by Paul D. Zuelke

Lower fees are not the key to better case acceptance

I was working with a new client recently whose profit picture was quite weak despite strong new-patient flow and reasonably good case acceptance. The problem was simple: His fees were unusually low. I reviewed his fee structure and found that all the fees that he charged—from simple space maintainers to complex adult treatment—were 20% to 30% less than appropriate considering the quality of his practice, the quality of his patients, and the economic stability of his community.

He was resistant to my recommendations for fee increases and earnestly tried to convince me that his fees had to be that low to “compete” with the other orthodontists in his community who “undercut me every chance they get.”

It turns out that the practice that he considered to be his single greatest “competitor” was also a client of mine whose fees were, across the board, 20% (on full starts) to 40% (on limited and other partial starts) more than this new client’s fees! The most interesting fact was that the more expensive orthodontist had a significantly higher case-acceptance rate than his cheaper “competitor.”

Healthy Competition

In February, I completed my 25th year consulting with orthodontists. I have seen orthodontists with this belief system—that fees have to be low to gain case acceptance and to fight the competition—over and over again. Yet in all those years, I have never—not even once— seen a practice that lost any appreciable case acceptance because of its fee structure. More importantly, I have never seen any orthodontic practice that gained case acceptance by lowering its fees (although I have seen some spectacular examples of orthodontic practices that lowered their fees, only to see even lower case acceptance).

More case starts are lost every single day by orthodontists’ being late or having poor verbal skills, poor patient-flow procedures, poor scheduling policies, poor telephone skills, or restrictive financial policies than are lost in an entire year due to higher fees.

It is interesting that orthodontists in Asia, Australia, South and Central America, and Europe have never been concerned about competition. Relative to the average income of their respective populations, their case fees are dramatically greater (often double or triple) than those of most American orthodontists. Even in the urban areas of these countries, where there are often plenty of other orthodontists, the fees still remain high, with no identifiable concern about the competition.

I have always taken the position that there are more patients available than the limited number of orthodontists will ever be able to serve. When you take into consideration the population growth of the United States, the rate at which orthodontists retire, the rate at which orthodontists are graduating, and the gender of these orthodontic graduates, I believe that my position on this subject is becoming more and more solid every single year.

I am amused by—yet at the same time concerned with—the efforts that some young orthodontists go through to find a location in which to practice. Their efforts are almost always focused on locating a community “with little or no competition.”

If I were a young orthodontist looking to start a first practice, I would open up in any rapidly growing, vibrant, community—but only if it had a solid number of other orthodontists already practicing. What happens in such a community is that the collective marketing of the existing orthodontists has raised the community’s awareness of the value and availability of orthodontics. The “pie” (the pool of potential orthodontic patients) that so many orthodontists believe is of a limited size, simply gets bigger.

The outstanding practice with a terrific team, a strong patient-care ethic, and a progressive attitude toward patient flow (can you get a new patient into braces within 14 days of the new-patient exam date?) will always rise to the top of the heap—even if it has the highest fees in town.

My best example comes from one of my very favorite, long-term clients. Within a 20-minute drive of his office, there are dozens of other orthodontists. This orthodontist’s fees are higher than almost all of those others. Some of his fees (such as his 12-month Phase I, which is $3,680) are dramatically higher than those of the “competition.” Nevertheless, his new-patient flow (mostly referred from other patients) is very strong, and his 10-year case-acceptance average ranks among the top 10% of my clients. This practice does not worry about, nor live in fear of, the competition.

In summary, other orthodontists are not your competition! You do not lose case starts to the competition because another orthodontist is less expensive. Orthodontists lose starts because they and their team do not create the perception in the patients’ and the parents’ minds that the quality of service and the quality of experience that they would receive during their time in the practice would be worth the cost.

A different point of view? Certainly. But it will serve the orthodontist and the team that lives it very well.

Fees That Please

Orthodontists have historically been unwilling to discuss their fees in a public forum, so I thought it might be useful to present a fee schedule that is structured in a format and presents a fee amount that represents the schedule used by my “average” client.

This fee schedule is not a recommended fee structure for any particular orthodontist or practice. Some practices should be charging 5%–20% more than the fees listed, and some should be charging 2%–5% less. It is presented solely for your interest, to demonstrate what I believe the relationship between various orthodontic fees should be, and to demonstrate how to construct a written fee schedule for your own practice.

The first item that many will notice is that the Phase I fees are often greater than the Phase II fees. That is different than how most orthodontists charge, but nevertheless it is a highly successful fee structure that maintains current case acceptance during Phase I, when patient and parent motivation is typically quite high. The lower fee also increases case acceptance during Phase II, when patient and parent motivation tends to be much lower than it was during Phase I.

Ultimately, the only important issue is the average fee generated per patient started. To calculate this, you simply divide your gross dollars produced for an average month by the total number of first-time starts (Phase II starts do not count) for an average month. This will give you your average case fee charged per patient. If that number is not 110% of your full-start adolescent case fee, then your average case fee is too low, and you will have a tough time being as profitable as is appropriate for this profession.

For instance, say you were to charge $6,000 for an adolescent full start, but that you also do a fair number of space maintainers, lingual arches, and other “limited” forms of treatment for which you charge less than $1,000 each, as well as a number of Phase I cases for which you charge between $1,800 and $3,000 each. Your average case fee on all first-time starts will be very low, but if you and your staff do a great job of getting those limited and Phase I cases to continue on into regular braces (even though, again, a Phase II case does not count as a new start), then your average fee will be much, much higher, as will the profit your practice generates.

Paul D. Zuelke is the owner of Zuelke & Associates Inc, an orthodontic consulting firm in Portland, Ore. He is also a founding member of PracticeBank, an Internet-based but otherwise traditional bank founded and organized to serve the financial needs of orthodontists. He can be reached at (503) 723-0200 or paul@zuelke.com.