“Pay your team what they are worth, and constantly remind them that they are part of the practice ‘family,’” Shull says. “Allow your staff to be creative, provide input about how to increase the level of patient care, and offer an incentive—even if it is small—to let them know you appreciate them.”
Every staff member that an owner dentist has to replace costs the practice money, Shull advises. Therefore, retention of great employees is essential for success.
The Cash-Flow Conundrum
Limoli says that a general rule of thumb is having at least 60 days of cash on hand and 90 days in receivables to cover immediate operations. From a general business perspective, practices need to have at least two payrolls in the bank, he advises.
“It all depends on the practice and is really a question for their accountant,” notes Limoli. “Factors to consider include the practice’s fixed versus variable expenses, their payroll, and whether the practice receivables are largely coming from someplace other than the patient’s pocket (eg, insurance).”
However, purchasing habits, as well as fixed and variable expenses (see Table 2), do affect a practice’s overhead, profitability, and cash flow from month to month. For optimal profitability, the practice’s purchasing manager should plan orders and stay on budget, manage inventory, and take advantage of dealer offers and promotions, Philp says.
“The practice budget should be 5% to 7%, and an assigned purchasing manager should manage the budget with online programs from the dealer,” Philp suggests. “Many dealers will consult with the purchasing manager and assist them with setting up their budget, online tracking, and ordering.”
Levin explains that the way to begin reducing overhead is to first break it out by category (eg, supplies, laboratory fees, labor—which can be further categorized into salaries, bonuses, benefits), then compare the practice to regional national averages. If the practice’s expenses are high, it’s for one of two reasons: waste, which needs to be eliminated, or low production based on the practice resources.
“The way you bring overhead down is either by eliminating waste, which actually directly lowers overhead, or by increasing production, which lowers the overhead percentage,” Levin says. “Because overhead is expenses as a percentage of revenue, when revenue goes up, overhead goes up less, and the overhead percentage goes down.”
As far as receivables, the experts are close in their ratios, with some saying that having 1.5 times the practice production in receivables is healthy, while others prefer to see it below that. According to Kirk Behrendt, founder and CEO of ACT Dental, most of his clients carry receiveables of 75% to 80% of their production. And, when it comes to collecting those receivables, there is no reason ever, he says, to extend payment beyond 90 days. The only exception might be instances of phased treatment. In those instances, receivables, and therefore payments, would be based on the treatment phase.
“I would love to have zero accounts receivable, but they usually equal about one month’s production,” Margeas observes. “Our financial arrangements are that patients pay for 50% of their restorations up front, and 50% at the seating appointment. If they have insurance, we’ll bill the insurance company first.”
The Expense Headache (and Heartache) of Insurance Billing/Coding Issues
Simply stated, as participatory benefit plans (eg, PPOs, EPOs, etc.) dominate the marketplace, dentists will continue to have their usual and customary fees challenged. In essence, the days of annually raising fees by a certain percentage are dead and gone, observes Limoli.
If practices are “out of network” but willing to accept the patient’s network fee discount, then they cannot list their full fee on the claim; they must list the discounted network fee they are willing to accept as payment in full. Further, it doesn’t matter if they are in or out of network: the claim must tell the truth, and the numbers must speak for themselves.
“The numbers can’t say one thing and a narrative say something else,” Limoli explains. “Taking the patient’s insurance, logistically, is no different than taking a credit card in a true retail environment. You charge for what the patient has received, the same way you would charge a customer’s account for exactly what they purchased.”
He admits that as the economy tightens, unscrupulous advisors search for new and creative ways of dancing around the fact that without insurance, many patients wouldn’t seek even basic preventive dental care. However, insurance billing and coding must be as simplified and streamlined as possible to avoid headaches and heartaches, he says.
“Medical billing for dental procedures is but one example,” Limoli suggests. “Some ‘advisors’ teach using a medical billing code when taking a CBCT—as if you’re searching for potentially clogged arteries—when in fact you’re actually placing an implant.”
Easing the heartache can be as simple as shifting from the overall concept of “production” to “collection,” Limoli says. The write-off is an emotional number that means nothing other than manipulative heartache.