Knowing the true cost of a product or service helps veterinary practices with pricing decisions. Published resources like the Well-Managed Practice Benchmarks Study and the AAHA Fee Reference provide guidance too. Yet a practice may still be on the fence about when to raise fees, which fees to increase and by how much. Here are a few ideas to get started.
Instead of annual, across-the-board increases, conduct a quarterly review of fees and determine which fees to increase, which fees to leave alone, and in some rare cases, which fees you’ll reduce. Monitor the quality of patient care and client service to ensure both continue to reflect the hospital’s fee structure. Teach and mentor the team to boost everyone’s comfort and confidence with talking about money and communicating the value of the practice’s services.
Next, analyze the practice’s “top 50” most frequently used fee codes.
- What are the top 50? Do the top 50 include mostly products and very few services?
- Is the average price invoiced lower than the price stated on the fee schedule? For example: A hospital invoiced the $55 physical exam fee 5,000 times in 2017, which should have resulted in $275,000 of revenue ($55 x 5,000). Per the revenue reports from the practice management software, the hospital actually generated $250,000 from the physical exam fee code, for an average fee of $50 ($250,000 divided by 5,000). This indicates that the practice discounted the exam fee and/or didn’t charge for the exam for some patient visits, resulting in a loss of $25,000. If this is true for other “top 50” fees, the practice could easily be losing hundreds of thousands of dollars each year.
- Is the price at an appropriate level for the “top 50” fees given the practice’s quality of care? Even a $1 difference could result in significant losses. For example: Three of the “top 50” for a practice included 7,000 pedicures (actual fee $15, recommended fee $16), 6,000 fecal tests (actual fee $29, recommended fee $30), and 7,000 anal sac expressions (actual fee $23, recommended fee $24). An increase of $1 for each of these services would result in revenue growth of $20,000.
Now dig into the pricing for value-based services (i.e., non-shopped, doctor time and knowledge services). Is the hospital’s value-based pricing in line with WellMP? WMPB 2017 (www.wmpb.vet/products) includes a worksheet to calculate the expected fee for a variety of non-shopped services and provides a great “reality check” for a practice.
If all of this seems like a lot of work, consider tapping the WMPB Fee Consult service designed to save a practice time and money by providing a fee examination and treatment plan for the hospital. The consultants at VetSuccess and WMPB extract the practice data – no spreadsheets to complete or forms to fill out – and then analyze the practice’s fees, make recommendations in the form of a treatment plan, and discuss the results, opportunities and revenue growth projections in a 30-minute telephone consult. Visit www.wmpb.vet/products to get started.
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