An essential goal for dermatologists working in aesthetics is to deliver high-quality, result- oriented patient care. It is important for you as an aesthetic physician or health care practitioner to understand the true costs and profits associated with achieving and sustaining the best patient outcomes. Developing a pricing strategy for the procedures you offer is a balancing act of fixed and variable overhead costs and profitability.
Determining Charges for a Procedure
Even before setting the price point for a specific procedure, one must evaluate what cosmetic services are valued by one’s current patients. If you focus on general dermatology, your patients are often visiting for acne, rosacea and hair loss. Consider adding procedures that address the cosmetic aspects of those specific conditions. If you offer a procedure that is not desired by your patients, it does not matter how good the results may be as very few will want to even try the treatment. For example, while 90% of all women develop cellulite, the cosmetic treatment of cellulite may not be in demand. How many people will spend on their face versus how many patients will pay for body areas that can be covered by clothing? Thus, while a procedure may be profitable, one must consider more than supply.
If the procedure you are offering is in demand, there is a simple way to determine your desired pricing structure. How much do you want to make per hour? While this question seems daunting, one can work backwards to set an hourly rate. If you want to bring home $500,000 per year and your overhead is 50%, you have to earn a gross revenue of $1,000,000. If you work 4 days a week with four weeks of vacation per year, you will work 192 days. Working 8 hours per day (not including one hour for lunch), you will work 1,536 hours each year. Taking the desired gross revenue of one million dollars and dividing this by 1,536 hours reveals you need to bill $651.04 per hour. Now you can determine how many patients you need to see to earn this amount per hour. For example, you can see one patient per hour and bill that person $651.04. Conversely, you can see two patients per hour and bill each person $325.52. With this easy method of calculating your hourly gross revenue, you can determine your charge per procedure. Once you determine your hourly charge, you can choose which aesthetic solutions will allow you to obtain that charge.
How to Make a Profit
If you offer a procedure that costs too much in overhead and leaves you too low of a profit margin, consider eliminating it. These services are often time consuming or not worth the effort. Instead, turn your attention to your top revenue-producing, profitable treatments that you enjoy performing.
In general, the lowest cost of entry procedures when starting a new business include injectables (neuromodulators, dermal fillers, injectable collagen stimulators), chemical peels and microneedling. These consumables cost hundreds of dollars vs. hundreds of thousands of dollars for a device. In addition, most of these treatments require patients to return for multiple enhancement and maintenance sessions. As your patient list grows, consider adding a device that addresses your patient’s cosmetic demands.
Factors That Can Affect a Procedure’s Costs & Profits
Level of expertise
Charging for procedures varies according to the physician’s level of knowledge, training, experience, skill and results attained. Therefore, to calculate the true profitability of a procedure, one must factor in a physician’s or health care practitioner’s expertise and qualifications. In general, cosmetic services that can be performed safely and efficiently, and produce instant or rapid improvements tend to be the most profitable.
Costs of material
Whether it is a new procedure or one that is tried and true, dermatology and aesthetic practices cover the costs of everything associated with the service. This includes the actual medical device, service contracts, upgrades if the technology changes and consumables. The cost of the device and service contracts must be amortized into a per-treatment cost.
General overhead
Overhead costs include any expenses that are not directly related to a patient’s medical care. Therefore, it is important to define what these specific costs will be and to allocate the funding properly. These expenses can range from staffing costs, office rent, front office machines, telephone systems, etc.
In addition, overhead costs will vary according to the area. Expect noticeable differences in a small town versus urban areas, especially in relation to rent and staffing costs.
What your competitor charges
Does it matter what your local offices and medspas charge? While it is important to perform a SWOT analysis, it is vital to remember that you compete against yourself. When first introducing a new procedure, you will not have the skills to be the best at a procedure. Consider charging less as an “introduction price” to lower the entry cost to your patients. Once you gain experience and you offer greater value for your services, re-examine your pricing structure and assess how it compares to your competitors. If you offer better results than anyone else, charge what you are worth. Even if there are numerous physicians and medspas working within the same market offering the same procedure, you will be profitable if you offer better value due to best results. Become the in-demand expert.
Time
Time is the most valuable currency. The goal is to get patients seen efficiently and to spend less time on menial tasks. For instance, if the physician or health care provider is spending fifteen minutes on prior authorizations or medication refills, there is a financial loss compared with evaluating and determining the treatment plan for a patient during that same time. The general recommendation is if someone can perform a task 70% as well as you can, delegate that task. Focus on advanced or complicated procedures that require your expertise and that clients value more. Hire a team member to perform administrative tasks or room preparatory procedures. Don’t rush the patient or make a client feel hurried. Depending on the cosmetic procedure, certain services may take as little as 15 minutes or as long as a couple of hours.
Type of procedure
Deciding which procedures and services to offer is based on value to your patients, as well as cost and profitability. Some cosmetic devices are so expensive that it is almost impossible to make a profit. On the other hand, a neuromodulator injection is an efficient in-office procedure that is known for being effective and well-tolerated amongst patients. In addition, this procedure can be repeated every few months, ensuring recurring revenue.
Before you decide to offer the latest aesthetic procedure to your patients, it’s important to evaluate safety, efficacy, ease of use and the return on investment. Design a practice that creates the revenue that you want with the satisfaction of helping patients achieve their aesthetic goals. A rewarding career while avoiding burnout is achievable, but you must regularly evaluate costs and profits.
