The Dangers of Undercharging (or Overcharging) for Concierge Membership

In most concierge practices, determining the right fee structure to charge your members is often a sensitive, stress-inducing exercise.

Many of us think of it like the opening game of The Price is Right. To advance, you must get as close as possible to the correct price, but if you go over — by even a single dollar — you’re out.

In a similar way, we tend to view overcharging for our membership as the ultimate mistake. Pricing too high will have disastrous results for our business, so it’s best to play it safe and price lower, right?

It may seem that way, but many don’t realize the risks of undercharging for membership are even more significant and impact far more than profit margins.

This post will provide a long-overdue discussion on the very real implications of wrongly pricing your membership fees and, as a result, mistaking the value of your practice.

What Happens When Your Prices Are Too Low?

We’ve seen it time and time again: Concierge physicians who don’t charge enough for their services run the serious risk of burnout.

Several factors cause a chain reaction that leads to physicians becoming overwhelmed and eventually finding they can’t keep the ship afloat.

First, when you undercharge for your services, you endanger your ability to run your business effectively. For example, a lack of revenue impacts your ability to:

Incentivize and recruit the right physicians.
Attract the right staff to help you manage operations.
Afford an adequate building for your practice (much less aesthetically “on brand” décor).

You’re simply not generating the necessary revenue for high-level branding and personnel.

Second, one of the key principles of concierge medicine is the ability to spend more time with fewer patients. But if you’re not charging enough, you have no choice but to keep bringing in more and more patients to stay profitable.

This overloads your physicians and staff, ultimately rendering the service they provide sub-optimal. Your patients become less satisfied, and the effort to remain profitable ends up decreasing your profits.

Third, charging too little can impact your ability to attract best-fit patients. When your prices are too low, it communicates lower value. This can repel the very people on whom you could have the greatest impact.

The cumulative effect of all this is a steady devaluation of yourself, your brand, and the services you provide, which can sap anyone’s confidence, drive, and mental fortitude.

The Benefits of Raising Your Membership Fees

The inverse plays out when you reevaluate your pricing tiers and set your membership fees at appropriate levels.

We’ve heard many positive stories from physicians in the ROAMD network who raised their prices to a level reflective of the value they provide. They gained a new confidence and sense of genuine appreciation when they realized how much their patients value them.

This has a massive positive effect on physicians’ practices.

They’re able to draw the best-fit patients who are willing to pay more for a personalized healthcare experience. They have the necessary funds to continue enhancing their quality of care. And they have the means and reputation to recruit the highest-quality physicians and staff.

Common Objections To Raising Prices

Most of the physicians I know in this field have undervalued themselves at one point or another. It seems to come with the territory.

But even when they come to this realization, the truth is that raising prices to match value isn’t easy. And far too often, the physician’s own objections to raising fees to an appropriate price point keep them from making a change.

At their core, most objections to raising prices come from a good-faith position of genuine empathy. Here are some of the most common objections and the logic behind them.

Objection 1: They Can’t Afford It

One of the most common objections against effective pricing is that a certain demographic or community doesn’t have enough money to pay it. Physicians from smaller towns and cities, in particular, feel reluctant to raise prices because they believe there isn’t enough disposable income in their target market.

We heard this concern from a physician who questioned whether patients in his city would pay more. When we looked closer at the spending patterns of his target demographic, we learned there was significant disposable income being spent on private schools and country clubs.

People who spend their income on top-tier education and social recreation will do the same for world-class, personalized healthcare they can trust.

Objection 2: My Service Isn’t Diverse Enough

Another common objection from concierge doctors is that their offering isn’t diverse enough to justify higher fees. They believe they’d have to layer in new services to justify higher prices.

The reality is that while you can add multiple pricing tiers for premium services (such as specialized diagnostic testing), it doesn’t mean your basic membership isn’t already worth more than what you’re charging now.

In all likelihood, your service is already loaded with value and doesn’t need to be upgraded in order to charge more.

Objection 3: I’ll Lose My Current Patients

Many concierge physicians — who care for and have invested deeply in their current patients — fear that by raising membership fees, they’ll lose those patients. More specifically, they immediately think of the four or five patients they don’t want to chase away with higher fees.

Perseverating on this specific handful of patients induces anxiety that often grinds the pricing conversation to a halt.

These physicians value the strong relationships they have with their patients and feel a sense of responsibility and empathy toward them. They wonder if risking the loss of those relationships is worth “an arbitrary” amount of additional revenue.

This is a misguided fear.

If anything, it’s far riskier to undervalue your service and overload your practice with too many patients, reducing the quality of their care and overloading yourself to the point of inevitable burnout.

What About Overcharging?

After all these years, we still haven’t heard one horror story from a concierge physician saying it was a mistake to raise prices.

