4 Moves for Higher Profits
Design the practice you've always wanted
In the uncertain economic climate of the past several years, practice growth has been slow or stagnant for many general practitioners. According to the Levin Group Data Center, 75% of dental practices have declined in production since 2008. Students are graduating with more debt than ever and reimbursements are down. The American Dental Association (ADA) has also reported that only 4% of the dentists who are retiring can really afford to do so comfortably.
If economic recovery continues to be slow and incremental, it's no longer a matter of waiting out the downturn, but rather it's time to adjust your practice and your goals to meet these challenges. What does it take to make a practice thrive in this environment? If inefficiency and empty chairs are the enemy, then finding meaningful growth opportunities that fit your unique needs is the key to making your practice as rock solid as possible.
The Economic Reality
When you ask the experts, they note that the Great Recession affected both patients and professionals in a profound way.
Allen Schiff, Dental CPA, CFE, and a founding member of the Academy of Dental CPAs, says that one of the first things he assesses with new clients is how they weathered the recession by asking about their production from 2008 to 2015. "If the answer is you've been relatively flat, that's pretty good, because those were difficult years," Schiff explains. "You somehow kept your hold on the market, but you didn't grow. On the other hand, if there's been a decline, you have to ask, ‘What are you and your team doing to be proactive to offset the negative growth factors?'"
A fundamental strategy to keep the chairs full must include a constant flow of new patients, because there's only so much dentistry you can do on your existing base. In addition, many experts say dentists can expect to lose 12% to 18% of patients per year through attrition.
When you think about this statistic in terms of dollars and cents, Schiff says, the impact on a practice is huge. "If a practice loses 12%, for example, that means dentists who did a million dollars last year may lose $120,000 worth of business," he says. "That means potentially next year they are going to lose $10,000 a month in business unless they're proactive and do something strategic."
Where Are You Now?
You can't make strategic moves to increase business without knowing exactly where your practice stands. In short, let the data be your guide.
A thorough practice assessment is a relatively new concept in dentistry. "When times were good 10 years ago, a lot of dentists thought everything was okay as long as there was enough money in their checking account at the end of the month," says Tammy Barker, senior product manager at Henry Schein Practice Solutions. "But now with what's happening in the competitive landscape, as well as with insurance companies and PPOs, dentists are having to look a little bit deeper into driving efficiencies."
When it comes to knowing what data to collect, Matt Singerman, practice education manager at Henry Schein Practice Solutions, says that practices need to identify and track the key performance indicators, or KPIs, that really matter. "For example, how many patients are in your active patient base and how many participate in your hygiene program? How many new patients are you gaining per month and how were they referred to your practice? What is your treatment plan case acceptance rate? And what is your ratio of production to collections? A practice needs to know the percentage of accounts that are 30, 60, or 90 days past due and how that compares to what they are producing. Knowing those kinds of numbers puts you in a position where you can make informed judgments and create action plans for your practice."
Anecdotal evidence is not going to cut it if you want to make meaningful practice improvements, Barker says. "There are three numbers practices tend to overestimate–their active patient base, their active patients in hygiene, and their case acceptance," she explains. "We find that when we measure those numbers, we really see improvements, because often times they are not what the doctor thought they would be."
After these baselines are documented, Singerman explains, dentists can work on understanding management processes and learning how to use their practice management tools to track and improve those KPIs.
Where Do You Want to Be?
Once you have the data, you can use it to decide on an appropriate business strategy and identify key opportunities.
Roger Levin, DDS, chairman and chief executive officer of the Levin Group, says that to ensure a viable business model, a good first step is to set very specific targets for each year based on the data gathered about the practice. Levin says, "An example of a target would be having 98% of all the patients scheduled at all times or achieving a no-show rate under 1%."
Second, businesses run by having systems, Levin says, so it's also important to examine the processes in your practice. "Dental practices need to have what I call best model systems, proven business systems that ensure maximizing production," he explains. "Systems include everything from the new patient process to scheduling to financial management to budgeting to marketing and more."
