The Best Way to Set Your Fees

As a dental practice owner, you're an entrepreneur. And every successful entrepreneur knows that controlling your fees is fundamental to profitability. Yet most dentists have surrendered this control entirely—allowing insurance companies to dictate their pricing. This compromised position leaves practices working harder for less, unable to reinvest in quality, and trapped in a race to the bottom. Learn how to reclaim pricing authority and build a sustainable, profitable practice.

Why Fee Control Matters for Your Practice

Dental practice ownership is fundamentally a business. And like any successful business—whether a restaurant, law firm, or technology company—profitability depends on your ability to control pricing. Yet according to industry data, over 95% of dental practices have become heavily dependent on PPO insurance plans, essentially surrendering their fee-setting authority to third-party companies.

When insurance companies set your fees, they're not considering your practice's costs. They're not acknowledging the hundreds of thousands of dollars you've invested in continuous education, state-of-the-art technology like CBCT 3D imaging, CAD/CAM capabilities, or the infrastructure required to run a modern dental practice. Insurance companies set fees based on a single criterion: their own profit margin—which is fundamentally opposed to your financial goals.

The Cost of Insurance-Dependent Fee Models

A Race to the Bottom

Insurance-dependent fee schedules create perverse incentives. To maintain profitability with low insurance reimbursements, you must reduce costs somewhere. This typically means:

• Using lower-quality materials and equipment
• Hiring less experienced staff willing to work for lower wages
• Deferring facility improvements and technology investments
• Reducing time per patient to increase volume
• Cutting corners on quality and patient experience

The result? A practice environment that won't attract top talent, won't retain quality team members, and ironically, won't provide the patient experience that justifies premium positioning in your market.

The Profitability Trap

Many dentists rationalize inaction on fee increases by noting that insurance patients represent a small percentage of their practice—perhaps 10-15%. However, the reality for most practices is very different. Our analysis of hundreds of practices shows that the vast majority of dentists have 70-90% of their patients on PPO plans. When you factor in this scale, the fee decisions on your "uninsured" patients create an uncomfortable dynamic.

If your practice generates 80% of revenue from PPO patients who subsidize artificially low fees, and you raise fees only on the remaining 20% of fee-for-service patients, you're creating a subsidy system where your most price-conscious patients—those on insurance—are being subsidized by your most committed patients. This feels unfair to many dentists and creates cognitive dissonance about pricing strategy.

Understanding "Fair" Fees

Dr. Alder Pankey's Definition

One of the most useful frameworks for thinking about fees comes from dental educator Dr. Alder Pankey, who defined a fair fee this way:

This definition shifts the conversation from cost-plus formulas or competitive comparisons to a relationship-based framework. When a fee is truly fair in this sense, both parties feel satisfied with the exchange. The patient feels they received value worth the investment, and the dentist feels appropriately compensated for their expertise and effort.

Consumer Awareness and Dental Pricing

One distinctive aspect of dental pricing is how little price awareness consumers have. Unlike automobile purchases, where consumers routinely shop around and know the market prices, dental fees remain largely opaque. Most patients don't know what the "typical" cost of a crown or filling is in their market, and many don't care—especially when they have insurance that covers most of the cost.

This isn't a reason to take advantage of patients. Rather, it highlights that dental services are purchased based on trust, recommendations, and perceived quality rather than price shopping. This means you have more pricing flexibility than you might think, provided you deliver genuine quality and communicate value effectively.

The Restaurant Analogy

Consider the restaurant industry. You can purchase a hamburger for $5, $12, or even $25 at different establishments. These aren't fundamentally different products—they're hamburgers. Yet consumers regularly pay premium prices when they perceive greater quality, a better experience, or better ingredients.

Fine dining establishments justify premium pricing through superior ingredients (grass-fed beef, wild-caught salmon, organic produce), ambiance, service, and the overall experience. Critically, restaurant owners openly market these quality differentiators. They don't hide the fact that they use premium ingredients—they highlight it.

The same principle applies to dentistry. When you invest in better technology, advanced training, premium materials, or a superior patient experience, these become justifications for premium pricing. The key is communicating this value to patients effectively, helping them understand what they're paying for beyond the procedure itself.

