Fee Setting

[DPA.Support]

I have recently become a member of the DPA and need some information. Our practice is in the process of introducing orthodontic treatments, including invisilign and would like to know if you can provide us with a price guide as to what we can charge for various orthodontic procedures and invisilign. Our area has a 3 year orthodontic waiting list and we are not aware of what can be charged for orthodontics. Our practice is a purely private practice with some Denplan patients. We hope you can help us with this.

We thank you in advance and look forward to hearing from you.

via DPA.Support

[DPA.Support]

Hi. It is great to hear that you are responding to the need for orthodontic services in your area by expanding that side of your practice. It is worth spending a few minutes discussing fee-setting as there are several methods.

Firstly you can refer to the DPA fees guide that is published annually. Unfortunately the sample size is too small for this to include orthodontics but it will give you a guide on other private treatments.

Secondly you can set your fees on a 'costs plus' basis by working out how much it costs you to carry out each treatment episode and then adding on your profit to arrive at the total. Your costs must be based on carrying out the treatment to the standard that is required by the patient. More commonly dentists will cost their treatment to an average standard however you should be prepared to vary this if necessary.

Calculate how much you will spend in the practice in the following year, omitting variable costs such as laboratory fees and materials. This can be estimated from the current year's accounts, taking into account plans for increasing wages and investment. Add to this your required drawings and the amount you need to set aside for tax. Then add on your materials by adding onto the fixed costs, the same percentage of your turnover as the materials were the year before.

Work out the number of hours you will work by mutiplying your hours per day by typically 200 working days and then reducing this by 20-25 per cent depending on how efficient you are at booking patients.

Now work out your hourly rate (net of laboratory costs) by dividing your required income by the number of hours you have to generate it.

Now you can work out your fees by adding your hourly rate to the laboratory cost for each item. Note that the presence of associates/performers does complicate this a bit and is beyond the scope of this reply but once you have grasped the basics it should not be too difficult.

The third way of calculating fees is 'value pricing' or 'market pricing' and this consists of charging what the market will stand. In order to do this you need to research your local practices by ringing them up and finding out what the market rate is for the work you intend to do. Do not simply undercut their price as price is often the only indicator of quality for a patient. You can use value pricing in addition to cost plus pricing to vary your fees for example at times of day which are in high demand or for urgent extractions where the patient's priority is speed and not cost.

When deciding your prices you have to choose two from the following list: high quality, low cost, high speed. For example a high speed, high quality service will not be low cost. A low cost, high quality service will not be high speed.

Other factors to consider are clear explanations of the proposed treatment and alternatives, fixed quotations written in the patient's language, informed consent, excellent records and staged payment by results.

Attached to this reply is a pdf showing the results of a fee setting exercise. You will see the breakdown of each fee. To the right is a column which is the cost to Denplan patients (who only pay laboratory costs). What you cannot see are the spreadsheets to the left which feed in information about the hourly cost (as described above) and the spreadsheet to the right which is a 'cut down' or filtered version of this sheet which is formatted as a Private Fees guide for patients, which does not show the laboratory element. You will also notice that I have numbered the private treatments for ease of reference when entering them into a computerised system.

The full version of this spreadsheet is available to DPA members in Excel format.