Keith D. Drayer, vice president and general manager of Henry Schein Financial Services, suggests after all this assessment and data gathering, practices can see where they are now in relation to their long-term goals. The strategies a practice chooses need to help bridge that gap. "For example, if their goal is to have a state-of-the-art digital, paperless office and their practice isn't digital or paperless today, they need to identify what equipment they need, create a budget, prioritize the equipment, and develop a technology implementation plan," Drayer says.
So where is the best place to put your investment dollars? The answer depends on your practice's existing production, needs, age, geography, and many other factors. The opportunities are numerous; therefore, you need to prioritize where you have the greatest need and where you'll see the biggest return.
Opportunity #1: Marketing
If your practice goals include growing your patient base or boosting production, a good place to start is with a hard look at your marketing plan. With all the choices, sometimes dentists know everything they could do, but they don't know what they should do, says Naomi Cooper, president of Minoa Marketing and chief marketing consultant for Pride Institute.
Confusion about the options can result in an ineffective strategy. Cooper advises her clients that deciding on branding (ie, the practice name and logo) and building a website are steps zero and one. The branding should communicate clearly and be consistent, no matter where it is used.
Although some practitioners may bristle at the idea of spending money on a marketing plan, Levin says that it is not an option in today's economy–it is both mandatory and critical.
"You need a mixture–internal marketing, online presence, community marketing," Levin continues. "What practices have to do is create a marketing plan every year, and then roll that plan out throughout the year. It needs to be part of the budget or people won't want to spend the money on it."
Cooper agrees that effective marketing includes developing a strategy based on the practice's goals, as well as a budget, a timeline, and metrics to quantify success. When it comes to carrying out the strategy, marketing tactics can be "in-sourced" to a team member, she says, but the decision of who is in charge should not simply just be made based on someone's age demographic or title. In addition, execution of individual marketing tactics to support the overall strategy should not be the sole responsibility of the dentist in most cases.
"If your hour is worth between $500 and $1000, you should not be spending that time on day-to-day administrative duties, which is what a lot of marketing implementation is," Cooper stresses. "This is where the do-it-yourself mentality holds dentists back."
Her advice is to find someone in the practice who has the time, energy, and expertise to help with execution, but have someone knowledgeable about marketing set the strategy. This is where a dental marketing expert can be worth every penny.
Practice Websites
Like it or not, patients assess you based on your practice website. "It might not be the best way to judge a practice, but often it's the first way–or the only way," says Cooper.
Cooper urges her clients to put their best face forward through their practice website, because having an outdated site is just as bad for business as having threadbare carpet in the waiting room or 40-year-old operatories.
Once you build a beautiful, informative website, the next step is making sure patients see it. To keep up with current algorithms of search engine optimization, a website has a shelf life of about 36 months, Cooper advises. After 3 years, consider a refresh.
This very technical side of online marketing is still a mystery to most dental professionals. "Everyone wants to be on the first page of Google," says Bill Busch, DMD, MAGD, a practitioner in Kansas City, Missouri. "Web optimization is an untapped resource. I think that's the Wild Wild West that we don't have time to understand."
Social Media and Online Reviews
Consumer behavior is increasingly dependent upon the Internet when it comes to making buying decisions, and patients are no exception.
"More and more people come to my office saying they found my practice through an online review," says Busch. "I ask patients for referrals, but time and time again, people rely on the Internet for their information. They say, ‘First, I started on the insurance directory and then I looked at all your Google reviews. Then I see you're active in the community doing free dental work, and that's why I'm here.' They do their homework."
In Busch's practice, someone else is assigned to be the social media director and is compensated for the time it takes. "Even if you're really not involved, you need to at least be aware of what people are saying with reviews and how you are addressing the public with social media," he advises.
Once that new patient makes contact via social media or the web, Cooper stresses, the customer service he or she receives must be excellent. "People who found you from Yelp or from search engine optimization are just looking for an excuse to go back into procrastination mode," she explains. "You put them on hold, you tell them you'll call them back, you don't have an appointment available for 4 weeks, and you've lost them."
Opportunity #2: Technology
An investment in technology can make a huge positive impact on your profits and production, as long as you have a strong plan, says Andrew Koenigsberg, DDS, of Gallery57 Dental in Manhattan. His practice used the earliest version of a CAD/CAM camera 10 years ago and has evolved into a state-of-the-art facility with its own full-service laboratory. "However, if technology doesn't fit into your game plan or workflow, it is never going to be successful. Buying the machine is not enough," he says.
