7: Fee-setting

Chapter 7

Fee-setting

Many dentists have commented that the NHS fee scale is unable to deliver a realistic level of income to sustain all the costs of modern practice and provide the desired level of income to the individual practice owner. One of the most challenging, but ultimately satisfying aspects of private practice is the ability to set and revise your own fee scale independently of any third-party payment system. As soon as you deliver any element of care outside a fixed-fee third-party payment system (such as the NHS) you will have to, in some way shape or form, calculate the cost of that particular procedure and charge the patient accordingly.

Taking control of your fee setting is one true benefit of a successful move to private dentistry and allows an increasing number of practitioners to gain satisfaction and contentment beyond mere financial reward. However, financial success is essential to ensure the long-term stability and continued development of your practice. If insufficient income is generated, then even with strict cost control, the ability to sustain your practice over the longer term is not guaranteed.

There has been a tendency in the past for individual dentists to rely on a fee structure recommended by a particular professional group or body. This approach is inconsistent within the context of the business and is a flawed approach to fee setting. To use someone else’s figures in respect of setting your own fees may prove to be a fundamental and expensive mistake and the philosophy of setting your own fees should be clear to all.

Method

One of the most important aspects is for each individual clearly to determine their future lifestyle. The allocation of time between work and relaxation is a relatively straightforward exercise but increasingly successful practitioners have been able legitimately to minimise their clinical commitment to a realistic level, whilst at the same time improving the quality of their social and family time. The major benefit of such an approach is clearly less stress and improved quality of life for the practitioner and their family.

The Variables

It is therefore very important that you are fundamentally honest in respect of:

  • the number of clinical hours per week on a realistic basis

  • the number of working weeks per year to allow for holidays and postgraduate development

  • loss of chargeable time because it is impossible to achieve 100% efficiency

  • an accurate forecast of the total overheads structure of the practice based on fact and allowing for inflation and further investment

  • a complete and comprehensive schedule of personal drawings, including forecast tax liability and realistic investment for retirement.

You must establish the facts of your practice and not simply take someone else’s figures when analysing your cost base and income requirements. You must make a candid projection with regard to future operating costs. Inflation may be at an extremely low level, but experience suggests that dental practice inflation does not follow the Retail Price Index and operational changes in your practice may have significant impact on your cost base.

Schedule 1 (Table 7-1) shows details of the overall operating costs and income requirements for a single-handed principal already operating within the private sector. The personal drawings requirement of, say, £100,000 has been carefully scheduled to allow for all required expenditure, including the current tax provision based on the previous year’s profits and increased pension investment (which is a factor and must never be ignored).

Table 7-1. Schedule 1: Operating costs 2003
Payroll costs £46,000
General overheads £24,000
Financial costs £18,000
Depreciation and amortisation £12,000
Personal drawings £100,000
Total £200,000
Add: Materials @ 7% £14,000
Total income required excluding laboratory fees £214,000

 

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Jan 5, 2015 | Posted by in General Dentistry | Comments Off on 7: Fee-setting
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