By: Howard Farran, DDS, MBA, MAGD
Publisher, Dentaltown Magazine

Do you have excess capacity in your office; meaning you could see far more patients on any given day? Then, your fees are too high. Are you booked up a month in advance? Then, your fees are too low. This, my friend is the bottom line. Many dental offices cannot get you in for a cleaning for six weeks, yet run their hygiene departments at a break even or a loss. Meanwhile, a periodontist in the same medical/dental complex charges $30 more per cleaning. Does this make any sense to you?

If I am your valued customer, want my teeth cleaned today, and am willing to pay more for a cleaning, why should I have to wait in line for six weeks with a bunch of patients who do not value your services? Most of free enterprise can get you in today. Usually, the only lines you find in capitalism are in government and healthcare.

Now the opposite, you have many holes in your schedule. Perhaps you are a young dentist who just started out. You should be attracting all of those patients calling around asking how much you charge for different procedures. It is far better to be busy than sitting around. Southwest Airlines, Wal-Mart, and Home Depot have the most revenue in their categories because they have the lowest prices.

The only secret to lower fees is to lower costs. A PPO is nothing more that a volume discount for a group of people who have negotiated and paid for a better rate. What if all of our fees were the PPO price, would your sales go up? Basically Southwest Airlines, Wal-Mart, and Home Depot gave everyone the PPO price without anyone having to join a plan.

The number one way to figure out which fees to raise is by using the Fee Schedule Optimizer (FSO) by Sikka Software Corp. (www.sikkasoft.com or 800-94-SIKKA). This takes the guesswork out of setting fees. The founder, Vijay Sikka, got into the business after he noticed his dentist wife, who has practiced for a number of years in San Jose, Calif., struggled with fee schedules. Now, the company has more than 35 employees and more than 600 dentist customers.

As a group, dentists in the US leave more than $2.25 billion on the table by not updating their fees. FSO was developed to help fee-for-service dentists, as well as dentists who accept PPOs, Delta Dental and other insurance companies. FSO has helped the average dental office file timely fee schedules with insurance companies. New dentists can use the program to identify where they should set their fees, so they don’t sacrifice their profitability by keeping their fees too low or price themselves out of the market by keeping their fees too high. Sikka Software has put together a database that is the richest in the country with approximately 55,000 dentists at zip code level.

We started using FSO this year and it has exceeded all of our expectations. We found an immediate increase in our net income in one quarter. FSO is customized to the dentist, not just the zip code. FSO reads procedure composition, frequency, revenue, time units, lab costs, chair time splits, cost of living and current fees among other things by procedure codes – automatically – from all major practice management systems; including SoftDent, Dentrix, EagleSoft, EasyDental, PracticeWorks, MOGO, PatientBase, DenTech, ComputerAge, Datacon and others.

Consider the following example of two dentists. One spends 90 minutes to do a crown, the other one 45. The first dentist uses expensive labs; the second uses moderately-priced labs. The first one does it all himself (loves the quality and his patients love his quality), and the second one uses her dental assistant for half of it including fitting temporaries, etc. Now imagine that both of them price their crown at $800, you can guess who is making money and who probably is not. FSO automatically aligns the profitability vector for the dentist with his/her unique style and his/her fees.

Our practices can’t be straight jacketed and neither can our style or uniqueness. Clearly, our fees shouldn’t be picked out of a zip code list and matched to the 70th or 80th percentile of that group. Also, what about those of us who are fee-for-service dentists at or beyond the hundredth percentile of this list? FSO produces a fee schedule for that dentist without concern for the ceiling. A $2,000-per-crown dentist may not be as profitable as a $950-per-crown dentist because of the different costs of his/her practice style.

So in conclusion, your fees, your collection policy and your labor cost determine the far majority of your overhead. Take them all as serious as a heart attack. Allow technology and economic principles to guide you in determining your fees. Taking your fees haphazardly could cost you a small fortune.

The Dental Practice Optimizer, at right, shows benchmarking information with Red and Green Traffic lights. Red signifies there is a problem and green means everything is okay. Dentists are able to click on the red to “drill down” or “zoom in” and view the problem area.