Professional services
Medical Practice Pricing Calculator
Prices practice services, where contracts rather than the fee schedule set the revenue.
Result
Overhead and margin are taken as shares of the selling price, which is why the cost is divided rather than multiplied. Adding 15% to cost does not produce a 15% margin. Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
Direct cost divided by one minus overhead and margin together, so the price carries both. In a practice this arithmetic applies properly only to self-pay services, because for contracted patients the allowed amount governs whatever the charge is. For those, the comparable exercise is checking whether the contracted rate covers the cost of delivering the service at all.
What moves the number
- Cost to deliver the service, including provider and room time.
- Whether the service is self-pay or contracted.
- Allowed amounts under existing contracts.
- Overhead per unit of provider time.
Where this one goes wrong
The useful output of a cost calculation in a contracted environment is not a price but a comparison: which services the contracts pay adequately for and which are delivered below cost. That is the basis for contract negotiation and for decisions about service mix. For self-pay and non-covered services the pricing arithmetic applies normally, and those are also where transparency about cost before treatment matters most to the patient.
Before you quote
- Compare cost to deliver against each contract's allowed amount.
- Apply cost-plus pricing to self-pay services only.
- Give self-pay patients the cost before treatment.
Where the rules come from
Questions
About this calculator
Can a practice price its own services?
For self-pay and non-covered services, yes. For contracted patients the payer's allowed amount governs regardless of the charge, so the fee schedule does not determine revenue and raising it changes nothing except what self-pay patients are asked to pay.
What use is a cost calculation then?
Comparison. Knowing the cost to deliver a service shows which contracts pay adequately and which are below cost, which is the basis for negotiation and for decisions about service mix. That is more valuable than a price nobody will pay.
Should self-pay patients be told the cost up front?
Yes, and it is increasingly expected. For patients paying directly the price genuinely matters to the decision, and a clear figure before treatment avoids both the dispute afterwards and the uncollectable balance that follows it.
The formula
price = direct cost / (1 - overhead% - margin%)
Put this calculator on your site
Free to embed. Paste this where you want it to appear. It stays up to date automatically because it loads from BDEVY.
Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Labour cost ($). Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($). Enter your own figure; the page starts at $120.
- Other direct costs ($). Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%). Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%). Enter your own figure; the page starts at 15%.
The result updates as you type, so you can try a figure, see what it does to price to quote, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Labour cost | $900 |
| Materials cost | $120 |
| Other direct costs | $0 |
| Overhead rate | 22% |
| Target net margin | 15% |
What comes out
| Result | Value |
|---|---|
| Price to quote main result | $1,619 |
| Direct cost | $1,020 |
| Overhead recovered | $356.19 |
| Net profit | $242.86 |
| Gross margin | 37.0% |
| Markup on direct cost | 58.7% |
Quote $1,619 to cover $1,020 of direct cost, recover $356.19 of overhead and leave $242.86 of net profit. That is a 58.7% markup on cost.
How sensitive the answer is
Holding everything else steady and changing only labour cost, this is what happens to price to quote. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Labour cost ($) | Price to quote |
|---|---|
| $450 | $904.76 |
| $675 | $1,262 |
| $900 example above | $1,619 |
| $1,350 | $2,333 |
| $1,800 | $3,048 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Labour cost ($)
- Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($)
- A money amount, starting at $120.
- Other direct costs ($)
- Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%)
- Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%)
- A percentage, between 0 and 80, starting at 15%.
What the results tell you
| Result | What it is |
|---|---|
| Price to quote | The headline result. A money figure. |
| Direct cost | A money figure. |
| Overhead recovered | A money figure. |
| Net profit | A money figure. |
| Gross margin | A percentage. |
| Markup on direct cost | A percentage. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.