by Roger P. Levin, DDS
The recent recession has been a game-changer. According to the Levin Group Data Center™, 75% of dental practices have suffered production declines in the last four years. Even now as the economy slowly improves, many dental practices are struggling to regain prerecession levels of practice production and doctor income. The recently completed Dental Economics/Levin Group Annual Survey, which will be published in the fall, will provide great insight on practice production trends and dentists' ability to grow their practices in today's economy.
It has become apparent that we have entered a new era of dentistry. What worked for dental practices in the past will not work now. While it remains possible for dentists to grow their practices, they need effective business skills and systems to reach the highest levels of success.
Prior to the recession, the majority of dental practices could be relatively successful without either excellent business systems or strong leadership. This was largely due to supply and demand. Patients were abundant. Most of them kept their appointments and accepted recommended treatment, especially for need-based care.
Now, there are fewer patients, more canceled appointments and no-shows, and most disturbing, decreased case acceptance for all services. To navigate this changing dental landscape, dentists need to manage their practices based on core business principles.
To grow your practice in today's economy, Levin Group recommends these four overarching strategies:
1. Manage overhead
2. Control collections
3. Replace outdated management and marketing systems
4. Attract and retain patients
1. Manage overhead
Levin Group recommends an overhead target of 59% for general practices. Every percentage point over 59% costs practices thousands of dollars. For example, if a practice is producing $700,000 with 65% overhead, that's $42,000 in excess overhead. For a practice with a 75% overhead, that would be $112,000 in excess overhead. Even if a practice is just a few points above 59%, it still has opportunities to increase income by thousands of dollars. Optimizing overhead requires a comprehensive approach, including these action steps:
• Follow the money - Keep track of collections, purchases, and expenses - from staff salaries to dental supplies. Record how much the practice spends in each category every month. Measure expenditures against past costs to see if they are increasing, decreasing, or staying the same.
• Track inventory - Practices should take inventory semiannually. This will help offices maintain a steady stream of supplies, avoid overages and shortages, and have greater control over expenses.
• Examine insurance participation - Practices should analyze patient insurance participation each year. Dentists should be aware of important data such as what percentage of total practice collections is generated by insurance, which insurance plans pay the highest reimbursement rates, which ones pay the lowest, what plans are provided by local employers, etc. This information will help doctors make the best decisions regarding insurance participation.
2. Control collections
Practices should get paid for the services they provide. Many dentists and their teams are uncomfortable asking for payment. While a dental practice is obviously a place where dental care is provided, it is also a business that requires payment for services rendered, so dentists can continue to provide high-quality care to patients.
Overdue accounts receivable have become more prevalent for many practices in the postrecession economy. These receivables cost the practice in several ways. First, there is the issue of not being paid for dentistry already performed. Second, the office must use team members to track down this revenue when they could be performing more productive tasks. Third, it may never be collected. The best way to reduce collections is to have patients pay at the time of service.
Levin Group recommends a collections target of 99%. In a sluggish economy, patients may be slower to pay their bills. Practices need clear financial policies that the team communicates to patients using a method such as Value Creation Scripting™. This essential communications tool not only conveys information about financial policies, but also influences patients to follow those protocols.
Practices should offer a variety of payment options, including cash, check, credit cards, and outside financing. Giving patients choices makes treatment more affordable and full payment easier.
3. Replace outdated management and marketing systems
Outdated processes are like cholesterol clogging up a practice's systems. Left unchecked, these inefficient processes will hinder productivity and ratchet up stress on the doctor and team. During a good economy, practices will often put up with outdated systems because the schedule is filled with patients. However, a weak economy exposes vulnerabilities in old systems. Without strong management and internal marketing systems in place, practices will find it nearly impossible to grow in today's economy.
Effective systems have the power to transform an underperforming dental practice into a high-performance dental business. Management and internal marketing systems are the foundations upon which the dentist builds practice success year after year. If that foundation is poorly constructed, practice success will be short-lived, difficult to achieve, or nonexistent.
To avoid lost productivity and production plateaus, practices should replace their management and internal marketing systems every five years. The following steps will help practices redesign their systems:
• Collect all necessary data to understand each practice system.
• Use all collected data to develop ideal models based on the unique needs of your practice.
• Customize all ideal models to fit the goals of the doctor and team.
• Implement new systems to increase production.
• Measure results to ensure that the new customized model is on track to achieve all practice goals.
Depending on how old (and inefficient) the systems are, it can require up to a year to completely replace all systems without disrupting daily operations or causing excessive stress on the team. Receiving expert guidance from trusted advisors can shorten the amount of time needed to develop and implement high-performance systems. To build a highly successful practice, all major systems must be addressed and inefficiencies that slow down systems removed.
4. Attract and retain patients
Current patients are the backbone of the practice and often serve as a source for new patients. In today's economy, patients are more likely to cancel or not show up unless value is built for the treatment and appointment. Levin Group recommends a variety of patient-retention strategies to keep patients coming to the practice:
• Schedule the next hygiene appointment in advance. The hygiene department provides a steady stream of patients and production. Patients should visit the practice every six months for recare. The best way to achieve that objective is to schedule the next appointment before they leave your office.
• Confirm all appointments 48 hours in advance. Practices should not rely on home phone numbers. Use modern communication vehicles, including email, text messages, and especially cell phone numbers.
• Provide superior customer service. The goal should be to exceed expectations during every patient interaction. Don't give patients a reason to not come to your office.
Quality customer service also encourages patients to talk about the practice to friends and family members. Remember, current patients are the best source for new patients. When patients are "wowed" by high quality care and great customer service, they will gladly refer their friends, family members, and neighbors if a scientific internal marketing program is in place. Team members should be trained to ask for referrals and testimonials from satisfied patients. Any patient who refers someone should receive a handwritten thank you note and phone call from the doctor.
Engineer your own comeback
Even in the current economy, dentists can still grow their practices exponentially. These four core business principles can help you effectively manage your practice, reduce costs, and increase production. Dentists can no longer wait for an economic turnaround - they have to engineer their own comeback.
To learn how to run a more profitable, efficient, and satisfying practice, visit the Levin Group Resource Center at www.levingroup.com/gp. It is a free online resource with tips, videos, and other valuable information. You can also connect with Levin Group on Facebook and Twitter (@Levin_Group) to learn strategies and share ideas.
To avoid lost productivity and production plateaus, practices should replace their management and internal marketing systems every five years.
