6 Habits of Financially Secure Practices
Based on 30 years of consulting with dental practices across the country, the author has identified six key financial habits the most successful dentists have in common—regardless of the type, size, or location of their practice. With time, discipline, and conviction, once these habits are mastered and integrated into a daily routine, they can guide practitioners to financial health.
Habit No. 1: Increase Fees Consistently and Appropriately
Each year, the cost of providing quality dentistry increases. Dentist business owners should regularly review their fees to ensure they are consistently charging appropriately for their services provided. Otherwise, by failing to evaluate fees, they run the risk of settling for less profitability. Dentists should recognize that all businesses increase their prices, typically to meet a specific profit margin.
Next, dentists should gain an understanding of the types of fee increases that may potentially impact their patients. For example, when patients pay out-of-pocket, even a small increase might be noticeable. Conversely, if crown and bridge treatment costs are appropriately increased most patients will not be concerned with the fees. Since hygiene appointments take place typically two times a year and crowns are done far less often, patients tend to notice even the smallest increase in hygiene fees while ignoring the bigger increases in restorative fees.
Finally, dentists can become “fee smart” by conducting research and obtaining guidance on appropriate fee structures and market changes. There are a number of fee surveys available that enable owners to compare their fees with their colleagues (eg, National Dental Advisory Service® [www.NDAS.com], Udell Webb Leadership Institute [webbdental.com], Renaissance Systems and Services, LLC [www.rss-llc.com]). A good target is to be in the 80th percentile (based on clinical skills). This information should be shared with the entire dental team so they understand that the fee increases are appropriate and will be supportive and confident when discussing treatment costs with patients.
Habit No. 2: Collect 100% Net-to-Net
Successful practices collect 100% of their net production. This means that if a practice produces $100,000 a month gross, which results in $92,000 net when taking into account insurance write-offs, professional courtesies, and other adjustments, it should collect no less than the $92,000 net. Unfortunately, too many practices reach 97% or 98% and assume “you just can’t collect everything.” Sustaining a 100% net-to-net collections rate is very achievable, and dental practices should accept nothing less. The key is to consistently communicate this expectation with the front-office team. This goal should be discussed at every staff meeting. The dentist owner should request input from the team on how they will achieve 100% net-to-net, and should recognize staff members for their ideas and solutions. Moreover, the owner should support the team in reaching this goal by putting in place the necessary payment and collection processes, procedures, and training. Programs are available to assist dentists in learning how to implement better collections. For example, one such program that is free is available at www.TheParagonProgram.com.
Habit No. 3: Plan for Consistent Growth
The third habit of successful practices is having a growth discipline—they plan, focus on patient satisfaction, and work hard to achieve a set growth goal. The first step is having a strong conviction that growth is achievable each and every year, regardless of external circumstances. A good target is 7% growth every year, which will enable the practice to double its production every 10 years. Again, this growth commitment should be shared with the entire team. Foster a culture of growth by making growth planning the main topic of every staff meeting, reporting key growth indicators and updates, and adjusting systems and processes to keep the practice on track. The commitment and engagement of the team will have the biggest impact on practice growth.
Habit No. 4: Believe in the Dentistry and Do Everything Possible to Enable Care
The fourth habit that enables financial freedom is to believe in the value of the dentistry being provided. The clinician should never assume he or she can judge a patient’s willingness or ability to move forward with treatment. Patients must be given financial options that enable care.
A key factor for increasing case acceptance is having each and every team member deeply believe that the dental services they provide enhance their patients’ lives. If the dental team is confident in the value of the dentistry, the patient will be also, which will, in turn, likely lead to a better experience.
Successful practices also make full disclosure a habit. They know it is their responsibility to provide the patient with a plan that is comprehensive and complete and that will provide optimal care.
They also inform patients that flexible payment options (such as a CareCredit credit card) are available to them. This should be emphasized beginning with the initial phone conversation and throughout the entire patient experience. When patients know they have options, they are able to make a more informed decision and are more receptive to care recommendations.
Habit No. 5: View Overhead in Terms of Revenue
Great financial habits encompass both the revenue side of the equation and the cost side. It is important to understand that when one side of the equation is affected, the other is as well—it will go either up…or down. For example, if dental staff costs are 25% of production, the practice is doing quite well. However, what if the practice isn’t collecting 100% net-to-net? The dentist owner will find that staff costs will increase out of the target range because revenue has decreased. When most practices look at “managing” overhead, they seek to cut costs. But if there is an expense problem, the real answer is to grow out of that problem. Practice growth is the number one way to reduce overhead. Therefore, even as a practice attempts to ensure it is not wasting money, it should focus even more of its energy on growth.
Habit No. 6: Know the Difference Between Good and Bad Debt
Debt is not necessarily bad. In fact, some debt can be smart and can lead to financial independence. The key is to avoid, at all costs, bad debt. This includes using an open line of credit because production and collections are not maximized, or carrying balances on credit cards that are being used to finance the practice and not paying them off in full each month.
While it is important to avoid bad debt, good debt is necessary because it helps build the practice and enables growth. Good debt is having a mortgage because it’s cheaper than rent. It’s purchasing technology that provides incremental production and enables better patient care. It’s attaining new patients by acquiring a competitive practice or updating your office so it is attractive to new patients who will, in turn, feel proud referring their family and friends to the practice. These examples of good debt can improve patient satisfaction, stimulate referrals, and accelerate growth and profitability.
By making a habit of integrating these six habits, a dental practice can begin to chart its path to financial security.
All statements and opinions in this article are the sole opinions of the author and not those of CareCredit or GE Capital Retail Bank. Readers are urged to consult with their individual advisors with respect to any professional advice presented.
About the Author
Founder and President, Paragon Management Associates, Inc., Columbus, Ohio