Price elasticity and why it is important in your practice
THE CONCEPT OF PRICE ELASTICITY is selling your services for the highest profit. If you can sell at a higher profit, you can spend more to acquire a patient.
This profit can be attained by:
- Charging more for your services by creating more value for customers
- Attracting customers who are willing to pay more for your services
- Keeping clients through their treatment plan (most offices stop short of functional improvement)
- Reducing your cost of delivery
Where to increase your profitability
- Most offices look at reductions first, because it’s the easiest place to look, but reducing costs doesn’t have to be about lowering payroll; it could be related to paying more for more productive employees if you could process more patients per hour and cut down on the manual labor time of creating spreadsheets — that also reduces your costs. Sometimes simple cost-cutting makes sense, but sometimes it is about being more efficient. Saving yourself into a profit rarely works as a long-term strategy. In recessionary times, businesses that focus on cost-cutting rarely work out. Sony made big cuts after the dot-com crash and was miles ahead of an unknown tech company, Amazon, and when things picked up, Sony lost market share and never gained it back. Strategic cuts and improvements work much better.
- Charging more for your services is what most doctors should do, and it is one of the easiest ways to generate a higher price elasticity, but most doctors will give 20 reasons why it won’t work before trying it. I have raised my prices over the years and found each time I raised my prices, the best patients stayed and we were more profitable. However, the cost of everything has increased; why shouldn’t your treatment? Some would say that’s why they shouldn’t raise their prices, and since it’s a free country, they are allowed to do that. However, they should not complain about student loan debt or having no savings while failing to do something about it. Inflation has raised the prices on everything, and people will understand why you have to raise your prices as well.
Is your case acceptance rate too high?
These days, we are in the software business, and I have clients who brag about their 95% case acceptance, and my mentor would have told them their prices were too low. He said that if 95% of patients accept your prices, your prices are too low. He suggested a 67-75% case acceptance rate, but you could decide for yourself. A side benefit of higher case fees is higher patient compliance. If patients have little or no skin in the game, their compliance with exercises and home therapies is typically minimal.
My kids’ orthodontist quoted us $8,000 for braces for 18 months with a retainer for straighter teeth; why can’t the average chiropractor get $3,000 or more to help someone avoid back surgery in the future? There must be a reasonable exchange of value. In addition, an orthodontist will help a child attain straighter teeth, which helps with confidence as a teen and adult. Sure, there is a conversation about bite and jaw alignment, but many parents want the best for their kids, including self-confidence from a nice smile.
If you don’t do a prepay, that’s OK, but getting a patient better is essential, right? Do you agree that ligaments take 90-120 days to heal? Doesn’t it take 90 days to show functional strength increases with an exercise program? If your treatment program was 8-12 weeks, wouldn’t that equate to more visits?
Treatment protocol studies
There are few studies about treatment protocols in chiropractic, but the Mercy guidelines in the 1990s was one of them. A group of various specialties and researchers looked at chiropractic patients and found that one of the best protocols was three times per week for four weeks and one time per week for 4-8 weeks. That’s a lot of visits compared to the average office, and you’re providing functional improvement. If you are evidence-based and integrating corrective exercises, it takes time for objective changes.
If you recommend only a few treatments, simply tracking those patients from the beginning to the end of their plan will make a difference. You will be surprised at how many patients drop out earlier than expected. Even if you recommend 5-10 treatments, ensuring they complete that plan will boost your visits. If you collect more from a patient as a whole, you will improve your price elasticity.
Consider who your ideal patient is
Chiropractic can help anyone improve their health, but if you say you are for everyone, you are really for no one. Your EHR should give you data on all of your patient visits in the last 12 months, and you should be able to determine which types of patients pay the most for their services. They don’t pay more for fun; they pay more because they value your service and expertise.
Even if it’s an insurance company paying more, you need to figure out who these patients are. Then it would help if you became the “who” to these patients. What are their problems, concerns and goals in life? Then, ensure you handle their needs; ideally, you create content for patients like this.
If your ideal person is a mid-30s female, white-collar worker, think about their problems and solve as many of them as possible. Is it related to upper trap or levator pain related to working at their computer? Cubital tunnel syndrome from poor ergonomics from their home workstation? (Note this has increased because many do not have keyboard trays, and with the increased ulnar nerve tension from typing on a keyboard on the kitchen counter, these cases are rising.)
It would help to put yourself in their shoes and think about their work situation, which could be at work or remote workstations.
Think about the issues they come in with and create content and solutions for them. Zig Ziglar said, “You will get all you want in life, if you help enough other people get what they want.” So essentially, you just have to solve their needs, wants and problems.
That’s what I did in practice. We had referrals from the medical community, the local community and past patients, and our practice was top-tier. These days we support chiropractors through software and do the same thing. Our primary client is the front desk and office manager, and we make them more efficient and help create a staff-driven practice. That leads to more profit because we make their team more efficient.
By solving their pain and continuing to focus on our primary users, the front desk and office manager, we have been able to grow. We support the doctors, but most want a staff-driven office, and that’s what the owners want. Charging more is one way to increase our price elasticity, but keeping our clients longer is how we choose to increase our price elasticity. As I mentioned in the beginning, raising prices is one way, but increasing the longevity of care is another.
This will spark some ideas, and some will make some changes, while others will be offended by running their health care business like a business. Either way, I have shared this with the best of intentions. With profits, you can grow, hire or attract patients. If you go out of business, you will not be able to support anyone, and I wonder why a doctor who aligns teeth should be compensated more than a doctor who aligns spines.
NAOTA HASHIMOTO, DC, is the cofounder of TrackStat, a patient tracking software that makes it easy for admin people to attract and convert new patients while ensuring your existing patients stay in your practice. It offers new ways to retain patients and also offers ways for staff to communicate and schedule patients while providing you all the metrics of success. To learn more, go to trackstat.org.