A Different Way

to look at Life, Health, Business and Politics

Archive for August, 2012

Price Elasticity and the New Chiropractic Reality

Posted by Marietta chiropractor on August 24, 2012

I love Economics, often called “The Dismal Science”.  The short definition of Economics is that it’s the study of the allocation of scarce resources.  Like many things in Economics, scarcity is a relative terms.  Tow of the great caveats in Economics is “What if” and “it depends”.  In other words, Economics really is a study of behavior as it relates to stuff.  Stuff like money and the stuff we substitute for money.

Since entering the world of healthcare (specifically Chiropractic) over 20 years ago, I’ve watched with great interest the games providers play with Economics and how really naive the healthcare business is when it comes to the Dismal Science.  It’s really amazing, too, how ignorant lawmakers, regulators and administrators are about the economics of healthcare, too.  But, I’ll focus on Chiropractic in order to keep my interest high and this article short.

We all know about Economics’ Law of Supply and Demand.  We also understand that the greater the demand for a given product or service at a given level of supply, the higher the price of that good or service.  Further, we know that given a certain level of demand the quantity supplied can affect the price of a product or service.  There is an additional concept within the Law of Supply and Demand called “elasticity”, which basically is how widely supply and demand changes given changes in the price of a product or service.

OK.  Enough background.  What I want you to see are the dramatic changes facing the chiropractic profession because of the Law of Supply and Demand and the Price Elasticity of Demand for chiropractic services.  Over the last 30 years, chiropractors have benefited (?) from relative parity with other health professions when it came to 3rd party reimbursements like health insurance and Medicare.  Prior to that, chiropractors were paid directly by consumers of their service.  As a result, fees were relatively low.  After “insurance parity” chiropractic bills skyrocketed.  For the longest time, the chiropractors’ bills were rarely questioned.  And as long as patients were required to pay little or nothing out-of-pocket, they flocked to chiropractors’ offices and everybody was happy.

Eventually, the profession began to choke the goose with the golden egg.  Managed care came on the scene and the scrutiny of chiropractic bills began.  Deductibles and copays started increasing.  In other words, patients were being required to take cash out of their pocket to pay for a portion of their chiropractic care.  At that time, we began to see serious competition among chiropractors themselves but also with physical therapists and MDs..  It seems that MDs could bill greater amounts with fewer out-of-pocket requirements than the chiropractors.

Chiropractors found that even the slightest increase in out-of-pocket expense caused a drop-off in consumer demand for chiropractic services.  So, the natural response was for the chiropractor to waive out-of-pocket costs or NOPE, no out of pocket expense.  Problem was, that tactic was deemed illegal under fraud statutes. Chiropractors started going to jail NOT in righteous protests but for fraud.

The next response by the profession was “exhaustion of benefits”.  Under this approach, a care plan would be rendered based partly on what a person’s insurance coverage was.  The amount covered would be subtracted from the calculated cost of the care plan at the doctor’s per visit rate (including covered therapy modalities) and the balance either paid up front with a discount or spread over the life of the care plan.  This approach has come under great scrutiny by both legal and regulatory authorities.  Hopefully, this practice is almost gone.

But, the history of chiropractic economics has shown that the Price Elasticity of Demand is very significant.  this just means that even though chiropractors had been paid very well for at least a couple of decades, that income was the result of creative billing and lax  oversight by 3rd party payors and NOT because they competed directly for consumers on a cash basis.  Over that time, chiropractors began to equate their value with their gross income instead of the REAL demand for chiropractic services by the cash paying customer.  Many of those same practitioners have been teaching chiropractic students over the last decade or two that there is no price competition and that they should expect (even demand) a high level of reimbursement.

The sad reality is that insurance coverage for chiropractic services is almost gone in America.  Chiropractors are now in an environment where they must compete with each other for clients but with alternatives that may still be receiving some 3rd party payments while the DC is not.  In other words, there a lots of chiropractors charging rates based on what used to be paid by someone OTHER than their patient.  And as we all know, no one spends their own money like they’d spend someone else’s.

