The cost of money is a hot topic as headlines scream inflation and even polite conversation strays into the economy, home loan rates and difficulties with finding staff. This formal and informal economic data can be disorientating to doctor business owners, and so here we discuss how to cut through the noise to lock in some sensible business decisions. It is time to raise your fees by 3.45%.
The AMA have published their annual Medical Fees Index
The AMA Medical Fees Index (MFI) is a weighted average of the cost and wage indices impacting the cost of practice for Australian doctors. It takes into consideration:
- Salaries and wages of staff employed – based on the ABS Wage Price Index
- Other practice costs (including medical defence premium costs) – based on ABS Consumer Price Index (CPI)
- Motor vehicle costs – based on Private Motoring Component of CPI
Raise your fees in line with inflation
We recommend that doctors routinely increase their fees on the same date every year. This ensures that patients and staff can plan for and expect regular small increases to keep pace with inflation.
In simple terms inflation makes money less valuable, so if professional fees are not indexed in line with inflation then the fees are progressively less year on year.
Setting in place a schedule of fee increases should be part of every medical practice’s calendar. It makes sense to have annual fee reviews scheduled for the start of the calendar year (1st January) or the start of the financial year (1st July). Notification of this should be included in your financial consent forms for patients.
How much should you increase your fees by?
The AMA Medical Fees Index has been reporting since 1973 and recommended price increases have fluctuated over that time. The low inflation environment of the past seven years has seen increases of less than 3%.
For 2023 Fees, the AMA recommends an increase of 3.45%.
We consider 3.45% the lower limit of what is reasonable. Last year we predicted that a number of high inflationary pressures would impact medical practices, including:
- A very tight market for medical practice administration staff (increasing wage costs);
- The increased workload required with managing telehealth (increasing per session staff costs); and
- The scheduled 0.5% increase in the superannuation guarantee on July 1st 2022.
We do not see these factors disappearing and in fact the persistently high headline inflation rate makes a higher number than 3.45% very likely in next year’s MFI. This means that for any practice not indexing their fees in the first half of 2023, we recommend they consider looking at a 4% increase as a minimum.
Practices should use this guidance and calculate the new price for all doctors’ professional fees on their books, effective on January 1st.
It is a requirement that doctors consider the appropriateness of their fees. There is no absolute limit to what is an unreasonable or unfair fee, but guidance can be taken from a consideration of costs to provide the service, and the particular circumstances of individual practices and patients.
At Hoxton Consulting we work to proactively increase the business and financial performance of our clients’ practices. Scheduling fee increases is one of the many tools we use to make life easier for practice owners worried about operating medical small businesses. Get in touch with us today to find out how we can support your practice.