L. D. Pankey used to say that a fair fee is any fee that the doctor is willing to work for and which the patient will pay with gratitude. I always thought this was a fair definition. L.D. practiced in an era without managed care, with a very favorable ratio of doctor to patients, and he practiced in an affluent area. This said, I believe L.D. would not change his practice philosophy one whit, regardless of where or when he practiced. He had the courage of his convictions.

Unlike L.D., today, too many dentists are acting "wimpish" when it comes to being adequately compensated. Just look at the numbers who sign contracts to perform services at less than their normal fees. They willingly subsidize insurance company profits by depriving their families of the money they deserve.

How do we explain this? Unlike businessmen, perhaps they don't realize the cost of their education and the financial commitment needed to practice. We'll not consider the expense of four years of undergraduate training. Let's just consider dental school cost -- $ 25,000 per year? $ 100,000 for tuition and stuff for four years? How about lost wages for four years? Another $ 100,000?

We've invested $ 200,000 in this person we call a dentist and we want a return of our investment and return on our investment.

If we're satisfied with an 8% return over ten years, we need to get paid $ 43,000 per year for the next ten years to break even.

Now read carefully if you agree with my premise so far.

Someone owes you $ 43,000 per year for ten years and you don't even have to lift a finger!

What has all this got to do with FEES?

I believe that a fair fee is your perception of your value in the marketplace, based on your needs, your skills and your judgment, and a fair return on your investment in yourself and your physical plant.

So let's look at one way to calculate what a fair fee might be.

How many days do you want to work? Let's say 200 per year. How many hours per day? Let's say eight - for 1,600 hours per year. How much do you want to earn per hour based on your skills, experience and needs? Let's say $ 125 per hour. How much do you need to add to this to get back the investment in yourself?

You'll need to add about $ 27 per hour to get your money back. So, let's figure $ 150 per hour is the minimum profit that you need to produce each hour to attain your goal. Obviously, you won't achieve this each and every hour, but a profit of $ 1,200 per day is your goal. If you have an overhead expense of 60%, your daily gross production should be $ 3,000, and a production goal of $ 375 per hour. This would translate to an annual gross of $ 600,000, and an annual net of $ 240,000.

Now let's set a fee.

A certain amount of reasonableness is needed here. We must determine the time needed to perform the various treatments we render. For example:

If, for example, it will take you 1 or 1.5 hours to complete a single canal RCT, your fee must be no less than $ 375 or $ 565. You need to increase the hourly amount of 10-15% as a contingency factor for cancellations, no shows, redo's, etc. Sometimes, because of the difficulty of the case, and/or difficulty with the patient (e.g., gagger, hypersensitive), you need to increase this contingency factor by a more appropriate amount.

Some of us are faster than others. Some slower. But by establishing a fair time estimate of each procedure or set of procedures, we can arrive at a fee that's fair to us and fair to our patient. Is this method perfect? No. But it's far more credible than a fee schedule created by an insurance company to ensure their profits at your expense.

If you're in a quandary regarding fees, consider this approach as a sensible beginning. And when you really break down what we do, it's relatively easy to establish time frames. We perform in five main areas - operative, crown and bridge, root canal therapy, prosthodontics/removables, perio - and in these areas we tend to be very repetitive. Yes, you'll do the occasional complex implant case, but the 90/10 rule prevails; and 90% of the time, you'll be doing the same procedures over and over.

If setting fees are a problem, try this method. It may help you achieve the financial success you deserve.

Calculating a fair fee (part II)

There is still another way to arrive at a fair and reasonable fee. I call it the 'NEEDS" approach. Note that it is not the "WANTS" approach! You have to be reasonable and fair as to your projected needs.

Unfortunately, we're not going to earn Bill Gates' salary - nor that of some of our former classmates now on Wall Street. So let's look at a thirty year old G.P. dentist in the New York metropolitan area, married, two children (boy 2, girl 3).

What are his needs?

Let's round this off to $ 13,500 per month - after taxes. All the estimates are approximate. We still haven't clothed, fed, entertained or maintained this family yet. All we did was provide a roof over their heads, some transportation, considerations for the retirement, death or disability of the father, and some consideration for the children's future.

Notice no country club living. No furniture. No maids. No house maintenance. No summer home. No food. No clothes. No vacations.

Let's arbitrarily add $ 3,000 per month, for a total of $ 16,500 after tax - or $ 25,000 before tax (35% tax). That's a net of $ 300,000 per year before tax.

Now ask yourself, what would you eliminate? Your home? Your child's education? Your retirement? I don't believe there's much. Do you?

So, what to do?

Well, you could think like a lot of dentists who feel that if they do more and more for less and less, they'll eventually do everything for nothing!

Or, you could say I'll work 1,600 hours per year, and, with a 60% overhead, I need to earn $ 750,000 gross per year ($ 750,000/1600 hours = $ 468 per hour or $ 3750 per day). Sounds like a lot, and it is. But your hygienist should be producing between $ 100 and $ 125 per hour, which reduces your need to $ 370 per hour, which is very doable.

In fact, if you read my previous column, you'll see a remarkable similarity.

You need to have systems and staff in place in order to produce at this (and greater) levels, and always maintaining the highest quality care.

These articles are meant to challenge you to think. Don't ask your old roommate what he or she is charging for a procedure. They are as clueless as you are! You've got to think of what you bring to the patient.

Consider yourself a hospital. You provide the physical plant, the equipment, the administrative staff, the nursing staff, the x-rays, the laboratory, the maintenance, and, finally, the surgeon! Try to stay in a hospital for a day and check the costs! And I would NOT want them to be anything but excellent! Regardless of cost.

Think of yourself as a health provider - not a tooth fixer - and your fees will go up, because you deserve a better fee and the patient deserves a better service.

Charge what you need. What you deserve. And what the patient can - and will - pay with gratitude. And provide excellence.

You, your family and your patients will be the better for it.