Nail down your digital radiography fees

Dr. Ruth Sobeck was losing business. As an equine practitioner in Palos Verdes, Calif., Dr. Sobeck's competition has always been tough. Five practices in the area fight for business with out-of-town mobile clinics. So Dr. Sobeck must make every effort to provide the highest-quality medicine to her patients. But five years ago, she saw those efforts slipping away.

An out-of-town practice was the first to invest in digital radiography. Almost instantly, Dr. Sobeck began losing clients who fawned over the new technology. Fearing a major hit to her practice's bottom line, she began looking into digital radiography equipment, but her accountant advised her that it wasn't feasible at the time. But radiographs weren't the only services Dr. Sobeck was losing to other practices. She also saw a decrease in diagnostics, treatments, and what she calls "while you're here" services—those add-ons that clients don't necessarily plan ahead for.

Dr. Sobeck soon realized she couldn't afford not to invest in digital radiography. A year later, she took the plunge. But after the initial excitement of her new purchase wore off, Dr. Sobeck realized she had a tough challenge ahead, one many veterinarians in her situation face: setting digital radiography fees. She consulted fee surveys and weighed the value of the new technology to come up with her ideal pricing. Dr. Sobeck eventually found a solution, but are you making the most of your equipment and charging appropriately for the service?

Pick your philosophy

First, you'll want to determine your underlying fee-setting philosophy, says Dr. Mark Baus, president of Fairfield Equine Associates in Newtown, Conn. There are two ways to compete in the digital radiography world: by offering the best price or by offering the best service. Dr. Baus prefers service. By taking good radiographs, writing a comprehensive report about the findings, and putting in place an archiving system that allows images to be easily read and transferred, you'll offer your clients a level of service that will earn you their trust and confidence—and their business.

Just as with any other service, there might be other practices in your area that offer a lower price for digital radiographs. But do they offer the same service? Do their clients leave feeling satisfied and informed? Are they paying for other services? Most clients are glad to pay a little more to receive top-notch care for their horses.

Next, there are two ways to charge for the images themselves, says Wilson Taliaferro, practice manager for Dr. Cooper Williams in Hampstead, Md.: by setting a fee per study (series of images taken during a single session) or a fee per image. Taliaferro prefers charging per image because of the "while you're here" factor, which prompts clients to ask for more images on the fly once the equipment is set up. If you charge per study, it's likely you won't always capture all possible revenue.

Find a balance

To find the right digital radiography fee, you have to balance making a profit with putting a major strain on your clients' budgets. Charge too little and you'll struggle to pay off the equipment. Charge too much and your clients will look elsewhere for more affordable service. A good place to start is by checking out the fees of your competitors who offer digital radiography to get a sense of what clients in your area are paying. Researching fee surveys can give you more comprehensive and wide-ranging information. But don't rely too much on this research, Dr. Baus says. "The entire veterinary industry charges too little for its services," he says. "And many fee studies are outdated and therefore inaccurate by the time they're published."

Once you've done your research, it's time to crunch numbers. First, take a look at your books and figure out how many radiographic studies you perform per year. Divide the total number of views taken by the total number of studies performed to find your views-per-study rate.

Next, consider your fixed costs. First, of course, is the cost of the digital radiography equipment. The depreciable useful life of a typical piece of new equipment is five years. So if you purchased a machine for $70,000, plan on a $14,000-per-year expense. But realize that equipment considered state-of-the-art five years ago isn't so impressive anymore. So do some homework on upgrade costs and build these into your budget. Next, you'll have interest costs, equipment insurance, property taxes, a service contract for off-site storage, and radiation safety expenses. Divide these costs by your average number of studies per year to find your cost per study.

You probably don't just want to break even on digital radiography, so you'll also need to set a desired return on investment. Taliaferro recommends at least 33 percent, especially if your compensation is production-based. So multiply your costs per study by 1.33 to find your charge for the fixed costs of radiographs.

Labor through the numbers

Next, you'll need to consider your variable costs. This encompasses the staffing and labor costs involved with taking digital radiography images. Do you have a technician who helps with studies? If not, ask yourself, "Am I comfortable having a client hold this expensive piece of equipment?" Letting a trained technician handle the equipment will help you—and your insurance company—breathe easy. You'll also want to charge for any time spent on office work or bookkeeping involved in the study.

Taliaferro prefers to charge by the tenth of an hour. At an hourly billable rate of $90 per hour for a technician, he calculates 0.1 hours (a selling price of $9) for setting up and breaking down the equipment and at least 0.2 hours (a selling price of $18) for assisting with imaging. Use a similar formula to find the fees for your services, including shooting the images, evaluating the images, and communicating with the client.

Keep in mind that these machines aren't indestructible—each use contributes to the machine's wear and tear. And if you're just taking two lateral views of front feet, you'll need to make sure you're charging appropriately. So consider charging a setup fee to complement your per-image fee and boost revenue. Typical setup fees range from $30 to $50 (similar to a per-image fee). If you're concerned about charging for setup, you can consider lowering your per-image fee. Though Dr. Baus doesn't typically condone lowering fees, owners in lower-income areas may have little choice.

Make an assessment

Add your selling prices for each fixed cost and for your variable costs to find your selling price per view. Does it seem high or low? How does it compare to your competitors? Don't feel locked into the number you've come up with, Taliaferro says. If a certain study, such as a repository or prepurchase study, requires numerous views, you may be able to charge a little less. But if you feel you have extra room to mark up, go for it. Keep the perceived value of your services in mind, though. If clients don't feel they're getting the best service for their money, they'll take their checkbook elsewhere.

Once you've decided on a fee, the real work begins. Look at your books and talk to your clients. Is your fee working? If you're pleased with revenues and your clients are happy, congratulations. If not, tinker with the number until you find what works.

Along with generating revenue for your practice, digital radiography can strengthen the bond between you and your clients and improve the level of care you provide their horses. So show them the radiographs. Burn them a CD with the images. Get them involved in the process of caring for their horse. "In a time of economic concern, communicating about the value of your services is more important than ever," Taliaferro says. "Make clients feel like you're part of their team."

Luckily for Dr. Sobeck, her clients' expectations made her fee increase a non-issue. And because they were so impressed with the technology, the ones who'd left came flocking back. After some tweaking, Sobeck has found the perfect fee for her clients, and business has never been better.

You have the technology, and you provide the best level of service and medicine. But are you charging for it? And do your clients realize the value of the services you're providing? "It's important to think about how you're pricing your services, but it's more important to think about the value you're providing," Taliaferro says. "The difference between a great doctor and a mediocre doctor is their communication with their client."