Caution is wise when it comes to technology, but if it's the right move for your practice, don't let the learning curve hold you back, says Gerald Lande, DDS, of Carmel, Indiana. "Honestly, most technology is usually easier than what you're already doing. The learning curve for most of it is not that hard. When you go from film to digital x-rays, for example, you hit the button like you always do. But now you don't have to develop it, it shows up on the screen. So in that respect, it's a no-brainer."
Depending on your practice's needs, incorporating technology doesn't always mean a purchase of new equipment–in some cases the technology already exists in the office, making the investment more about time than money.
Practice Management Software
Practice management software is an example of a pervading technology that is certainly underutilized in some practices. Barker notes that many offices are using only 15% to 20% of their software capabilities, just out of habit. Addressing that gap can help improve the practice's efficiency and productivity rapidly.
Practice management software had a huge impact on Busch's bottom line. "I think one role technology has in dentistry is to keep our chairs full. We know how to do the dentistry, but the biggest part is making sure we have enough dental work to do. One of the easiest ways to leverage that and keep your chairs full would be the patient engagement platforms that are available."
For example, one day his system, Dentrix, helped immensely when his schedule completely fell apart due to cancellations. "By using the patient engagement platform," Busch says, "we were able to reach out to almost 2,000 of our patients, and we had those spots filled within 10 or 15 minutes."
If a website or social media are strategies for increasing the number of patients, practice management systems are about doing more with your existing patient base. In addition to reminding patients about scheduled appointments, this software can also help advertise existing services about which patients might not be aware.
"I think doctors overlook the power of the database and the data mining that they have at their fingertips," he says. "Most of these patient engagement platforms are $200 a month but they pay for themselves 20 or 30 times over a year. Leverage the real-time patient contact and engagement with your office to fill holes, offer things that patients weren't aware of, or promote things you're really good at–fill your chairs."
Another benefit of using your practice management software to the fullest is a more streamlined workflow. "When you automate routine processes, you make time for patient care," Singerman says. "You can also learn to manage workflow to maximize efficiency. There really are some ways of doing things better–method does matter."
When you use your software correctly, he explains, it helps you make productive processes automatic, gives you data about your performance, and provides you with the tools to improve your productivity. The caveat is that you have to set it up and consistently use it the right way. "Software can only give you good data out if you put good data in," Singerman concludes.
CAD/CAM
"I don't think anybody could argue that CAD/CAM has and will continue to revolutionize clinical dentistry," says Koenigsberg, who got a CEREC system about 13 years ago. He describes CAD/CAM as the first truly game-changing technology he experienced.
Busch agrees that it can greatly improve a practice's income. "CAD/CAM dentistry is just a no-brainer," he says. "You can increase your income 20% to 30% more a year just by doing CAD/CAM single-visit dentistry." He says that before he adopted CAD/CAM, he lost money when he did a crown for $800 in two patient visits. "We recover probably 16 clinical hours every month that I would have been seating crowns where they had to come back in two visits," he says.
To detractors who complain about quality, Busch counters that today's systems are better and much easier to use. "The accuracy is there, and it's dependable, and once you get past 13 or 14 restorations a month, it really doesn't cost anything. Because instead of paying the lab $2,000 for those 14 restorations, you're paying your lease bill. Instead of paying $200 a crown, you're paying $20."
Lande was an early critic of CAD/CAM, but improvements in the technology turned him into a believer. "Once it became 3D, where you could do the fit and the occlusion, both sides of the crown, that made it more appealing. And when you looked at the financials behind it, it just seemed to make sense. When the economy tanked in 2007 and 2008, it really helped financially to have it already."
Once the system is paid for, the cash flow benefits are even better, Lande says. "Plus, there's all the other benefits–the control that you have, the convenience of not having temporaries." Another key advantage is patient experience and comfort, which can ultimately boost your referrals and new patient base.
CBCT
Although it's not for everyone, investing in cone-beam computed tomography (CBCT) can be a smart strategic move. "An office that is doing mostly composite fillings and has no desire to do anything else probably doesn't need a CBCT," Koenigsberg explains. "On the other hand, if a practice wants to place implants, then they have figure out a way to get that technology."
