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How much should doctors charge ?

Posted Jul 03 2009 2:06pm
One of the great mysteries of medicine for patients is why doctors charge what they do. Some are amazed at the fact that bright young doctors are willing to slave for hours for patients whom they do not know, for an income which is not bad , but which is much less than others ( bankers , for example) command. They admire the fact that doctors are willing to work for 24 hours at a stretch ; and to get up at two o'clock in the morning for emergencies. It can be an arduous lifestyle which disrupts both personal and family life - something which it's not possible to compensate for simply by money.

On the other hand, most patients feel that doctors charge too much. They envy the Mercedes many doctors drive ; and the fact that they take Wednesday off for playing golf. Many resent the fact that they have to pay hundreds of dollars for medical procedures which may just take a few minutes.

Also, it’s a well-known fact that the fees charged can vary considerably – not only from doctor to doctor – but from patient to patient as well ! Patients would be much happier if the medical costs were transparent.

The truth is that the amount which doctors charge is often a mystery for doctors themselves. Most doctors are not very good businessman; and fees are usually set for reasons which are beyond their control.

Since they are used to working for free during their the medical training and residency , young doctors often quite uncomfortable collecting fees for their professional services when they first start weighing hundreds of thousands of dollars in debt. Most use market criteria to set their fees – and charge what other doctors are charging. While this is a useful rule of thumb, in many cases it can be too much- while in others it’s too little.

Many, who are idealistic when they are young, charge enough to make a comfortable living , so that they can cover their expenses , and still have enough to keep the family happy. This is easier to do in smaller towns in India for example , but extremely hard to do in the US , where doctors will start their practice often owing hundreds of thousands of dollars in debt to cover their loans to pay for their educational tuition fees.

Other doctors , who are hard-nosed businessman ,take a much more pragmatic viewpoint . They do an informal market survey to study how much patients in their community are willing to pay for their services – and price these accordingly.
Some doctor will deliberately charge a higher fee than the competition. This is especially true for senior doctors , who feel they have earned the additional income because of their experience and expertise. Others do so because they want to create an air of exclusivity about them , because they know that patients often misinterpret high fees as being equal to a better quality of service. After all , if a doctor charges more, it must be because he is better !

This is especially true for fields such as cosmetic surgery, where patients pay directly for their services, and there is intense competition for patients. Some doctors deliberately charge a premium, not just in order to maximize their income , but to convey that they are better than the rest. However, remember that higher is not always better. On the other hand, lower fees are not always a bargain either !

What I doctors who charge less ? Some doctors are financially quite comfortable , and because they have low overheads , they are willing to charge just enough to cover their costs. They charge enough to cover their staff salaries and electricity costs for example , but they often end up underpaying themselves. Ironically, though the doctors charges less because he doesn't need much money to be contented, the disadvantage of charging low fees is it often conveys to patients that the quality of services may not be as good !

This is why it's quite common to see an escalation of prices. Once one doctors increases his fees , the others often have to do so , in order to toe the line. Fortunately , this is true in the other direction as well, and of one doctor drops his prices , many others will do so as well , in order to stay competitive.
In places like the US where third party payers dominate the market, the ability of the doctor to set his own fees is practically zero. He pretty much has to charge what the third party is willing to pay. As medical insurance becomes prevalent in India, this is going to be true here as well , where the insurance companies are soon likely to call the financially shots.

In countries like the UK, which have a nationalized health service, doctors do not have to worry about how much to charge , because this is a decision which is taken out of their hands . For many doctors, this can be a blessing !

While many doctors pride themselves on their professional skills , and take pride in the fact that they couldn't be bothered about money, the fact of the matter remains that medical private practice is also a business , and unless doctor learns how to charge the right amount for his services, he will often end up underpaying himself. In the long run , this may mean that he may not be able to invest in either updating his professional skills or buying state-of-the-art equipment , both of which can lead to poor quality medical care. He will then end up losing his patients to corporate hospitals, which are extremely good at maximizing their profits. Doctors need to find the right balance, so that they can both enjoy their financial income, as well as their emotional income. Earning money is not a sin just because you are a doctor; and if this money is utilized to improve patient care, this is good for everyone involved.
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