Setting veterinary practice fees

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Make sure your veterinary practice implements a plan for setting and increasing your fees to keep up with the competition.

Football season is in full swing, and all this talk about the importance of having a solid defense and a strong offense makes us wonder if veterinarians could apply a similar strategy when it comes to pricing and delivering their services to clients.

Ask yourself this: As the quarterback of your practice, are you confused about how to set and charge your fees appropriately? Is your defensive line—your receptionists, technicians and support staff—worn out from spending too much time justifying your pricing and not enough time offering the level of care that makes the price secondary in the eyes of your clients—particularly if there's a new service, your fees are increasing or team members are unsure if your price is fair?

If you answered "yes" to any of those questions, it's time to make some changes to your practice playbook. So huddle up and follow this plan for success.

Be ready to play with a solid game plan

Rule No. 1: All the practicing in the world won't matter if you're not ready to play ball when the game starts. Make sure your practice is rewarded with a win by charging appropriately for your services. Get started with the following strategies:

> Competitive pricing. You'll want to be price-competitive, so monitor what Internet pharmacies are doing by having a member of your staff go online to see what they're charging. And periodically survey other practices in your community to compare fees for price-sensitive services. Make the calls anonymously to ensure compliance with federal and state antitrust laws, though.

Depending on the quality of patient care and client service you offer, your fees should fall between the middle and high end of your competition. You don't want to be the cheapest option. You want to differentiate your practice by enhancing and communicating the level of service you offer so your clients can put your fees into perspective. Ideally, you'd be at the middle to high end of the range so long as your medical care and client service support that.

> Cost-based pricing. This strategy is most commonly used for pricing inventory. Establish a selling price by determining a cost and applying a markup. In companion animal practices, an average markup of 90 to 150 percent is added to the cost of pharmaceuticals, along with a dispensing fee of $6 to $11, according to Benchmarks 2013: A Study of Well-Managed Practices from Veterinary Economics and Wutchiett Tumblin and Associates. The total price is then compared to a minimum prescription fee and the client is billed the higher of the two. Drugs with low turnover rates (less than 8 to 10 times per year) typically have a higher markup to cover the additional carrying cost.

> Variable pricing. This changes your standard pricing to influence when, where or how clients purchase services and products. Examples include special pricing on dental services to increase visits in the month of February, wellness plans with monthly payment options and loyalty programs that offer rewards for client referrals.

> Value-based pricing. This strategy aligns the price of other medical services with your exam fee, which reflects the economics of your community. It takes into consideration your clients' demographic, employment, education and community setting (urban, rural or suburban). Through our study and other resources, we have found that if the client will pay X for an exam, we can predict they'll pay X, Y, Z for the other services.

Download a chart that'll help you compare your fees with those of Well-Managed Practices at dvm360.com/feechart.

Know when to adjust your strategy

Rule No. 2: Even if you started playing with a solid strategy, you don't have to stick with it through the end of the game. Sometimes you've got to adjust your game plan depending on how your team is performing or what your opponent is doing, and increasing your prices is just one way to stay in the game.

When you increase your prices, a series of small increases is preferable to one large increase for two reasons: 1) Smaller or partial increases are likely to go unnoticed, and 2) smaller steps make the increases more palatable for everyone. Be selective about what fees you want to increase and review fees on a quarterly basis. If your fees are below what published resources indicate, if you've experienced increases in expenses or if your practice expands or enhances the care provided, a fee increase is warranted. Whenever you increase fees or add a new service, monitor what's happening and know what your customers want. For example, if your lfee for a CBC is twice as much as the average of $52 (Benchmarks 2013), and the doctors hesitate to use that test because it costs too much, consider reducing your fee to be more in line with published resources.

Here are a few strategies for increasing your prices:

> Presentation is key. Get started by educating your staff about why you're increasing your prices in order to make sure everyone's on the same page. Stay away from generalizations like, "Everything's more expensive these days," or "We haven't raised our fees in years." Instead, focus on more concrete reasons behind the increases, such as, "We want to raise the bar on our level of care, and in order to do so, we're going to offer digital radiography." Or, "We want to provide the best possible care for our patients, and in order to do so, we're investing in new equipment and investing in you."

> Talk it out. The next step is working with your staff to fine-tune their communication skills when they discuss prices with clients. Arm them with appropriate responses, such as, "Yes, our prices have increased a bit, but we can assure you that the increase is necessary to provide the very best care for Beau."

> Aim for improvement. Never stop looking for opportunities to raise the bar on your quality of care and service. From finessing your bedside manner to getting involved in your community, make sure you're doing your part to help build and foster a trusting relationship with clients. Educate them about the importance of routine physical exams and wellness care for their pets. Thank them for choosing your practice to help their furry family members live a long and healthy life.

By following these rules and developing a sound strategy for setting and increasing your prices, you're sure to advance your practice to the goal line. Now play ball!

Denise Tumblin, CPA, is president and owner of the veterinary practice consulting firm Wutchiett Tumblin and Associates. Christina Materni is a financial analyst at the firm.

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