April 2018
Volume 14, Issue 4

Why Is My Income Dropping?

Look inward to maximize your practice’s income potential

Roger P. Levin, DDS

The popular movie quote "Show me the money!" from Jerry Maguire captures the sentiment of many dentists these days. Since the 2000 to 2009 recession, annual dental incomes have been decreasing by anywhere from $25,000 to $30,000 or more. Unfortunately, the cost of operating a dental practice has increased during the same time.

So, why are dental incomes dropping? There are a variety of key factors influencing this phenomenon, including the following:

Increasing numbers of dentists. Since 2004, the number of dental schools in the United States has increased, which of course has resulted in more dentists. This has created higher competition among those dentists to serve the approximately 64% of the American public that visits the dentist once a year.1

Decreasing insurance reimbursements. It's no secret that many dental insurers have decreased reimbursements during the last 10 years. This has led to lower practice revenues and doctor incomes. This trend is likely to continue until most, if not all, insurance reimbursements are at the preferred provider organization level or below.

Changing practice models. The emergence of more small group practices and large practice organizations has altered the playing field regarding delivery of care.

Increasing student loan amounts. Student loan payments bite into doctors' earnings and also create pressure to maintain a certain income in order to pay back those loans while maintaining a reasonable lifestyle.

Increasing costs of doing business. Costs associated with labor, rent, real estate, and regulatory policies always increase with inflation and negatively affect doctors' incomes.

Maximizing Your Income Potential

Of course, it's easy to conclude that the quickest way to increase practice revenue is to increase patients and production. But in this era of fierce competition, finding the fast track to higher income may be as simple as looking inward.

Evaluate Expenses

Start by scrutinizing all practice expenses. Break them down into categories and compare them to national averages that can be accessed online. Assess the status of each category, and determine whether the expense is high or low relative to the national average.

For example, a recent review of a practice with a staff labor expense comprising 31% of its revenue found that it was spending more on its employees than many would recommend. A target of 25%, including all benefits, bonuses, and associated labor costs, is a more sustainable figure. After assessing the staff profile, it was quickly determined that they were highly compensated because they had been employed for many years and were continuing to receive increases in pay at exactly the same rate, regardless of economic trends or how their raises affected the practice's income. This discovery required a difficult choice. The dentist felt very loyal to his team, but he also came to understand that if left unchecked, this situation would require him to work several more years beyond his retirement target.

Ultimately, he was able to negotiate a retirement package for one of his longest-employed staff members. He also advised the other team members that future raises would be in amounts equivalent to the current cost-of-living index and that he was creating a bonus system based on the practice's growth over a certain level. Within a year, he was able to get his income back to his desired target with a minimal effect on day-to-day operations.

Streamline Operations

Another way to reduce costs and immediately increase revenue is by streamlining daily practice operations. Start by evaluating every step of patient interaction from the front desk, through hygiene and case presentation, to scheduling the next appointment.

Look to maximize the number of patients who currently have appointments, employ techniques to fill open time in the schedule, enhance case presentation, and provide additional team training. This requires a demonstration of positive leadership by the doctor, a development plan for every team member, and specific goals for the practice areas (eg, current/new patients, services, referrals, marketing) that will be addressed, streamlined, and tracked.

Spend Money to Make Money

Sometimes, a practice must make investments that will increase the bottom line. With this in mind, it is strongly recommended that practices focus on an internal patient marketing program. A robust internal marketing plan increases the opportunity to achieve referrals for new patients who provide higher average production, which leads to a higher income for the doctor.

Technology can be another beneficial practice investment because it can make dental procedures more efficient and predictable. However, practices should be careful about when and how they introduce new technology. Always consider costs, staff training, maintenance, and return on investment.

Conclusion

Remember, a dental practice is a business, and running a business can be extraordinarily complex. To respond to declining doctor incomes in dentistry, it will be more important than ever to have strong management systems, staff training, financial controls, and a marketing program that is tracked to ensure a return on investment.

Reference

1. National Center for Health Statistics. Oral and Dental Health. US Centers for Disease Control and Prevention website. https://www.cdc.gov/nchs/fastats/dental.htm. Updated May 3, 2017. Accessed February 20, 2018.

About the Author

Roger P. Levin, DDS, chairman and CEO of Levin Group Inc., is a nationally recognized speaker who presents practice management seminars throughout the country.

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