Hanging On and Holding Tight
Posted Aug 02, 2012, Published 2012-09-01
During the "boom" years of the late 1990s-2008, lab fees made significant gains; in a number of cases, they caught up with or even exceeded the Consumer Price Index. It's not like the lab community has ever measured its fees against cost of living increases but, for the sake of observation, when LMT began tracking lab fees back in the 1980s, we sometimes looked at the rate of inflation as a sort of measure to record growth.
We are now on the cusp of year five since the economy went bust. As you will read in this issue's biennial Wage Report and next month in our Fee Report, the sense of being squeezed is making our headlines. Many laboratories report they are holding tight to old fee schedules and have also had to cut back on technician work hours. Once again, we are hearing a familiar story. Here's an excerpt from LMT's 1991 Wage and Price Survey Report:
" . . . Many laboratories can't afford to pay higher salaries because their price schedules are too low—in fact, many prices are seriously lagging behind inflation rates. To have kept up since 1980, restoration fees should have increased by 75%; instead, they've gone up an average of 45%. In 1980, the national average price for a full gold crown was $42 (not including metal); in 1991 it's $54.78 but to match the Consumer Price Index, that fee should be $69.42."
Let's stay with this full gold crown comparison for a minute. Just to keep pace with the cost of living, by 2008, that 1991 crown ($54.78) needed to be priced at $86.601. In reality, according to LMT's 2008 biennial report, the average fee was $112, meaning lab owners completely closed—and exceeded—the inflation gap going all the way back to 1980!
Clearly, there was enough demand during the boom years--along with ample confidence—to nudge fees up to, well, to a more reasonable price point.
Where Are We Now?
In next month's LMT, you will discover that, on average, industry-wide fees show minimal increases in the past four years; in fact, the 2012 fee for that gold crown sits tight at $112 (not including metal).
Therefore, let's take time to reflect on what led to the gains we made and figure out what needs to be done now so that, going forward, these gains are not eroded. Before you acquiesce to client pressures for lower fees, consider two things:
One: fees to patients for a crown in the U.S., range from a low of about $800 to an average high of about $1,600, depending to a large degree on regional location and overhead. Isn't it reasonable that your fee represents at least 10-15% of the patient's cost?
Two, let's state the obvious: your lab fee has to be high enough to provide you with the income you need to make a decent living while at the same time, allowing your clients the same opportunity. To work for anything less is to have a "hobby."
Of course, it's much easier for me to suggest you maintain your prices than for you to actually do that when faced with pricing pressures from all ends of the universe and the risk of losing clients! We acknowledge that the market has become a very tough one. But you also know that, in the long-term, price-cutting is a losing strategy. It brings you down and brings the industry down.
Except for those to-be-expected pockets of dissent, most labs are reporting that they are hanging on and holding tight; while they're not raising prices, they're trying not to cave in to lowering prices just because their clients are lauding some other lab's fees over their head.
Our community's mantra, now more than ever, especially with the 2.3% excise tax you'll be paying starting in 2013 (see page 8), has to be something along the lines of: "I know my costs, I know my goals, I know what I need to make a living and I know my work is worth every cent of my fee, so I'm doing everything in my power to demonstrate my value."
P.S. Please note that LMT has changed its phone and fax numbers. Our new PHONE: 203-426-4LMT . Say it out loud and you'll see it has kind of a special ring to it! And our FAX number, too, is also easy to remember: 203-491-2300.
1 The CPI Inflation Calculator can be found at http://www.bls.gov/data/inflation_calculator.htm
Fun Read: Chris Salierno, DDS, publisher of The Curious Dentist, an online newsletter, posted a "thought experiment" detailing how much a crown, sans lab fee, costs him in materials and immediate staff support to prepare and place. See: http://thecuriousdentist.com/how-much-a-crown-actually-costs and, for a general overview of how a dentist ought to set his own fees, also see Dental Economics, "What Does a Crown Cost," http://www.dentaleconomics.com/articles/print/volume-95/issue-5/departments/flourishing-in-changing-times/what-does-a-crown-cost.html
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