How to set fees for your medical services that are ‘just right’

One of the great mysteries of medicine for patients is why doctors charge what they do. Some are amazed at the fact that bright young doctors are willing to work long hours for patients whom they do not know, for an income that is not bad, but that is much less than other professions such as bankers command.


Aniruddha Malpani, MD“Patients would be much happier if the medical costs were transparent.”
-Aniruddha Malpani, MD, medical director of Malpani Infertility Clinic in Mumbai, India


Patients admire the fact that doctors are willing to work for 24 hours at a stretch and that they sometimes get up at 2 in the morning for emergencies. It can be an arduous lifestyle that disrupts the physician’s personal life – something that you can’t compensate for even with money.

On the other hand, many patients also feel that doctors charge too much. They envy the Mercedes that some doctors drive and the fact that they might take off an occasional Wednesday to play golf. Many resent the fact that they have to pay hundreds of dollars for medical procedures that may take just a few minutes.

Also, it’s a well-known fact that the fees charged by doctors can vary considerably – not only from doctor to doctor – but from[s2If !is_user_logged_in()]…

[/s2If][s2If is_user_logged_in()] patient to patient as well. Patients would be much happier if medical costs were transparent.

Key Point: Since you don’t learn how to be a business person in medical school, sometimes the operational aspects of running a medical practice can be challenging. In India’s free market, fees for the same services can vary wildly from doctor to doctor, and even from patient to patient. It’s important to charge consistently for your services and to set your fees low enough that patients can afford them, but high enough that you have plenty of operational funds with revenue left over to upgrade equipment and update your professional skills.

Inconsistent fee setting

The truth is that the amount that doctors charge can sometimes be a mystery even for doctors themselves. Many doctors are not very good business people, and the inconsistencies in the fees they charge reflect that.

Since doctors are used to working for free or very low wages during medical training and residency, young doctors often quite uncomfortable collecting fees for their professional services when they first start practicing. Most use market criteria to set their fees and charge what other doctors are charging. While this is a useful rule of thumb, in many cases it can be too much—while in others, it’s too little.

Many doctors who are idealistic when they are young charge enough to make a comfortable living so that they can cover their expenses and still have enough to keep the family happy. This is easier to do in smaller towns in India, but it would be extremely difficult in the United States, for example, where doctors often start their practices often owing hundreds of thousands of in debt from medical school.

Even some experienced doctors who are financially quite comfortable are willing to charge just enough to cover their costs, especially if their practice overheads are low. They charge enough to cover their staff salaries and electricity costs for example, but they often end up underpaying themselves. Ironically, even though these doctors charges less because they feel that they don’t need much money to be contented, the disadvantage of charging low fees is that it often mistakenly conveys to patients that the quality of services may not be as good.

This is why it’s quite common to see an escalation of prices. Once one medical clinic in a region increases its fees, the others often do so as well to toe the line. This can be true in the other direction as well—if one doctor drops his or her prices, many others will do so as well in order to stay competitive.

Market considerations

Some doctors who are savvy business people take a pragmatic viewpoint. They conduct an informal market survey to determine how much patients in their community are willing to pay for their services – and set their prices accordingly.

Some doctors will deliberately charge higher fees than the competition. This is especially true for senior doctors, who often feel that they have earned the additional income because of their experience and expertise. Others do so because they want to create an air of exclusivity about them, because they know that patients often misinterpret high fees as being equal to a better quality of service.

This approach is especially prevalent in fields such as cosmetic surgery, where nearly all patients pay directly for their services, and there is intense competition for patients. Some doctors deliberately charge a premium, not just in order to maximize their income, but to attempt to convey that they are better than the rest. However, higher is not always better. On the other hand, lower fees are not always a bargain, either.

International trends

In industrialized countries such as the United States where third-party payers dominate the market, the ability for doctors to set their own fees is practically zero. They pretty much have to charge what a government-run insurance plan or private payer is willing to offer. As medical insurance becomes more common in India, this trend may become more common here, too, with the insurance companies starting to call the shots.

In regions such as the United Kingdom, which have nationalized health services, doctors do not have to determine how much to charge, because this is a decision that is taken out of their hands. For many doctors, this can be a blessing.

Doctor and business person

While many doctors pride themselves on their professional skills and take pride in the fact that they couldn’t be bothered about money, the fact remains that medical private practice is also a business, and unless doctors learn how to charge the right amount for their services, they will often end up underpaying themselves.

In the long run, undercharging for your services may mean that you won’t be able to invest in updating your professional skills or buying state-of-the-art equipment, both of which can enhance the medical care that you provide. You could then put yourself at risk of losing patients to corporate hospitals, which are extremely good at maximizing their profits.

It’s important to find the right balance so that you can enjoy your financial income as well as your emotional income. Earning money is not a sin just because you are a doctor—and if part of the revenue that you bring in is used to improve patient care, it’s a win-win for both you and your patients.

