There was a great question on our Linked In discussion group, Leading Home Care Network the other day. Thought you might like to see the response:
Peter and Amanda Smyth from Craftsburry Common, VT asked:
When increasing your billing rate, what guidelines do you use?
There are three things to consider in setting rates:
1. Your target gross margin – We like to see 40% gross margin in private pay.
2. Your billing rate philosophy re: your competitors – do you want to be low, middle, high?
3. The availability of caregivers in your local market – what do you need to pay to attract the very best caregivers?
Once you know what you need to pay to hire great caregivers, you can calculate the billing rate using your target gross margin using the “Billing Rate Calculator” from The Academy for Private Duty Home Care. This is a spreadsheet that starts with your hourly pay rates, adds in your FICA taxes, unemployment, workers comp, and any benefits.
They you plug in your target gross margin % – we suggest 40% – and it tells you what you need to charge. Then you test this amount against your competitors and your billing philosophy and set your new rates.
When raising rates, we suggest you apply the new rates to new clients, and keep current clients at the old rate. If there’s a big difference, you can raise rates on current clients, but be prepared to lose some.
Here’s a link to the Billing Rate Calculator –
Hope this helps,