So, what we have in chiropractic now are thousands of recently graduated chiropractors who entered school to become a doctor who didn’t have to work hard while making lots of money entering a market where there is little or no 3rd party pay and an economy where people are squeezing every penny out of every dime just to make ends meet.

The new economic realities of the chiropractic profession are that students owe at least twice (in student loans) what they can expect to earn in a year.  The average income for chiropractors is falling as is the average fee for service.

Today’s chiropractor is ill-equipped to face the new market realities.  He/she must become excellent marketers, well versed in public speaking, one-on-one selling, social and business networking and business management.  They will work in smaller offices with lower overhead, smaller staff, lower incomes and lower fees.  The competition for the old reliable NMS conditions will be hard to wrench from the hands of orthopedists and physical therapists.  They will be forced to improvise their approach or seek other careers, like teaching Biology at the local middle or high school.  Not exactly what they borrowed $200,000 to end up doing.

The new reality is that chiropractors will almost be forced to narrow their scope like chiropractors of old, offer fee systems that are reasonable for most individuals and families to pay out of pocket and to sell chiropractic like BJ Palmer did in his time and Sid Williams in his.  As for me, I am glad to see this change coming.  But, I don’t think my profession and its system of learning and regulation are.  I guess time will tell.

 

 

Advertisements

Posted in wellness | Tagged: , , , , , , , , , , , , , , , , , , , , | 3 Comments »

The Membership Practice: Fees For Life!

Posted by Marietta chiropractor on August 22, 2012

I get lots of angry feedback from many fellow chiropractors about my “low fees” and practice style.  You see, my fees range from $89 a month for an individual to $149 for an entire family for regular chiropractic care.  It seems they deem my fee and practice structure as less than “professional”, insisting that your experience at the chiropractic office should be virtually the same as that in your MD’s office.  One replied on a Facebook forum about a blog post titled The Membership Practice:  Walmart and Unlimited Chiropractic Care. asking if one would go to Walmart to consult with a heart surgeon.  Crazy.

Truth is you would NOT go to Walmart to consult with a heart surgeon.  Face it.  You’re probably not going to buy an expensive business suit or cocktail dress there either.  Nor would you seek out a heart surgeon there.  However, millions of people around the country (indeed, the World) shop at Walmart EVERY week for home essentials like non-perishables, etc.  Studies have shown that even wealthy Americans shop at Walmart every week for consumable household goods like detergent, toothpaste, soap, deodorant, etc.

Many of my detractors will ask “What is a chiropractic adjustment worth?  My reply is simple, maybe even a little simplistic.  “A good chiropractic adjustment that does what a chiropractic adjustment should do is PRICELESS!”  OK.  OK.  What SHOULD a good chiropractic adjustment do?  A good chiropractic adjustment helps improve communication between your brain and body enabling you to live a better life, make better decisions and simply be a better you EVERY day of your life!  So, how would I value that?  I’d say “If you include chiropractic into your lifestyle for the next 40 years (and get more out of your life) at my current rate of $89 a month, it would be valued at about $43,000!

And, I’d be glad to let you pay me the Net Present Value of $43,000 today for lifetime care if you’d like.  But, really.  Who’s going to do that?  Right.  Probably nobody.  And, I really don’t want you to pay me up front.  I’d rather you pay me a little bit every month so you can appreciate your investment in your health and your life.

You see, crazy chiropractors like me admit from Day One that you should be checked regularly from now on by your chiropractor.  We also admit that while a chiropractic problem CAN lead to a Medical problem, it doesn’t need to.  We know (and want YOU to know) that your body and life will work better without pressure on your nervous system cause by a slightly misaligned vertebra.  By making it affordable (even CHEAP) we help folks find a way to include regular chiropractic care as part of their health and life maintenance plan.  Hey.  Think about your car.  What’s cheaper, maintenance or repair?  My point, exactly.

So the next time someone tells you the chiropractor wants you to come for the rest of your life, tell them you understand why!  And, tell them you know where they can find one that will make that affordable and easy for them to do.

I know hundreds of chiropractors around the country that offer Chiropractic Membership Plans.  Let me know if you need one.  I’ll help you find them.  And remember, Life is good! 

Posted in wellness | Tagged: , , , , , , , , , , , , , , , | 3 Comments »