Does that mean you’ll be successful at any price point? Of course not. There’s a ceiling on what new and existing members will be willing to pay.

But in my experience, every test case of a reasonable increase in membership fees has yielded increased revenue, less burnout, higher-than-expected retention, and pivotal growth and development.

Practices That Flourished After Raising Prices

I’ll be discrete with names and locations, but the kernel of each story underscores the theme of this post: Your membership fees are a reflection of the value of your practice.

Less Is More

The first example comes from a physician who was reluctant to raise his prices and avoided it for years. Finally, he made the tough decision to change his financial model and triple his rates.

The result?

His panel decreased from ~300 patients to ~150… but he ended up making more money. Fewer patients meant he could allocate more time for each appointment. It also meant he didn’t need to rush into hiring more physicians as he’d originally thought, avoiding new expenditures on overhead and possibly making the wrong hire.

Perhaps most importantly, by having more time with each member, his physician-patient relationships improved and the quality of his service soared. This growth further solidified his patients’ loyalty.

Today, he has a healthy waiting list of patients eager to join his practice at that higher price point.

Tiers for Fears

A few years ago, another physician in our network was in full-blown burnout mode. Something had to change.

After several years of experimenting with multiple complex membership tiers, she decided to increase her prices and simplify. She realized the value of her services and simplified her pricing structure while asking that patients pay more for access to some of her premium diagnostic testing technologies.

It worked. When her pricing accurately reflected the value of her services, her practice became more functional and profitable. And, just as importantly, she got a new lease on her professional life and overcame burnout.

A Rising Tide Lifts All Ships

This final example comes from a physician who has, over the years, remained committed to raising her prices and has discovered a simple but powerful truth:

When you raise your prices, you increase revenue — but you also lift the quality of your service, the patient experience, and everything else along with it.

Since this particular physician started raising prices, she’s been able to purchase her own building, develop a fantastic website, and hire a new physician and amazing staff to help care for her ever-expanding waitlist. So far, she hasn’t found a price point that people won’t pay for superior medical care.

Primary Considerations When Updating Prices

All that said, pricing shouldn’t be arbitrary. A myriad of practice-specific considerations will influence your pricing updates. This includes macro and microeconomic factors, your geographic area, and even your desired lifestyle.

Don’t Forget Inflation

Like all businesses, medical practices are subject to inflation, which is a constant (up there with death and taxes). You have to raise prices yearly just to keep up with this, or you’re actually losing a portion of revenue year over year.

A good rule of thumb is to anticipate you will need to raise your fees at least 3% yearly to account for inflation, and always let members know this up front when they sign up. A best practice is to hardwire this 3% annual increase into the membership agreement so you’re upfront about it, and you’ll be pleasantly surprised that few, if any, ever question it.

Consider Geographic Income

Studying the spread of disposable income in your geographic area — from region to state to city to neighborhood — can be informative.

Look at the main financial anchors for where your existing or prospective patients spend their money, including country clubs, private schools, high-end automobiles, and any elite membership programs. On your next commute, pay extra attention to the number of Land Rovers, Teslas, and Mercedes you pass. All of these assessments will give you a better overview of what people can afford and are willing to spend.

Be Intentional

Your prices should never be arbitrary. They should be based on specific financial information, P&L, and capital investment figures. This way, you’ll know exactly what your membership fees need to be to reach your specific goals.

Also, be intentional with how you communicate a price increase with your existing members. This is why your financial research and due diligence are so important — they’ll help you have confidence in your value and growth potential when you communicate an increase.

Don’t be apologetic. In fact, you should be proud of what your practice is worth.

You can consider giving discounts or scholarships for applicable patients, but make those temporary so you don’t begin undervaluing your practice through exceptions.

Another best practice is to communicate that the rate change goes into effect 3–6 months sooner than you’re planning, but existing patients get grandfathered in for those 3–6 months at their current rates. Everyone loves special treatment; you can make members feel special even when increasing their rates.

Know Your Worth

The service you provide to your members is worth so much. Don’t settle for prices that strain your practice and lead to reduced care and personal burnout.

Your patients know your value, and your prices should reflect that so you can continue to provide the high level of service they expect.

Written by Dr. Scott Pope

Dr. Scott Pope serves as the Chief Growth Officer at In Scope Ventures, a growth consulting firm focused on early stage healthcare companies. Scott is passionate about healthcare entrepreneurship and has been involved in various advocacy efforts to promote innovation in the industry.

Scott earned his PharmD from Ohio Northern University, where he participated in Habitat for Humanity, Phi Mu Delta, Order of Omega, and NCAA basketball. After graduating from ONU, Scott completed a pharmacy residency at Cone Health, followed by a specialty residency in infectious diseases, internal medicine, and academics at Campbell University and Duke University Medical Center.