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Set fees objectively, with simple algebra


Chart A
The cage needs to be cleaned, walks need to be taken, vitals taken twice a day, plus there are feedings and cage clean-up.

For this discussion, let's figure $10 per hour pay for support staff.

Thus 50 minutes of hands-on time at 0.167 cents per minute is $8.33 of support-staff labor — just for the basics.

Before we set the fees we must consider "soft time."

That includes answering the telephone, setting appointments, checking clients in and out, cleaning floors and windows, infrastructure duties such as payroll, maintenance issues, inventory management, consumer services and...the list is endless.

Our research has demonstrated that in most situations one hour of soft time equals about one hour of hands-on time.

With this knowledge we can set up a fee for a basic day for a dog: 50 minutes x 2 = 100 minutes.

100 minutes at 0.167 cents per minute = $16.70.

The simple labor formula is cost of labor divided by the labor budget number.

We will use labor cost at 20 percent. Thus, $16.70 divided by 0.20 = $83.50.

The fee for a 24-hour stay should be $83.50 if labor cost is $10 (See Chart B).

To this we would add professional fees, medication fees, specific nursing duties and diagnostic services.

Our surveys show most practices charge about 50 percent of what is needed to sustain daily inpatient care.

If the average cost of labor is $20, then the resultant fee would double to $167.

When the cost of labor in our practices is a known, we can use that for fee setting.

Chart B
While it is not true that the highest paid veterinarians always offer the best services, it is likely true that the highest-paid support staff provide better services than lower-paid staffs, making it reasonable to charge fees according to their time.

Many practices subsidize inpatient services with outpatient services or they just refer them or offer only a limited array of services.

The result?

Consumers now "fracture" their dollars at several clinics to get services (spay clinics, vaccine clinics, eye specialists and orthopedics), thus adding more financial stress to the system.

Many practices could offer more inpatient services if they charged appropriately, using the cost of labor to provide the services and set fees.

With a limited array of inpatient services and veterinarians on commission pay, there is a disincentive to learn more about labor-intensive inpatient services.

The failure to charge the fair fee for inpatient services becomes a disincentive to provide them.

Take these steps to set fees

  • Accept that your overhead is different and commit to creating your own fee schedule.
  • List the top 10 inpatient services, time them and then create your fees using the cost of labor and algebra.
  • Use the highest-paid person to calculate the labor cost.
  • Set labor costs at 20 percent.
  • Begin a new life with inpatient services.
  • Smile, and get defensive no more.

Next month, we'll discuss pricing strategies.

Dr. Riegger, Dipl. ABVP, is the chief medical officer at Northwest Animal Clinic Hospital and Specialty Practice. Contact him by telephone or fax (505) 898-0407,
, or Order his books "Management for Results" and "More Management for Results" by calling (505) 898-1491.


Source: DVM360 MAGAZINE,
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