THE EDITOR'S CORNER
In many parts of the country, orthodontists are experiencing a downturn in case starts and in income. In response to this, many orthodontists are reducing their fees, in some instances by as much as 30%, in an effort to attract more patients with a lower fee.
Well, it might work. But, let's take a look at what it would take to make it work. Let's assume that three orthodontists--A, B, and C--each had 100 patient starts in the previous year, that in each case this was a decline of 10-15% in case starts, after a series of declines for prior years and each decided that he would reduce his fee to stimulate increased patient referrals and acceptance. Orthodontist A had a fee of $2000 per case and he decided that he would reduce that by 30% to $1400. Orthodontist B had a case fee of $1800 and he decided that he would reduce that by 25% to $1350. Orthodontist C had a case fee of $1500 and he decided that he would reduce that by 20% to $1200. In order to make the same number of dollars at the reduced fee that he made at the original fee, instead of 100 cases, Orthodontist A would have to start 143 cases; Orthodontist B would have to start 133 cases; and Orthodontist C would have to start 125 cases.
Although orthodontic fees are not high relative to other goods and services, they are still generally at a level which would require a substantial decrease to impress anyone with a lower fee. And, there is nothing wrong with a lower fee if it is balanced by increased numbers of patients to treat. But the crunch comes if it doesn't work that way and the number of patients does not increase. In that case you have substantially lowered your income. This may happen if not enough referrers are impressed by the reduction, if not enough people find out about it, if all the orthodontists in the area also reduce their fees. In that case, all that has happened is that the level of fee has been reduced in your area, probably without any increase in utilization of orthodontic services.
I think if you were going to consider so drastic a move as a 20-30% fee reduction, you ought to make a very careful analysis of your community to see where the increased numbers of patients are going to come from. Orthodontist A would need a 43% increase, B a 33% increase and C a 25% increase. In an established suburban community with a utilization rate that is already at or above the national average of about 15% of the child population treated in orthodontic offices, there is not much elasticity of demand. You would be looking to increase your case load by those percentages by taking them away from your orthodontist neighbors. In such a community it would probably be unrealistic to assume that the overall utilization rate could be raised by a significant amount.
In a community with a utilization rate that is at the 5% level, there might be great success in stimulating a dramatic increase in utilization by a 25% decrease in fee. In fact, that has been demonstrated in the inner cities of the major metropolitan areas. This one category probably lends itself to the device of fee decrease. The fee reaches a level that is comfortable for an increasing number of people whose economic disadvantage is being reduced and whose aspirations for better homes, better education, and better health care are growing.
In the case of the inelastic suburban community in which you expect to take referrals away from the other orthodontists, it might be better strategy to test the possibility of success by getting the reaction of referring dentists in advance of making the move. You might be surprised that the dentist does not think your present fee is too high, that he may not be impressed with the reduction, that he may not place your fee as Number One on his list of reasons for referral; that in many cases he didn't know what your fee was.
An orthodontist contemplating a fee reduction should also pause and give some thought to the effect that this news may have on his present patients who will be paying the higher fee. For how long can that group be counted on as a source of referral, if cases they refer have a fee advantage over them.
If a fee reduction can truly be estimated to do what is intended--to increase the number of patient starts--then it deserves consideration. If it is questionable, then the cost of the test might be too high and one should probably look elsewhere for a solution. If it is highly questionable, forget it. It probably would have more to do with the orthodontist's comfort zone in fee presentation, and be likely to result in further erosion of income.
I still feel that there are enough people who will pay for quality service at a fair fee, properly presented. For orthodontists who are truly delivering a high quality service, it makes more sense to establish fees and fee increases fairly and to actively seek out those referrers and those patients whose primary consideration is quality service, rather than reducing fees to attract more patients whose primary consideration may be a lower fee.