Strategic Fee-Setting Framework

Understanding Your Practice Economics

The foundational step in setting appropriate fees is understanding your practice's economics. Specifically: What is your overhead percentage, and what should it be?

Overhead includes all costs required to run your practice except for dentist compensation. This includes:

• Staff salaries and benefits
• Facility rent or mortgage
• Utilities and insurance
• Equipment, technology, and supplies
• Continuing education and professional development
• Marketing and patient acquisition
• Professional fees (legal, accounting, consulting)
• Loan payments and financing costs

A healthy overhead ratio for a well-managed dental practice typically ranges from 50-60%. This means that 50-60% of gross revenue goes to cover these operational costs, leaving 40-50% for dentist compensation and profit.

Indexing Fees to Your Costs

Rather than setting fees arbitrarily or based on competitive comparisons, the most sustainable approach is indexing your fees to your actual costs of doing business. This ensures that as your costs increase, your fees increase proportionally.

Consider this: If you invest $160,000 in a CBCT 3D imaging system to improve diagnostic capability and treatment planning for implants, that's a significant capital investment. This technology should improve your ability to diagnose cases, plan treatments with greater precision, and achieve better outcomes. All of this justifies premium pricing for procedures that benefit from CBCT imaging.

But here's the key insight: You don't need to recoup this entire investment immediately. As you perform more procedures using the technology, the cost gets distributed across more revenue-generating activities. A annual fee increase of even 3-5% across relevant procedures will absorb this capital investment over time while maintaining sustainable practice growth.

Annual Fee Increases

The most practical approach is implementing modest fee increases on an annual basis—at minimum once per year, ideally aligned with the calendar year or your practice anniversary. These annual increases should:

• Reflect inflation: The cost of materials, labor, and operational expenses increases every year. Your fees should keep pace.
• Account for technology investments: As you invest in new equipment, training, or systems, these improvements justify incremental fee increases.
• Be transparent: Communicate to patients that fee adjustments reflect increased costs and improved quality, not arbitrary price gouging.
• Be consistent: Apply increases across your fee schedule to maintain consistency and avoid distorted incentives between procedures.
• Be moderate: Annual increases of 3-7% are typically well-accepted by patients and sustainable for practice growth.

The consistency and reasonableness of these increases matter far more than the specific percentage. Patients understand that costs increase; they accept that businesses need to remain profitable and invest in improvement. What they won't accept—and what creates patient dissatisfaction—is the perception of arbitrary or excessive price increases.

Overcoming the Insurance Dependency Trap

Why Most Dentists Don't Control Their Fees

The conversation about fee-setting in dentistry has largely disappeared over the past two decades. In the 1980s and 1990s, major dental conferences regularly featured presentations from accounting experts and practice consultants about strategic fee-setting. Today, these conversations are rare.

Why? Because for the vast majority of PPO-dependent practices, fee-setting feels irrelevant. If 80-90% of your patients are bound by insurance fee schedules you don't control, what's the point of strategic fee-setting?

This is precisely backward thinking. The fact that you have limited control over insurance-contracted fees is an argument for reducing insurance dependence, not for surrendering control.

The Path to Fee Control: Reducing Insurance Dependence

Regaining control of your fees requires reducing your dependence on insurance companies. This doesn't necessarily mean becoming completely fee-for-service—though that's an option if you choose it. Rather, it means strategically reducing your PPO contracts to a level where the insurance revenue no longer dictates your overall practice economics.

A realistic goal might be to reduce from 16-18 PPO plans down to one or two carefully selected plans. This creates three benefits:

1. Pricing freedom: The majority of your patients are now outside the insurance fee schedule, so you control their fees.
2. Administrative simplification: Managing one or two insurance relationships instead of eighteen dramatically reduces administrative burden and cost.
3. Patient consistency: You're attracting patients who choose you for reasons beyond insurance network participation, creating a more stable patient base aligned with your practice values.

Addressing the Patient Acquisition Challenge

The primary concern for practices considering reduced insurance dependence is patient acquisition. If you resign from insurance plans, won't your patient flow dry up?

