News & Events

Medical Claims Processing: Setting Prices for Your Practice

by Tom Limoli

As the New Year gets going it may be time to reevaluate your practices pricing structure. In updating your fees for 2011, take care and please do not trap yourself by attempting to establish your office fee schedule based on what some third-party payer reimburses at 65% of the 85th percentile. And don't establish your fees based on the provider down the hall or across the street. Your fees should be based on your overhead, expenses, patient base, and your individual level of professional expertise.

You need to sell your services at a price your customers are willing to pay—and one that generates a profit for your practice.

Pricing your product or service is one of the most important functions of your business. You need to sell your services at a price your customers are willing to pay—and one that generates a profit for your practice. There are many ways to arrive at your price schedule, some rational, some not.

Here is one method for setting your fee schedule that takes into account costs, customer's willingness to pay, and the competition.

• Cost is the total of the fixed and variable expenses to service provider.
• Price is the selling price per unit customers pay for your service.

Evaluate Your Costs

The price you set is the cost to the customer. It should be higher than the costs of your expenses to produce the service you provide. That is office space, labor, equipment, supplies, marketing, the services you purchase from other vendors, and all the things you pay for as a small business owner.

Think of your costs as a pool of water. You must add up your costs like stacking blocks on the bottom of the pool and your prices must stack up to a point where you can stay above water. Occasionally you may set prices at or below cost for a temporary, specific purpose, such as gaining market entrance or clearing inventory. However, this is the exception and your costs should be the foundation of the price you charge.

The customer's willingness to pay

How the customer perceives the value of your service determines the maximum price customers will pay. This is sometimes described as the perceived value. Perceived value is created by an established reputation, marketing messages, packaging, and sales environments.

Once you have an idea of what is valuable to your market, besides the direct qualities of your product, you can position yourself to build additional features into your customer relationship which provide this additional perceived value. You can now make an informed decision about how to price your product or service.

Somewhere between your cost and the price the market will bear is the right price for your service—a price where you can make a profit and is fair to your customers.

Your Competition

An obvious and important component of perceived value is the comparison customers and prospects make between you and your competition.

You may find a competitor selling essentially the same product but at different price. He may even have a vastly different market share. He is probably selling on perceived value.

Inform yourself on the prices your competition charge, but base your pricing decisions on your practices costs.

Tom Limoli, Jr. is the prevailing expert on proper coding and administration of dental insurance benefit claims. He serves as president of Limoli and Associates, a company that over the past quarter century has assisted dental offices in streamlining the insurance reimbursement process. Mr. Limoli’s no-nonsense approach to the management of third-party reimbursement has been implemented in thousands of dental practices across the country. Customized fee schedule analysis for your individual office is available for a charge from Limoli and Associates / Atlanta Dental Consultants at (800) 344-2633 or

About Apex EDI

Apex EDI is a leading healthcare claims clearinghouse for medical and dental professionals. Apex EDI serves thousands of physicians, dentists, and other medical providers nationwide with its Apex OneTouch® solution. The OneTouch® solution is a Web-based electronic claims reimbursement system that increases productivity and profitability while facilitating fast payment of insurance claims and providing additional reporting and analysis. Founded in 1995, Apex EDI is based in American Fork, Utah.

Posted in: Medical Claims Processing

Leave a Comment (0) →