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How Much Should We Charge?

When designing my own practice, I’m constantly battling how much I should charge. A part of me wants my services to be affordable to everyone, but I don’t want everyone to be my patient. There is definitely a sweet spot when it comes to how much we should charge for our services.

And, while we are on that topic, physicians are in the service industry. You might believe that you are of some higher caliber with angel wings and touched by the hands of god, but that’s only in your head. Here, on earth, you are a service provider.

Service Providers

Butchers, dentists, mechanics, plumbers, electricians, handymen, and maids are all in the service industry. Naturally, many take offense to compare a physician to any of these servicemen. There are several reasons for this.

From the perspective of the person who is paying $2,000 a month for their family’s health insurance plan, the doctor better be an infallible god who will rip from certain death on demand.

The only way commercial interests can justify charging people $150,000 for a week’s stay in the hospital is by making doctors saints, gods; mythical creatures that can do things for you no pagan diet or lifestyle ever could.

Customer, Consumer, or Patient?

I am a healthcare consumer, a doctor’s patient, and a customer of my health insurance plan. You may argue with this, but the economists and politicians who make the rules and regulations agree with this.

Many like to consider the patient-doctor relationship as something holy, untouchable, and pristine. However, it seems that state medical boards, attorneys, and patients who sue those angels feel otherwise. Because, in the end, once we feel harmed by even god, we’ll hold that motherfucker to task!

For the 2 of you still reading this after the above blasphemy, there is something liberating about treating a doctor as a human being and thinking of ourselves as able clients of a service.

My Income Needs

What do I need in life to be happy? I don’t have kids so it’s a bit simpler for me:

  • roof over my head
  • food in my belly
  • a way to get around
  • health for my wellbeing

For some, that’s a 7,000 sqft home, a private chef, a large German vehicle, and a concierge membership with their local hospital.

I have a 550 sqft condo in Long Beach, CA, without dedicated street parking. I got a pink folding bike, a bus card, a fancy farmer’s market and nearby grocery store, and a cost-sharing plan with Sedera instead of health insurance.

For somewhere around $5K a month, I can get by comfortably. I imagine it’s at least double for those of you with kids, and if you live in CA with CA dreams, it’s triple that.

Technically, when designing my ideal medical practice, it should cover my expenses. What about something for savings? Sure, if I’m planning to retire early, which I’m not.

Practice Overhead

Each medical practice will have unique overhead. An Urgent Care needs decent signage, which comes at a premium per square footage. An aesthetic practice will need a very hefty buildout, and a medical office with an on-site surgical suite will require a major rebuild.

One practice will need 5 MAs, while another might not need any staff whatsoever. And all of us will have some legal expense, whether malpractice insurance or ongoing attorney fees.

Cost Per Patient

Depending on your zip code it may be impossible to charge past a certain amount per patient. But, at least here in CA, people are willing to travel quite a bit for medical services.

Based on current patient spending rates, lower-income families usually spend around $1,000 – $2,000 per year.

A middle-income household will spend closer to $4,000 a year.

A higher-income household might spend well over $15,000, including concierge-level care and preventative services.

Remember, you wouldn’t get the whole pie here. Depending on what services you offer, you’d get a small percentage. If you’re a primary care doctor, you’d get the majority of this, and if you’re a specialist, you’d get maybe 10-20%.

You can find more granular data from the Bureau of Labor Statistics, Kaiser Family Foundation, and Census Bureau. But, remember, your zip code will have its own unique population, so whenever possible consider your unique situation and remember there is a large spread.

How Much I Want to Work

I don’t want to work 60 hours a week or 40 hours a week if I have to stay up to date on all the clinical knowledge necessary. At least, I’m not that dedicated to medicine.

30 hours of clinical work, so around 5 hours of daily work, 6 days a week, seems reasonable. In private practice, there would be plenty of administrative time necessary to run the practice. So, be sure to give yourself plenty of time.

I suspect that I’ll spend about 60 hours a week or 2,880 hours a year working in and on my medical business, and I need to be reimbursed for all of that. Half of it will be clinical hours, the other half admin.

Calculating Cost Per Patient

Let’s say I need $10K in income a month; this would require a gross income of $15K a month, or nearly $185K a year.

$15K at 260 monthly hours would be $60 an hour. I would need to earn $60 for every hour I spend in and on my business to end up with $10K a month, assuming I have no overhead.

Add your monthly overhead to the total amount you have to earn gross (before taxes) to account for any overhead. So, if I need to earn $15K a month, adding a $10K overhead would put me at $25K. Now, I need to earn $95 per hour.

How many patients do you want to see per hour? In the ideal world, most people would see two patients an hour. But if you’re a pediatrician, Urgent Care doctor, or basic primary care doctor, you might be able to see three patients an hour.

Since you won’t earn during your admin hours, let’s divide the $25K a month by the number of your clinical hours (130) at 2 patients per hour, which would be $100 per patient.

$100 Per Patient Per 30 Minutes

So, a doctor who works 30 clinical hours a week in private practice would need to charge $100 per patient for a 30-minute slot to earn a decent income.

Double that if you need double the income and triple that if you are a highly specialized specialist.

How Many Patients Do You Need?

The nice thing about health insurance is that it’s a massive funnel of patients sent to you, often more than you can handle.

In the private world, you’ll have to find your own patients. This isn’t hard to do if you are in a relatively well-to-do neighborhood where the demand and wealth far exceed the supply.

For a practice to fill 30 clinical hours a week at 2 patients per hour, it will need 3,200 patients a year, which is relatively easy if you are in a city with a population of 1M+.

Membership Model

The Direct Care model is all about a monthly membership. So, how much should a patient be charged for their monthly membership?

The average membership in healthcare lasts right around 20 months. If you have a solid patient engagement protocol then you’ll likely be on the very right of that bell curve.

Depending on how many times a month you think you need to see your patient, your monthly membership model should reflect that.

If you are a dermatologist who will see each patient 3x per month and spend 30 minutes per patient at $100 per visit with 30 clinical hours available per week, you’ll need a patient panel of only 90.

Urgent Care Cash Model Example

If you’re going to run a cash-only Urgent Care and your appointments are 30 minutes long, and you have the same 30 hours of clinical time per week, if you want to earn $25K a month, then you’ll still charge each patient $100 per visit.

Assuming the average patient will use your Urgent Care 2x per year you’ll need 1,500 unique patients in your practice, each of whom will spend $200/year with you.

Another way to do it is to sell them a monthly membership of $20 or an annual membership of $200.

In return, they get longer appointments, better-priced medications, text follow-up with you, and concierge-level care with a physician they like and trust.

Some patients won’t use your services at all. Some will use it once a year. Others will use it 5x per year. On average, you’ll have 1,500 patients who will use your services 2x per year.

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