The answer is: It will, unless you implement a parallel strategy to attract patients through other means. The good news is that digital marketing channels—content marketing, search engine optimization, social media, and targeted advertising—can deliver new patient volume at a fraction of what you currently pay insurance companies.

Many practices spend 5-8% of gross revenue on insurance fee writedowns and administrative costs related to PPO plans. Even a modest digital marketing investment—1-2% of gross revenue—can generate equivalent or superior new patient volume when executed strategically, with the added benefit that these patients aren't pre-selected based on insurance status.

Implementation Roadmap

Year One: Assessment and Strategy

• Calculate your current overhead percentage and identify your target range (50-60%)
• Audit your PPO contracts: Which plans are most profitable? Which cause the most administrative burden?
• Implement a small annual fee increase (3-5%) across your entire fee schedule
• Begin documenting your practice's quality differentiators and value propositions
• Start planning your digital marketing strategy and new patient acquisition system

Year Two: Gradual Reduction and Communication

• Continue annual fee adjustments aligned with your practice costs
• Begin strategically resigning from the least profitable or most burdensome PPO contracts
• Launch comprehensive patient communication about your practice transition (why you're leaving insurance networks, how it benefits them)
• Implement your digital marketing program to begin attracting fee-for-service patients
• Train your team to discuss fees confidently and explain your value proposition

Year Three and Beyond: Optimization

• Stabilize your insurance relationships at a manageable level (1-3 plans)
• Evaluate your results: patient retention, new patient quality, profitability
• Optimize your fee schedule based on actual patient demand and your practice positioning
• Reinvest profitability gains into patient experience, technology, and continuing education
• Continue annual fee adjustments to maintain healthy practice economics

Common Objections and Responses

"Won't Higher Fees Cause Patients to Leave?"

Patient departures due to fee increases are typically minimal—5-10% or less—when increases are modest, applied consistently, and communicated thoughtfully. Patients understand inflation. They understand that their dentist deserves a reasonable living. What they don't accept is exploitation.

The patients most likely to leave over modest fee increases are price-sensitive patients who were never ideal for your practice anyway. The patients you want to retain—those who value quality and are looking for a long-term provider relationship—will accept modest fee increases, especially when you explain the reasoning.

"My Insurance Patients Won't Feel It's Fair"

This concern suggests that your uninsured patients should subsidize your insurance patients, which is fundamentally backwards. Your fee-for-service patients shouldn't bear the burden of your insurance company's arbitrary fee restrictions.

The solution isn't to keep fee-for-service fees artificially low. The solution is to reduce your insurance dependence so this dilemma disappears. At that point, your fee structure can reflect your actual costs and the quality you provide.

"Digital Marketing Seems Risky"

Digital marketing does involve risk if executed poorly. However, insurance dependence is a risk with a 100% certainty of negative outcome: declining fees, rising costs, and trapped profitability.

Strategic digital marketing—focused on attracting patients aligned with your practice values and positioning—is far less risky than hoping insurance companies will suddenly raise reimbursement rates. You have direct control over your messaging, positioning, and budget allocation.

The Path Forward

Fee control is non-negotiable for practice success. Whether you implement this through gradual insurance reduction, fee increases on uninsured patients, or a combination of strategies, the fundamental principle remains: You must have authority over your pricing.

The good news is that this isn't theoretical. Hundreds of practices have successfully made this transition. They've reduced insurance dependence, implemented strategic fee increases, and discovered that patients will pay appropriately for quality dentistry delivered with genuine care and commitment to results.

Your practice's profitability, your team's job satisfaction, your ability to invest in quality, and ultimately your patients' access to excellent dentistry all depend on your willingness to take control of your fees. It's not just good business—it's essential stewardship of your practice.

Reviewed by

Naren Arulrajah

CEO & Founder, Ekwa Marketing

Naren Arulrajah is the CEO and Founder of Ekwa Marketing, a 300-person dental marketing agency that has helped hundreds of practices grow through SEO, reputation management, and digital strategy. A published author of three books on dental marketing, contributor to Dentistry IQ, co-host of the Thriving Dentist Show and the Less Insurance Dependence Podcast, and a member of the Academy of Dental Management Consultants. He has spent 19 years focused exclusively on helping dental practices succeed online.