There’s more than one way to think about your pricing. Which one is most important really depends on what you’re thinking about or measuring at the time. In EDGEPro, we use three pricing models in our dashboards: List pricing, Patient pricing, and True pricing. Let’s break it down and talk about what, how, and when each of them is most appropriate.
List Pricing is our term for your “usual and customary” pricing. Rephrased: it’s what you would charge a patient for any item or service if there were no vision or medical benefits applied, and no discounts given. In your dispensary, your frame list price is a result of your markup strategy. Your retail pricing should usually be based on applying a multiplier to your cost. (There may be some exceptions to this in terms of budget or value frames, or specific classes of frames, like “Davis Vision Frames.”) For exam services and lens pricing, the U&C calculations likely also include regional geographic standards.
Why is list pricing important? The obvious reason is that higher prices yield better revenue results per sale. Your markup strategy needs to be appropriate to your demographic, region, and practice type. List price can also affect your compensation from insurance providers, so it’s important to be familiar not only with appropriate UCRs, but also the expectations of plans in which you participate.
Patient Pricing is the EDGEPro term for “what the patient pays out of their own pocket” for any sale. It’s also the default pricing display on the EDGEPro platform. The reason is actually very simple – the patient’s responsibility is the aspect of any sale that we are most able to influence at the time of the purchase. It best reflects the skills of our team, the success of our merchandising, and the accuracy of our markup strategies.
True Pricing states the complete contribution of a sale. It is a sum of what our patient has paid out of pocket for an item, plus any reimbursements received from third party payers for that same item. “True” is a good way to put it, because the other two pricing evaluations, list and patient, are incomplete statements. List can be, and usually is, discounted in some way, and patient payments only tell part of the story as well. When we’re evaluating the success of a brand or service, we really do need to understand the whole of what the sale has added to our bottom line. What is it truly contributing to our bottom line? When we understand the “true price” model, we can make well-informed decisions about managing our practice products and services.
There’s a number of ways to look at your revenue pie. All three pricing models have a place in our business analysis. Make sure you choose the pricing model that’s appropriate when you’re evaluating your business processes. Examine the correct aspect to be sure you’re making the best decisions.