Lande falls in the latter camp. After restoring implants for years, he decided to learn to place them and purchased a CBCT. "I bought the GALILEOS, because it would coordinate with my CEREC," he explains. "I could make surgical guides so I could place the implant and feel more confident."
Clinically, CBCT has taken Lande to the next level. "There are still not a lot of general practitioners who have a cone beam. But it's amazing what you can see on it; the difference between 2-dimensional and 3-dimensional is just eye opening."
Financing Technology
If you are ready to invest in new technology, Drayer advises having a plan and knowing where your credit stands.
"This is an excellent time to lock in very low fixed rates on financing," Drayer says. "Financial institutions that deal with health care professionals specifically, like the financing offered through Henry Schein Financial Services, are originating loans at more attractive terms than they have in the past 6 years."
Schiff agrees that financing might not be as difficult as one would expect. "Quite frankly, the borrowing power dentists have is quite substantial, and there's plenty of money out there. The national failure rate for dental loans is 0.003%, so many banks are willing to lend them money if there's the right opportunity."
Even so, Koenigsberg found that he was not able to finance the kind of state-of-the-art practice he wanted on his own. "Things that are harder to finance as an individual are easy to finance as a group. The ROI is greater and the incremental cost of equipment is much lower with multiple users."
Whether you practice solo or in a group, Levin stresses that planning financially for purchases in advance will greatly help practitioners when it's time to buy. His recommendation is that every year the practice include a "capital investment for technology" line item in the budget. A technology plan is also important to help evaluate the office and prioritize purchases. Levin says, "Ask which technology will do one of four things: improve quality, increase speed, increase production, or provide a return on investment. My idea is that if it doesn't do one or two of those four, then you probably shouldn't be buying it."
After the purchase is made, Schiff advises amortizing the depreciation expense over the life of the loan, rather than succumbing to the temptation of a large up-front deduction, in order to offset the "phantom income created from the principal debt reduction."
Opportunity #3: Your Staff
"I get asked all the time, ‘Where can I hire a great staff?'" Levin says. "And my answer always is, ‘You don't hire great staff, you train great staff.' Training is not a one-time activity." As leaders of the dental team, he says, dentists need to create personalized training plans, rather than take a one-size-fits-all approach.
"We typically find that practices don't invest in enough training to begin with, and then most practices experience turnover every 12 to 18 months," Barker says. "The new team member is trained by the existing team members, who didn't have adequate training to begin with. There's a dilution of knowledge, and the practice starts to see an increase in inefficiencies."
In addition, practices with turnover in business staff may start to see a problem with overdue collections or lapses in follow-up with patients who are overdue in hygiene or have unscheduled treatment plans. This can negatively affect the practice until a new staff member is up to speed.
Having an excellent, well-trained dental team increases your chance for financial success exponentially, according to Drayer. When your staff can work as a team, he says, the office is likely to be more efficient, you will have higher employee retention, and your patients are likely to be much happier and, therefore, to refer other patients. This all leads to greater profitability.
Billing and Collections
When it comes to effective collections, Drayer says, having a systematic approach and pragmatic policy that is implemented consistently will yield the best results.
While having a policy is critical, it's not enough. Financial policies of the practice need to be made clear to patients and need to be enforced by staff members, which means taking emotion out of the equation. Levin says this is another place that targeted staff training pays off, since 98% of financial coordinators have no background in managing finances.
On the point of developing and implementing a clear financial policy, Levin recommends giving patients a choice of four options: 5% off for cash up front; credit card payment; half payment in the beginning in a multiple-appointment case; and patient financing. With patient financing through companies like Springstone or CareCredit, a patient can often get a loan or a line of credit in 3 minutes and the office gets paid within 24 hours.
When payment is due, persistent and direct patient communication should be the practice's policy, Levin says. "Put in a system that if any patient is overdue by 1 day, that patient will be called that day. If you don't reach the patient, you should have a 9-week follow-up process until patients realize they have to pay the bill."
