 and 90 percent of their in-network patients when they go out of network. When they follow all the prep and then do everything necessary to be fully prepared to do this and imagine the feeling doctor that you are going to have by regaining control of your practice. And re-engaging the ability to set your own fees, it is just powerful beyond measure – so hopefully I have inside some people to think about this today, and of course, one thing you are going to need to do as you go out of network is to replace the source of where patients have come from in the past – if they have come for PPO plans, as soon as you resign that source of new paints is going to dry out – that is going to go away. But the great news is – you could play a small fraction of what you are paying the insurance companies to send you paints by doing your own digital marketing, and I would encourage you by developing your own comprehensive digital marketing plan as we have, I would encourage you guys to jump on my shoulders and do what we have done in my own practice which is to use your own company Naren, EKWA
digital marketing – which is our digital marketing agency to provide us with quality new patients at a fraction of the cost and also attract patients that are choosing you for a reason other than you are on their insurance. Maybe we can put a link in our notes about your marketing strategy meeting so that many of our listeners could hit that link and schedule a marketing strategy meeting with Lila stone – our marketing director and learn what Ekwa can do for them. I think that would be a wonderful piece of the action, an actionable item coming out of this podcast episode. Hey, as we come to the finish line here, let me circle back to your opening comment, the opening announcement Naren and that is coming up on December 8th; shortly after publishing this episode, we have our last master class from 2021. And this master class is called grow your practice 1 percent or more each year. We time that master class precisely for now because we know that many of you are margin your goals of 202. I hope your goal for 2022 is to grow at least 10 percent during 2022. December 8th 7 to 10 pm eastern time, 3 hours – 3hours of CE very inexpensive – 89 dollar tuition might be the least expensive 3hours of CE you will ever get, and maybe the most practical as well! Go to thriving dentist.com/master class. We do limit attendance, and we do that because we run it more like a workshop than a lecture, but if there are seats viable, I will encourage you to come to join us on December 8th to grow your practice 10 percent or more each year. On that note, let me say thanks; hey Naren, thanks to you and your team for all the support that you provide my practice – Life Smiles practice in the marketing arena and also thank all of our listeners. We appreciate each and every one of you. I have a request – if you have not written a review for the less insurance dependence podcast – jump on iTunes and write us a review in the same way that a Google review helps your practice, and iTunes review has the same type of positive effect of the podcast. So if you have not done it, jump on iTunes and write us a review. On that note, thank you for the privilege of your time, Naren and I look forward to you on the next insurance dependence podcast.