How much to charge?
Fair market value of nurse consulting services
I am often asked by consultants, “How much should I charge?” and from healthcare facilities and attorneys, “What is the fair market hourly value for nurse consulting services?”
The objective of this blog is to offer a fee formula to answer those questions and at the same time, shed some light on the business side of those questions. The consultant’s services considered in this fee formula are evaluating, analyzing, and rendering a knowledgeable opinion on the delivery of healthcare and the related outcomes to healthcare facilities and client attorneys.
The fee formula assumes that the typical consultant:
- spends two-thirds of the income on expenses for the operation of the practice (accounting and legal assistance, office, office equipment and supplies, marketing, professional development, taxes, insurance, etc.);
- retains one-third as personal income;
- spends one-fourth of the time on non-billable hours (administrative tasks).
Fee formula terms:
- Net hourly income is the hourly amount of money the consultant wants to retain as personal income. This amount is variable and dependent of the consultant’s personal lifestyle and the cost of maintaining that lifestyle.
- Hourly expense is the monthly amount spent on business expenses divided by the total number of hours spent in the practice for that month.
- Tentative hourly fee is the sum of the income and hourly expense.
- Non-billable hours is the time spent on administrative tasks or any time not billed to a client. Examples are bookkeeping, marketing, research, etc.
Formula: Net hourly income + hourly expenses = tentative hourly fee + ¼ of that tentative hourly fee for non-billable hours = consultant’s hourly fee.
In the first example below, the consultant wants a net hourly income amount of $35 an hour. This is used in the example because it works out to $65,520 a year for a 36-hour week. This is close to the prevailing pre-tax hourly wage of a staff nurse.
Example 1: $35 + $25 = $60 + $15 = $75
Example 2: $75 + $25 = $100 + $25 = $125
If you have already determined a fee for services, do a time study. It can be a simple study. For example, track the amount of time spent on billable and non-billable hours (keep them separate) for a month. This will give you the basis for calculating total hours and the percentage of the total hours you spend on non-billable hours. Add up the total expenses spent for that month. To obtain an hourly amount for expense, divide the monthly expense amount by the total number of hours spent in the practice for that month.
Once calculated and set, do not lower fees. In special circumstances, discounts can be offered on the number of hours spent; but, not on the fee amount. Consider charging more when offering unique services, such as acting as an expert witness. I recommend that consultants investigate using lower cost vendors at least annually. Profit equals gross income minus expenses. When expenses are decreased, profit is automatically increased.
Recalculate fees for services at least annually. Increase fees if necessary. Don’t lower fees that are in place and working.
In summary, implementing the fee formula is well worth the time and effort. Calculating fees mathematically creates an understanding of the business aspects of fee setting. When a consultant is not able to meet expenses, the practice runs out of money and the business fails. This fee formula ensures that a consultant is able to meet expenses, continue their lifestyle, and operate a successful practice.