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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.