Practice Management: What is the Cost?

Proper procedure pricing is key to maintaining a profitable and competitive aesthetic practice.
How to determine procedure pricing.

Building and maintaining a successful aesthetic practice requires more than a steady stream of patients. If your services are not priced correctly, no amount of volume will help improve revenue shortfalls. When setting the price for a medical procedure, there are several factors to consider, including your costs to offer the treatment, your desired income and your local competitors.

Determining Your Costs

The first step in setting a price for each treatment is ascertaining both the direct and indirect costs associated with that procedure. Svetlana M. Danovich, MD, plastic surgeon and founder of SD Medical Arts in New York City, starts by adding up the direct costs of the procedure, which include the cost for any medical devices or materials used; personnel cost (hourly); anesthesia; and ancillary products, such as linens. Then she adds in the indirect costs, which include overhead (or facility) costs, such as rent, utilities, cleaning supplies, software, phones, marketing, etc.

The total direct and indirect costs will tell you the minimum you must charge not to lose money on the procedure. But you also want to make money. “When running any business, it is critical to determine all of these fixed costs before pricing anything,” says Denver-based plastic surgeon Gregory A. Buford, MD, FACS, author of Beauty by Buford. “From there, you can then determine the value of your time and the profit margin necessary to properly achieve that value.”

When factoring in a profit margin, many physicians are afraid to charge too much—but in doing so they undervalue their time and effort. “If you feel your time is valuable, price your time accordingly,” says Dr. Buford.

Device Considerations

Lasers and energy-based devices have come to play a large role in aesthetic care and deserve special consideration when it comes to pricing. If you own your device outright, you can charge a little less for each procedure once the cost of the device has been repaid. “If you buy a device with cash, you must keep in mind that by paying for the device in full, you delegated funds that could have been used elsewhere,” says Dr. Buford. “As such, you need to establish a fair profit margin that factors this in.”

Lisa Jenks, MD, owner and medical director of Genesis MedSpa in Colorado Springs, Colorado, obtains loans to buy more expensive pieces of equipment. “I take the monthly payment on the loan into account when setting prices,” she says. “I prefer not to get loans through equipment companies because they tend to have higher interest rates than what I can get through a bank.”

In addition to the cost of the device, practices must also consider the cost of disposables per treatment and any required or recommended maintenance fees and contracts. Some devices, particularly those for face and body contouring, require consumables; in some cases, practices may be charged a usage fee every time the device is turned on in place of a lease or upfront payment for the equipment. All of these expenses must be taken into account when pricing these types of procedures.

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