See the next article in this series:
Calculating physician fees requires market knowledge and flexibility

Aniruddha Malpani, MD Dr. Malpani is medical director of Malpani Infertility Clinic in Mumbai, India, medical director of the HELP-Health Education Library for People, and author of a physician and patient education blog. He is an angel investor in Plus 91, which offers customized Web sites for doctors.

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9 Comments

  1. Mathew John
    Posted Nov 2012 at 5:40 pm | Permalink

    Nice article. But still the answer remains elusive. How do u set your fees based on the expenditure that you incur ?

  2. Arvind Bhave
    Posted Nov 2012 at 5:11 am | Permalink

    @Mathew John Exactly! only one idea comes through. That of conducting a market survery – an informal one. How does one go about doing it? Since it is informal i suppose one doesn’t go to a market research organization. And i suppose one will have to do it anonymously. So the question still remains.

  3. Suprashant Kulkarni
    Posted Nov 2012 at 7:43 am | Permalink

    The articles speaks out our minds but the question remains unanswered ( as posted by Mathew John). May be its local body of doctors who can conduct a survey to know the peoples perception and set up minimum fees structure for all doctors including consultations, procedures, surgical procedures etc depending on the qualification of the dr, specialised trainings, fellowships, years of practice etc etc. Though all doctors may not abide by this structure , it will be a good guideline to those who wish to. Often doctors get underpaid in their initial years and thats when they need it the most.. to set up clinic, upgrade instruments, expertise upgradation etc.

  4. dr.rajeshkant mangatram
    Posted Nov 2012 at 10:09 am | Permalink

    you should charge according to the paying capacity of clientage of your area & you should also renew your charges yearly.
    the best point suggested by the writer is, we should earn enough so that we can invest money into further enhancement of facilities for the patient.which is a win win situation.Many of our doctor friends even after earning good amount, don’t invest into our own profession & look out other avenues for investment where we have no control & we are at loss sometimes.

  5. malliakrjuna reddy
    Posted Nov 2012 at 6:57 am | Permalink

    this article beats around the bush. no clarity of thought just written because it has to be written

  6. mdCurrent-India staff
    Posted Nov 2012 at 8:19 pm | Permalink

    Dear Doctors, thank you all for your comments. This article covers overall concepts in pricing your services – in the near future, you will also see articles here with more specific recommendations. Please feel free to continue posting questions and comments here, and we will try to include answers in future articles!

    Sincerely,
    mdCurrent-India Staff

  7. Rakesh Khera
    Posted Dec 2012 at 2:48 pm | Permalink

    There are no clear answers to this question. I guess one should charge as one pleases!

  8. Chandrakant Madgaonkar
    Posted Jan 2013 at 3:45 am | Permalink

    In the just bygone years of our profession, doctors in general, irrespective of their specialty, were collecting/ charging fees on a reasonable scale as, I suppose, there was an element of “ethics” prevailing in their practices. But with the advent of our “modern” and cut-throat practice, it’s now all gone in cold storage. Our leaders lecture on humanitarian services, but it’s all open to us what their “ulterior” motives are. As in any profession, the days of “survival of the fittest” are here to stay in our profession too, and with increasing local and “state” laws and regulations consuming doctor’s earnings, majority of us have to enhance our fees. However, it’s up to the individual to feel the “pulse” of their patients and charge accordingly, without compromising their professional standards.

    It may be pointed out here that, in Karnataka State, the health department has implemented a system of compulsorily displaying the professional charges of doctors in their clinics / hospitals, so that the patients are reasonably aware of their medical expenses. The doctor is free to charge and display their fees – there is no minimum or maximum limit; you may therefore charge the exact displayed sum, though in some deserving cases, many do scale down their fees, but not exceeding the max sum. I suppose, this system is beneficial to both doctors and patients, as the element of “unpleasantness” is reduced to the minimum.

  9. Posted Jan 2013 at 3:06 pm | Permalink

    Yes – the whole point is that there are no right answers – every doctor needs to find what works best for them . I think it’s very naive unrealistic for anyone to expect that there is a standard formula for setting fees .

    There’s nothing wrong with charging “more” ! In fact, many patients feel that a doctor who charges more
    must be better

    Dr Aniruddha Malpani, MD
    Malpani Infertility Clinic, Jamuna Sagar, SBS Road, Colaba
    Bombay 400 005. India
    Tel: 91-22-22151065, 22151066, 2218 3270, 65527073

    Helping you to build your family !

    My Facebook page is at http://www.facebook.com/Dr.Malpani

    You can follow me on twitter at http://twitter.com/#!/drmalpani

    Watch our infertility cartoon film at http://www.ivfindia.com

    Read our book, How to Have a Baby – A Guide for the Infertile Couple,
    online at http://www.DrMalpani.com !

    Read my blog about improving the doctor-patient
    relationship at http://blog.drmalpani.com

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