Even when in-house systems are well established and running efficiently, practice management consultants often provide a "fresh pair of eyes" that can benefit a practice. Busch used one who assessed his practice location, fee schedules, and other information, and made recommendations, including which fees to increase. The consultant also came to the office to train the staff. Busch also employs an insurance consultant, a professional who, for a flat fee, negotiates your rates with your insurance companies.
"I just made about 15% across the board this way," Busch says. "Some doctors don't know they can ask for a raise from the PPOs. Some people know they can ask, but don't ask often or don't know the rules of how often they can ask."
Opportunity #4: Helping Yourself
Investing in yourself as a practice owner or team leader can also go a long way toward boosting practice profits, but it's not always the first strategy on dentists' minds. Levin says that taking the time to get training for yourself–on everything from professional selling skills in case presentation to learning to run your business like a CEO–is a wise investment.
"Dentists are so busy; they don't have the time for pure academics. They need to get very specific training to benefit their own practice. They need to go to the experts who have already put it all together so they can learn and implement it very quickly," Levin explains.
Barker, who helps dentists through Henry Schein's Profitability Coaching Program, says it's akin to getting a personal trainer at the gym. "When you hire a personal trainer, they help you see all the little things you can tweak and do better, and it has a huge impact in your fitness. And that's exactly what we are doing with our customers," she says.
By the end of the sixth month in the Dentrix Profitability Coaching Program, the average customer has increased their month cash flow by $8,000 a month. "Customers are paying $2400 for this program," she says, "so if you annualize the return on investment, it's over 1600%."
Events like Henry Schein's annual Business of Dentistry conference can provide missing skills as well. Being held this year from October 7-10 in Kissimmee, Florida, the conference focuses on helping dentists learn new skills in business management, Dentrix software use, and clinical techniques. There are courses tailored to other dental team members as well, so the whole office can benefit.
For an increasing number of dentists, the definition of entrepreneurship is expanding to include the services of dental support organizations (DSOs). "Profitability of any business is simply a function of how well the business is run," says Quinn Dufurrena, DDS, JD, executive director of the Association of Dental Support Organizations. "DSOs utilize the collective experience within their organizations to implement business best practices across the broad spectrum of services they provide, from billing to marketing, insurance to accounting. Additionally, DSOs use their economies of scale to help reduce those costs and those associated with procurement and lab expenses."
Expenses were key in Koenigsberg's decision to embrace group practice. "I'd been in solo practice for 23 years, enjoyed the perks of being a solo practitioner, and recognized the limitations and hassles of partnership. However, I realized I couldn't afford to incorporate the technologies and provide the customer service I wanted on my own. I don't believe that it is possible economically without some kind of sharing arrangement."
New Offerings
Providing the best possible patient services can also mean expanding your offerings–which requires an investment in your clinical education. "New services are some of the most profitable, Koenigsberg says. "They will distinguish your practice from the competition. If you want to offer new services, the only way is to get education, whether that is on CAD/CAM, implant placement, or orthodontics."
Gary Radz, DDS, associate clinical professor at University of Colorado School of Dentistry and a practitioner in Denver, Colorado, adds that sleep appliances represent an opportunity to boost revenue–if the doctor and team are prepared to make a time investment upfront. Radz offers sleep dentistry in his private practice and is also dental director for Somnia, a sleep wellness store in Lone Tree, Colorado.
The challenge with developing a sleep practice, he says, is threefold. First, there is getting the proper training. "Most dentists need to acquire new knowledge, so it requires going to a number of continuing education courses until you have enough expertise to be able to provide that service," Radz explains. Second, a dentist must be committed to advertising the new offering to patients to reap the full benefit. Production from providing sleep appliances can range widely–it could be anywhere from $2,000 to $20,000 a month–depending on the number of patients, and marketing plays an important part in ensuring a return on investment. Finally, there is the challenge of billing, which is perhaps the most difficult part for dental practices. "Reimbursement is through medical, not dental, so the dental business team has to learn to negotiate their way through medical billing," Radz says. But an investment in sleep dentistry can definitely be worth the effort, in terms of increasing both practice profits and your status as a comprehensive provider.
Although some may balk at the time investment required to expand one's scope of practice, Koenigsberg believes that it's well worth it. "Many dentists feel if they can't get a plug-and-play solution, something they can take in a 1-day course or 3-hour evening course, then they're not interested. I think that's bad for the patient who is not getting that new service, and I think it's bad for the dentist whose practice is going to be limited."
