What the health care debate teaches us about pricing

Until a few weeks ago, the most popular post on this blog was one that I wrote a long time ago on charging by the word versus charging by the hour (it’s since been eclipsed by a recent post on using a sample translation as a sales pitch). This is a topic I think about a lot, and this morning while listening to NPR’s Morning Edition, I made a connection (admittedly this was before I had any coffee, so it may be an erroneous connection…) between the current health care reform debate and translation pricing.

Linda Wertheimer talked to Mayo Clinic President Dr. Denis Cortese about the Mayo Clinic’s model of providing high-quality care at a manageable cost, largely by putting its physicians on salary. As compared to the fee-for-service model that exists elsewhere, the Mayo Clinic believes that physicians are/should be paid to keep patients healthy, rather than just for treating them when they’re sick. Whether or not we agree with this model, its basis appears valid: in the normal system, if I go to the doctor for my sore shoulder and she decides I need rotator cuff repair surgery, she makes a lot of money; if she tells me to stretch and take ibuprofen, she makes only what I pay for the office visit. Under the Mayo model, the doctor earns the same amount no matter what treatment she prescribes.

So, what about this is applicable to translation? It seems to me (and feel free to disagree) that I am inclined to work more carefully when I get paid by the hour. I know that if I spend two hours reading reference documents that will result in a better translation, I get paid for that time. If it takes an inordinately long time to find just the right word, that’s OK. Whereas when I’m getting paid by the word, the actions mentioned above are essentially off the clock.

I’ve partially solved this problem by raising my per-word rates to the point where I can afford to do off the clock work and still make a healthy hourly rate. However, the problem in our industry (which Dr. Cortese addressed as it relates to medicine) seems to be that many clients want to pay a lower hourly rate than what they effectively pay when the translator charges by the word. Let’s say that I produce about 500 finished words per hour on average, and that my clients pay 15-20 cents per word. Right now, I would say that although my clients are effectively paying $75-$100 an hour, they would balk at that number if I listed it as my hourly rate. In the NPR interview, when Linda Wertheimer asked Dr. Cortese how Mayo retains physicians when they are paid a fixed salary, his answer was that Mayo’s salaries are competitive with what physicians make in the fee-for-service model, and that its physician turnover rate is less than 2% per year. So, it seems that the missing link in our industry is that competitive hourly rate, which leaves most of us charging by the word. Thoughts?

8 Responses to “What the health care debate teaches us about pricing”
  1. Sarah Dillon September 23, 2009
  2. Tom Ellett September 23, 2009
  3. Andres Heuberger September 23, 2009
  4. Rama Lama September 24, 2009
  5. Kevin Lossner September 25, 2009
  6. Joan September 28, 2009
  7. Judy Jenner October 12, 2009
  8. Judy Jenner October 12, 2009

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