In January 2013 my rates for a one-hour PT session will increase from $120 to $150. I started my Cash-based PT practice almost 3 years ago and my costs (though always quite low compared to most clinics) have been rising each year. I stayed very busy throughout 2012 and at times felt downright overwhelmed. With the increases in my business expenses and a continually growing confidence in my ability to stay fully booked, I feel the time is right for a rate increase. I did a good bit of research on how to most successfully implement a rate increase, I’ve notified my patients of the pricing change, and I have already received some feedback from a few patients. So today I’d like to share my reasoning behind this decision and some of the things I’ve learned along the way.
As I was brainstorming on when and how much to raise my rates, I was also considering a few other possibilities for income growth, especially in regards to employing another therapist. As I hinted in this post, I decided that I want to stay solo for at least another year and focus my income growth efforts elsewhere. I have other things I’d like to do and products I’d like to develop. I want to start creating an online CEU course on how to rapidly fix ankle sprains. I want to publish a big FAQ page on this site to add value for my readers and hopefully decrease the mountain of email questions I’m receiving each week . I just reviewed my 2012 business goals and realized that although I reached my income goal, I fell short on a number of things I wanted to do on my clinic’s website that will produce more patients over time without continual effort (such as consistent blogging and use of video). As I analyzed all of this, it only reinforced the fact that there is something I need much more of …. TIME.
For all the above reasons, I’ve raised my rates 25% and I’ll be blocking 1-2 days per week to focus on these other projects. If my rate increase does not result in me losing more than 25% of my business, I’ll be making the same (or more) money and will have freed up at least 20% more time each week.
This may seem like a pretty big increase, and in fact, it is. My business costs have gone up about 18% since I started my practice, and I didn’t want this rate hike to simply “catch me up” to my expense increases. For this reason, I overshot my expense growth so that I hopefully will not have to raise rates again for a good number of years. However, since I’ve now received some feedback from patients who are successful businesspeople, I’ve realized I may have been better off approaching it in a different manner.
Though some people will say they hate seeing steady annual price increases, if you raise rates in small increments on a regular schedule, those increases are much less “noticeable and painful” than a large hike every few years. Based on the feedback from a few patients, a 10% increase every 12-18 months would not have caught their attention as much as a one-time 25% increase after these first three years.
Am I worried about this feedback or about losing too much business? No. I offer a highly valuable service to every one of my patients and make sure they all have the best experience I can possibly provide. I care deeply about them and about getting them feeling and moving better as quickly as possible. I am completely confident that my treatments are worth $150/hour (and actually much more if they sprained their ankle and have a competition a few days away).
I do not say these things arrogantly … I purposely made these statements because I’m trying to reinforce something to my colleagues interested in cash-based PT: Confidence in the value of what you are providing is absolutely vital to a cash-based Physical Therapy practice. The way you speak about your services and your treatment prices can be the deciding factor in someone’s decision to see you rather than the insurance-accepting PT down the road. It can affect how motivated patients are to schedule adequate follow up visits, and how compliant they are with their home exercise program. It can influence how likely they are to tell others about your services or go online and post a good review of your clinic. The list goes on.
With that said, you can be completely confident in the price tag you place on your services, but go out of business if the value you provide is not congruent with the price, and/or if market factors do not support the price. These factors are numerous and covering them would take a book in and of itself … general economic health, geography, area demographics, prices of related services, competitor characteristics, etc.
Some of my patients act as business mentors and one said the following when asked about price increases and making sure they not detrimental to your business or your clientele: “People will typically pay for what they VALUE with little complaint. So the most important thing to consider is consistently demonstrating value to the customer/patient.”
Do you have any out-of-the-ordinary ways of creating value for your patients? If you are/were in a cash-based scenario, what could you do to demonstrate high value and compel prospective patients to choose your clinic over an insurance-based one?