Conclusion
It's an unfortunate fact that dental school curricula are simply too overloaded to include the kind of hands-on, practical business training that dentists need to run their practices in the way that truly benefits their patients and themselves. For most, it's trial by fire, where your reputation, career, and credit are on the line.
Although there is no magic bullet to increase production and profit, being proactive with assessing your practice is the place to start. Understanding the reality of your practice's unique situation leads the way to opportunities that you may not have considered recently, but that are right for you.
Dentistry's 8 Game Changers
Roger Levin, DDS, shares the key factors that have influenced the current state of the business of dentistry.
1. The recession. The change in the economy starting in 2008 slowed down dentistry to a large degree, just like many industries.
2. Changes in how patients make buying decisions. Our patients are much more careful where they spend their money and how they spend it.
3. More dental schools. Since 2008, there were 13 more dental schools opening in the Unites States, which means the supply is increasing, and when supply goes up, competition goes up.
4. Higher student loan debt. The average dental school student graduates now $277,000 in debt (if they go to one of the newer for-profit schools, it's closer to $380,000). That changes some of the choices dentists make.
5. Decrease in insurance reimbursements. We are seeing downward pressure on reimbursements from many companies, which means lower production.
6. Expansion of the dental support organizations or "corporate dentistry." This means different forms of competition are emerging in the profession.
7. Fewer associateships available for dentists. Since 2008, there aren't as many choices for students coming out of school.
8. Delayed retirement. The reason there are fewer associateships is the average dentist is now practicing 8 to 10 years longer.
Top Business Advice for New Practitioners
1. Build Experience
"Earning potential is greater for an entrepreneur rather than gaining employment as an associate, but I recommend that new dentists practice for 12 to 18 months after dental school. That gives a good year to go through a whole cycle of business as well as all the seasons. They can learn to motivate team members and manage patients."
Allen Schiff, Dental CPA, CFE
2. Craft an Identity
"The first question I always ask a transitioning or scratch practice is, ‘What is the name of practice?' This is a really critical question. Historically there was a lot of regulation, where you had to use name, middle initial, last name, DDS or DMD, PC, and that was it. Your name was on your shingle and that's all the marketing you were allowed to do. Today you have to be able to communicate a qualitative difference in terms of your practice philosophy, who you are, and what sets you apart."
Naomi Cooper
President, Minoa Marketing/Chief Marketing Consultant, Pride Institute
3. Consider a DSO
"We've seen dentists of all ages and experiences choose to contract with dental support organizations (DSOs). But I think we're seeing younger dentists more recently due to factors such as a desire to have a more balanced work/home life, along with a heavy student debt load, which makes incurring additional debt more challenging and less promising."
Quinn Dufurrena, DDS, JD
Executive Director, ADSO
4. Consult the Experts
"New practitioners need dental knowledgeable people. One of the biggest mistakes is using the family attorney for a dental contract. The family attorney doesn't have enough experience in that area. You need an attorney and an accountant and you might want a consultant or a broker, but you should surround yourself with experts."
Roger Levin, DDS
Chairman and CEO,
The Levin Group
5. Measure the Practice KPIs
"Learning how to track key performance indicators (KPIs) can be different for new practices. They have the opportunity to create productive processes from the start; however, a new dentist may be overwhelmed with all of the decisions he or she has to make. It might be an associateship and planning a transition. They might be opening their own practice, so they are dealing with large capital purchases, leasing a building, and hiring a team. New practitioners have to make a special effort to understand effective practice management."
Matt Singerman Practice
Education Manager, Henry Schein Practice Solutions
6. Make a Financial Game Plan
"When you think about dentists who are just starting their practices, they want to pay off their student debt as rapidly as they can. I use a rule of thumb that the practice debt has to be paid back in 10 years. If a practice is trying to pay off their debt in 5 years or 7 years, in my professional opinion, that's just too rapid for them to retire the debt. Their cash flow gets hurt and then other things start to suffer. The sweet spot for commercial loans is 10 years; 12 or 15 years is simply too long."
Allen Schiff, Dental CPA, CFE
