- Well, let me give you a little bit of reality around your fee schedule and how this is going to affect your top line collections as well as your bottom line profit.
- Let's use a typical example of a practice that has a 40% profit margin.
- That means that 60% of your collections, of the amount you collect, is your overhead.
- 40% is profit, and that 40% includes all owners compensation, right?
- 60% overhead, 40% owners comp profit.
- In that practice, if you decrease your fees 10%, you're going to have to collect 25% more in order to make the same profit every year.
- So generally, when a practice is calling, “I think I'm too expensive, I need to decrease my fees,” my short answer is no.
- My long answer is, “Okay. Do you want to make the same amount of money?”
- “Well, yeah, of course I do.”
- “Okay, great. Then if you want to do a 10% fee reduction, you need to collect 25% more money to make the same profit at the bottom.
- “Now, let's flip the scenario. Let's say you're saying, “Man, I want to see less patients. I want to treat them at a higher caliber, and I want to work less. How can I make more money doing that?”
- Well, let me tell you about how increasing your fees will affect your bottom line profit. - If you take the same practice that has a 40% profit margin, 60% overhead, and you increase your fees 10%, that means you can actually collect 20% less and still make the exact same amount of money.
- You can increase your fees 10%, collect 20% less, and have the exact same take home amount of money at the end of the year.
- When you increase your fees 10%, you're not going to lose 20% of your patients and your collections.
- Generally, you're going to lose 6 to 8%. Our data shows us, 6 to 8% of your patients are going to leave. And that's great.
- What that really means is now you're seeing 6 to 8% less patients.
- You're making 12 to 14% more bottom line profit, and you've increased your fees 10%.
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