By Mark Mandell, DC, MBA

Why would patients haggle with you over a $300 deductible for their health insurance and then pay $1,200 for a new mattress or drive off in a brand new car? Do patients fail to recognize the value of their health?

No, but they are likely more sensitive to healthcare costs because they already pay more out-of-pocket healthcare expenses than in prior years, including an average increase of $600 in annual insurance premiums in employee-sponsored plans1.

Furthermore, they pay doctor bills with a shrinking paycheck, but they pay for big-ticket items with savings or other money sources.

Understanding how consumers pay their bills can help you to shift their mindset from considering your fees as a cost to viewing fees as a long-term investment in their health.
Average Americans see themselves as having two sources of money — their paychecks (income) and their personal savings (wealth).

A paycheck has to cover mortgage payments, monthly bills, shopping purchases, credit card payments, student loans, payroll taxes and small incidental expenses.

Many patients are feeling the economic squeeze on their paychecks. According to the Department of Labor, median weekly paychecks fell 1.5 percent in the first three months of 2003.2 Most Americans have little room to add more monthly bills.

Personal savings, on the other hand, are for future expenses such as retirement and children’s college tuition and also for large, annual or one-time expenses.

Automotive companies have taken advantage of this distinction and created leasing programs to switch car buyers from using their savings to pay for cars to using their paychecks.

TV infomercials also cater to this spending philosophy by pricing their gizmos at “Only five easy payments of $29.99!” instead of listing the price at $150.

Most chiropractors have followed the automotive and infomercial trend of selling their patients on smaller payments, collected multiple times on a per-visit, weekly or monthly basis. Each of these collection periods results in billing relatively small fees that target patients’ paychecks.

For long-time chiropractic patients accustomed to paying monthly chiropractic bills, this is an anticipated regular expense. But, for new patients who may already be stretching their paychecks and paying $174 monthly for employer-sponsored family coverage3, the expectation of paying another $100 every week or month may be prohibitive.

Getting patients to pay more healthcare costs out of their income in this environment may be like trying to squeeze water from a stone. But you may be able to provide a solution to the problem: Give patients another payment option and help them find the money. Offer them an annual payment or case-based fee.

Bucking the trend
Annual payments or case-based fees essentially reserve the automotive and infomercial financing process.

Rather than having patients pay small amounts of $10, $50 or $100 at a time, a chiropractor may be able to achieve more patient compliance by offering a single, annual charge of $1,000 or more. Though it sounds counter-intuitive to charge more to be cost-effective, what you are actually doing is making your care more affordable by redirecting patients to tap into their wealth (savings), instead of monthly income or paycheck. Instead of trying to convince patients to squeeze cash from their wallets, you are redirecting them to look at another source of money that they often consider separate.

In the last few years, this redirection has become an important concept because of changing consumer-spending habits. Because of the recession, on top of shrinking salaries, people are also taking home less money due to higher state and local taxes. Accordingly, many of our wage-earning patients are legitimately concerned about the addition of new monthly expenses.

Refinancing mania frees cash
The biggest recent boost to consumer spending has been mortgage refinancing, in which many homeowners access the wealth in their rising home values by cashing out extra money. Mortgage rates are at historical lows such that monthly payments can be reduced even with a larger loan.

Last year, $140 billion was cashed out in mortgage refinances4, generating an economic boost five times larger than the planned tax cut. Much of this money is used for large, one-time expenses like home improvements and paying down debt, similar to costs customarily paid out of personal savings.

So what does mortgage refinancing have to do with your office fees? If patients are hesitating to choose chiropractic care because of the weekly or monthly cost, offering them a one-time annual payment or case fee that is paid from personal savings or mortgage refinancing cash may be a more affordable option. Payments from personal savings or mortgage refinancing cash also do not affect patients’ monthly take-home pay.

Calculating appropriate charges
Setting the correct fee is very important. While every office should set their own fees based on their specific operations, there are some guidelines to establishing annual fee programs. To set a one-time annual fee, start by calculating the average number of visits per year that your long-term patients see you. Do you recommend bi-weekly or weekly maintenance care visits? If so, then your annual fee should be representative of that care schedule.

Many doctors often include a discount of 5 percent to 15 percent as an added incentive for upfront annual payment. If you are not following the calendar year directly, then be sure to carefully track the time period and provide ample warnings to your patients when their annual period is coming due so they are not caught by surprise.

Case fees can be more complicated because they sometimes imply a guaranteed cure, but the principles to establish a case fee are similar to the annual fee process. Either way, it is recommended that you speak with an attorney and an accountant prior to establishing an annual or case fee program in order to properly address the legality and the timing of revenue recognition in accordance with federal and state laws.

Understanding the financial concerns of patients in today’s environment of rising healthcare costs is an important part of running an office. Knowledge of how patients may feel about paying for their healthcare can help you to structure a more affordable payment system and make your practice more accessible to patients in need. Teaching patients how to invest in their health is, after all, the most valuable service that we provide.

Dr. Mark Mandell has an MBA in management and a BS in policy analysis in consumer economics in addition to his doctor of chiropractic degree. He combines both his chiropractic and business educations to help numerous healthcare companies and chiropractors understand the unusual economic environment of doctor-patient relationships. Dr. Mandell can be reached via email at mmandelldc3@comcast.net or at the offices of Chiro-Matic Mattresses at 800-526-5116.

1 Kadlec, D. “Where Did My Raise Go?” Time, May 26, 2003, Vol. 161, No.21.
2 Ibid.
3 Ibid.
4 “Consumers May Get A Second Wind In The Second Half,” Business Week. Jun 23, 2003, p.25-26.