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Introduction
While it seems simple, setting prices within therapy practices can be one of the most challenging aspects of running your own business. There are a multitude of factors to consider, with therapist rates differing from person to person, and honestly, it can feel rather overwhelming! However, with the right knowledge, you can be sure to set private practice prices that accurately reflect the value of services, and allow you to be reimbursed with the fees that you deserve. Implementing good practice management software can also help you elevate the quality of your services and charge higher prices, as well as aid in producing excellent progress reports. But regardless, keep reading to know more about how to set the best prices for your practice.
Three common mistakes therapists make while setting prices
When it comes to therapy pricing, there are three common mistakes that you need to recognize in order to set the price that will provide value and elevate the quality of your services.
Using market rate as your rate
There seems to be a tendency to Google search what other local therapists charge, and just settle on a price that falls in the middle. After all, you don’t want to undercharge where you won’t get the reimbursements you deserve, but you don’t want to overcharge either, as you need patients to come through your doors! However, settling for a median price can obscure the real value of your practice, and the market rate is not unique to the skills that you offer.
Charging the rate that insurance providers reimburse
Many therapists look to charge prices at what their insurance providers reimburse, however, this can also be highly inefficient as it doesn’t reflect the value that your service specifically supplies. Setting fees in accordance with what other organizations pay should not be a sole guideline for what you charge!
Increasing your prices slowly
Hundreds of therapy practices tend to set the initial price reasonably low, and slowly work up to increase it over time to reel clients in, and retain them over slow, and incremental changes. However, this isn’t an entirely reliable method, as many clients feel that this is sneaky and that there should be more transparency. Rolling fee raises for individual clients can also be very difficult to keep track of and maintain, not to mention highly confusing! While increasing prices sounds simplistic, the lack of individualization to your true value may lead you to think twice before implementing it within your services.
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Factor your cash flow before setting up your price
One of the best ways to help you set up a price that actually reflects the expertise and value of your services is by calculating your cash flow. You can set a proportionate price that accounts for all your expenses while allowing you to maintain a strong profit!
Cost of marketing
Marketing is a necessity in ensuring that you get the word out there concerning your business and that you attract patients to your practice. Naturally, this is going to cost, especially if needing to establish an online presence through a website domain, ads, and blogs.
Education and certification costs
If you or any of your employees need additional training and support, it’s important that you factor this into your cash flow. You must be certified to provide care for your patients, and you also must be up to date on all the most recent care processes and training procedures.
Practice insurance
Insurance is a must, especially when it comes to healthcare! You need to ensure your practice has protection against any malpractice claims, damages, or accidents, as this way, you won’t need to break the bank when the unexpected occurs.
Rent
Many therapist practices opt for online services, however, if you choose to evaluate clients in person, you’re going to need an office. Make sure to include rent costs if this applies to you!
Salary of employees
Having employees means you’ll have to pay them, and so this needs to be included in your cash flows. This can also help you determine whether you’re over or understaffing and can help guide you in the necessary amendments you need to make.
Other miscellaneous overheads
Of course, there are also small miscellaneous costs that add up and impact your overall profit and operations. Some of these costs include practice management software, which can help streamline your workload and simplify your operations. You can significantly reduce costs by going paperless, which is a reason why many therapists are quickly turning towards this as a healthcare solution!
Step-by-step guide on setting the right prices for your therapy practice
Now that you’re aware of the common mistakes, and know how to calculate your cash flow, you may be wondering the exact steps that need to be taken to actually set your therapy price. Luckily, we’re here to help!
Determine your total fees and expenses
Hopefully, you’ve set up a detailed cash flow chart with the accurate numbers, but if not, you need to calculate your total fees and expenses. Ideally, this is within a specific time period, such as month to month, but regardless, you need to evaluate your financial situation. This is inclusive of factors including marketing, rent, miscellaneous costs such as practice management software, liability insurance, as well as any additional training or education that you may need. Doing so provides you with a better picture in regards to finances, and can help you set the baseline price that will cover expenses and maintain a profit.
Factor your no-show rate
A no-show rate refers to how many clients per week miss their appointments with you, and like any healthcare business, this is bound to happen. In some cases, this is related to the Patient Average Visit (PVA) numbers, however, the no-show rate is specifically for those who fail to show up. This is important to consider because you cannot bill for that hour if the cancellation is not within the cancellation fee window. In other words, knowing your no-shows allows you to know how much to charge each session, with high no-shows indicating more income needed to earn profit.
Benchmark your price expectation
While you shouldn’t entirely base your prices around the market rate, as discussed earlier, you should still carry out research to be able to provide a benchmark for your business. This enables you to ensure you’re not overcharging and allows you to research according to your needs and resources, with a specific benchmark providing a fair and justifiable comparison.
In-depth research and test
Make sure that you do your research extensively, and set aside the time for it specially. It takes time to be able to set a price and looking into several factors as well as market rate, in addition to other caveats, will take some time. It may be beneficial for you to test your price out on current clients, or other trusted healthcare professionals, to gauge whether it is appropriate and reasonable.
Offer sliding scale or affordable fee option to your clients
Sliding scales are a great way to attract and retain clients, as it offers an affordable price option without compromising on quality. It provides a holistic view of each individual’s financial situation and allows you to help those who may be at lower income levels. Sliding scales cater to those who may not have health insurance, however, it’s important to note that if you deal with private insurance, this may not be a valid route. This is because you could receive a greater or lower payout than the insurance company, which may place you at risk in regards to insurance fraud or other legal issues, despite your intentions. You may find that the contract you have with an insurance provider forbids you from making any changes to a client's copayment, meaning this option isn’t viable. However, evaluating your clauses should allow you to have more confidence in regards to whether this can be implemented, as it does serve a solid fee route for many clients.
Final thoughts
Setting prices in therapy practices can be difficult, however, it doesn’t have to be! With the right research, that is specific to the needs, resources, and requirements of your business, you can set a price that is competitive on the market, and doesn’t compromise on value or quality. The right price can minimize patient difficulty as well as increase patient loyalty, and ensure that you’re appropriately reimbursed. Now that you’re aware of the common mistakes, you can hit the ground running when it comes to assessing and treating clients, and without financial loss!
Further reading:
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