Costs, time and technology are three key variables to consider when setting fees. Costs include not only cost of goods for products, but also all expenses as summarized on a profit and loss (P&L) statement. Time includes not only initial appointment minutes, but also total service hours. For audiology services, "time" would be represented by the minutes scheduled to complete the procedure and perhaps the additional minutes associated with follow-up care such as writing reports or calling physicians. For hearing aids in a bundled system, the time variable must include not only the hours associated with selling and fitting products, but also all associated warranty time guaranteed for the life of the products.

Something that is unique to hearing aid dispensing versus other healthcare fields is that some people purchase binaural products while others purchase monaural. One can make an argument that an audiologist's binaural percent should be considered when setting hearing aid fees. To appropriately set fees, every audiologist must decide how much time will be spent with monaural fittings and follow-up; how much more time, if any, will be spent on binaural fittings and follow-up; and calculate actual binaural percent.

Answers to these and other questions should be used to set pricing based on costs, time and technology. Although two hearing aids doubles the invoice cost, fitting two hearing aids typically does not double the time or other practice expenses associated with selling, fitting and follow-up care. Choosing not to account for binaural sales in time allocations for hearing aids could price hearing aids beyond what the local market can bear.

Knowing the market is another important variable to consider; however, be careful not to violate the Sherman Antitrust Act when gathering price information on competitors. If the formula pricing that considers time, all costs and technology places product and service pricing beyond what the market will bear, your choices are to reduce the time allocation, reduce product costs or reduce expenses if you expect the practice to survive and thrive.

Audiologists must be aware of the differences between usual and customary (U&C) fees, collected fees and breakeven fees. U&C fees represent charges for services and products. In healthcare, few practices collect 100 percent of U&C fees, primarily because of participation with third-party payers that pay at reduced rates. Collected fees are the fees that are paid by patients and third-party payers after all discounts and adjustments. It is common to see collected fees 30 percent to 50 percent lower than U&C fees, but the adjustment percent is dependent upon both the paid amount and the practice's U&C fees. One could lower the adjustment percent by lowering U&C fees, but this is not recommended.

Breakeven fees are those minimum fees that are needed to cover all practice expenses. Typically, U&C fees are the greatest, while collected fees must be equal to or greater than breakeven fees for any practice to survive and thrive.

Audiologists should identify associated service time by procedure and cost of goods (COG) by product to objectively determine U&C fees that will not only maintain, but also grow the practice. At the least, COG should include invoice cost plus shipping and taxes. There is no COG for service procedures. All expenses associated with providing services should be included in the breakeven analysis so that payroll, rent, marketing, equipment, and all expenses are considered in the hourly breakeven analysis and breakeven fees. The calculated net fee must be increased to account for adjustments, insurance write-offs, refunds, and returns. Tracking gross fees, adjustments and net payments is recommended so that the practice's individual collection percent is obvious on the practice's P&L. Knowing that collection percent is necessary to accurately calculate average net to gross fees.

One way to convert average net breakeven fees to applicable U&C fees is by using basic algebra where a = b / c with: a = U&C fee per hour (unknown, but TBD); b = Net average hourly breakeven fee; and c = total collection rate (100% - total practice write-off percent).

Identifying a practice's breakeven hourly rate, setting U&C fees, P&L statements and general accounting are often daunting for audiologists, but quality financial tracking and accurate numbers tell a story that is invaluable for effective practice management.

Kathy Foltner, AuD, is CEO of AuDNet Inc. She also teaches courses in Practice Management and Basic Business at Rush University Medical Center and Salus University. Contact her at kfoltner@aud-net.com or 312-593-1787. Visit www.NowiHear.com or www.aud-net.com for more information.