Calculating physician fees requires market knowledge and flexibility

Physicians just starting out may not be certain of how to calculate fees for their medical services. While it is tempting to charge large fees in order to resolve debts and build a savings quickly, new physicians probably will not attract enough patients to sustain a clinic if their rates are too high. Conversely, setting your fees too low puts your clinic at risk of not covering expenses and going into further debt.

“I was the first subspecialist in my community and pegged my fees at 150 percent of what the internists were charging,” says Sanjay Kalra, MD, DM, consultant and head of the Bharti Research Institute of Diabetes and Endocrinology at Bharti Hospital. “Given another chance, I would begin at a higher rate.”

Key Point: Calculating your fees requires a careful consideration of your personal financial goals, competitors’ rates, and your patients’ resources.

When calculating fees for your clinic, consider the following recommendations from experienced physicians:

  • Study what other clinics or private hospitals are charging in your area for comparable services and base your fees accordingly.
  • Do not overcharge, but setting fees too low may affect patients’ perception of your quality.
  • Patient feedback regarding fees can be helpful, but do not let it compromise your clinic’s financial health.
  • Reassess fees every year or two, then adjust for inflation and changes in the market.

“A 10 to 20 percent increase once in two years is not a huge increase when you look at the starting point and inflation in India, which is 6 to 8 percent per year.”
—Thomas Alexander, MD, DM, FACC, FICC, FCSI, interventional cardiologist and head of the Division of Cardiology at Kovai Medical Center and Hospital in Coimbatore and a member of mdCurrent-India’s Editorial Advisory Board.

Study the market

What other clinics and private hospitals are charging is not protected information or difficult to discover, says Thomas Alexander, MD, DM, FACC, FICC, FCSI, an interventional cardiologist and head of the Division of Cardiology at Kovai Medical Center and Hospital in Coimbatore.

Every couple of years, the hospital revises its charges—including[s2If !is_user_logged_in()]…

[/s2If][s2If is_user_logged_in()] consultation and procedure fees—usually based on input from the consultants and fees from other local hospitals. Fees can increase 10 to 20 percent between revisions.

“A 10 to 20 percent increase once in two years is not a huge hike when you look at the starting point and inflation in India, which is 6 to 8 percent per year,” Alexander says. For example, outpatient consultation fees at Alexander’s hospital were Rs.100 in 1993 when he joined and have only climbed to Rs.200. “However,” Alexander warns, “those doing private practice outside a hospital setting can and do charge consultation fees between Rs.300 and Rs.500.”

Consider patient financial situations

Physicians say they do not formally survey patients about what they are able to afford for medical services, or recall any objections when fees have been raised. Regardless, affordability should be a consideration, says Raghavendra D. Kulkarni, MD, professor and head of the Department of Microbiology, SDM College of Medical Sciences and Hospital, Dharwad, Karnataka.

“We want to offer services at a minimum possible cost to patients without incurring losses,” says Kulkarni, whose department typically charges 30 percent more than the actual material expenses for each of its tests. “It is always successful,” he continues. “Patients can compare the charges with those of other service providers. They are happy with what we are charging.”

New physicians, especially, should be aware of what patients expect to pay for services. But be careful not to charge too little, says Pragnesh M. Vachharajani, MBBS, PGDMCH, a family physician in Ahmedabad, Gujarat, with a special interest in obesity and lifestyle-related disorders. “Patients underestimate physicians who undercharge,” he says. “When you are new, you do not want to take risks.”

Like most physicians and private hospitals, Vachharajani re-examines his fees every year or two, and typically raises them based on rates in his market.

“Now, after 10 years, depending upon patient feedback and following some leaders in the practice, I can afford to take risks and charge more for some services than my colleagues in the area,” he says. “It all depends on one’s growth and satisfaction.”

Find a balance

In the end, regardless of the method chosen to calculate your fees, experienced doctors recommend finding a balance between your personal financial goals, the market, and your patients’ financial resources.

“Try to minimize the profit margin,” says Kulkarni. “Do not expect too fat returns for the service component. We are doctors, not businesspeople.”

Do you have any tips for other doctors about setting fees? Write them in the comments below!
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