Roger P. Levin, DDS, shares management techniques and marketing strategies for practices to start the next year in strong financial shape.
Q: What is the No. 1 thing dentists can do to improve the financial performance of their practices?
A: Fix their collections. This is an area where most practices can reap significant benefits. Our studies show that the average collections percentage is in the low 90s; it should be in the high 90s. A 5% or 6% increase in collections can make a dramatic difference to a practice’s bottom line. If the practice generates $500,000 in annual production and you increase your collections by 5 percentage points during 12 months, you’ve just added $25,000 to your finances. If your annual production is $1 million and you improve collections by the same amount, you would have an extra $50,000 in the practice’s checking account. Talk about an instant cash infusion!
Think of collections this way: First, you’ve already done the hard work of persuading this individual to join your practice as a patient. Second, you’ve already motivated the patient to accept recommended treatment. And third, you’ve already performed the treatment. So, after doing so many things well, you’re going to stumble at the end and not collect your fee? By tightening up their collections, most practices can reap substantial rewards.
Q: What are some of the reasons for poor collections?
A: There are 2 main reasons: mindset and execution. What I mean by “mindset” is that there are still some dentists who have this outdated view of dentistry strictly as a profession and not as a business when, in reality, it has always been both.
But that antibusiness mindset has consequences. It probably means your team doesn’t ask for payment at the time of service or that the front desk team doesn’t follow up with patients who are late paying their bills. Don’t get me wrong: I’m not blaming the staff. It’s up to the dentist to set the priorities for the practice. If good business practices aren’t a priority for the dentist, then they won’t be for the staff either.
Q: What about those practices that are led by business-minded dentists but still have collections problems?
A: Then the issue is execution. And by that, I mean systems. The vast majority of practices don’t have documented step-by-step systems in place. Without systems, team members don’t always know what to do and don’t consistently perform the correct activities, such as collecting at the time of service. Without systems, the practice operates by habits, and just how good those habits are will depend upon the individual team members.
Q: What are some other key financial factors?
A: In the new dental economy, dentists have to do more with what they have, and that means current patients. Most patients are candidates for a variety of dental procedures other than single-tooth treatment. Performing an annual comprehensive exam is a great way to apprise patients of their immediate and long-term needs as well as inform them of various services that can improve their oral health and their smiles.
Many active patients slip through the cracks due to poor scheduling procedures. The goal should be to have 98% of active patients scheduled at all times. Too many practices have hundreds of former patients who have been allowed to slip into inactivity. The scheduling coordinator should work with the hygiene team on a project to reactivate and reschedule as many of these patients as possible, starting with the patients who have been seen most recently.
Reactivating hygiene patients leads to a whole slew of positive ramifications. A fuller hygiene schedule fuels an increase in doctor treatment. If proper collection procedures are in place, the practice can enjoy a significant bump in production. In addition, with more patients in the practice, there are more opportunities to generate referrals. If your current patients are happy with the level of care and customer service you provide, then they are happy to refer friends, family, coworkers, and neighbors who are in need of dental care. Of course, your team will need to be proactive about asking patients for referrals.
Q: Do you see spending as an issue?
A: Absolutely. High overhead is one of the most intractable financial problems dentists have. It takes persistence and vigilance by the doctor, office manager, and team to reduce spending and cut waste. The first thing you should do is look at every dollar you spend. This can be a tedious, painstaking process that nobody really wants to do, but it will often yield shocking discoveries, such as: Why is the practice paying for phones nobody uses? Obsolete magazine and internet subscriptions? Service warranties for retired equipment?
Some of these automatic payments, which were set up years ago, can be deadly to your bottom line. It’s like paying $200 a month for premium cable when you only watch 7 channels. That can add up to a tidy sum through the years.
Another opportunity is inventory. Many practices could qualify for an episode of Hoarders by the state of their supply closets and storage areas. When was the last time anybody went through these spaces? You often find tons of usable supplies that are buried behind old equipment and junk. Practices should make it a point to clean out their storage spaces twice a year. If you find good supplies, use them before ordering more. If you discover expired items and broken equipment, dispose of them properly.
Q: So, to summarize, what are the important take-away points?
A: Most practices can improve their financial performance significantly by fixing their collections, keeping patients active, promoting comprehensive care, and cutting waste and unnecessary spending. For the majority of practices, starting with collections makes the most sense because it can have the biggest immediate impact. Once that has been fixed, you can then work your way through the other issues as quickly as possible.
Dr. Levin is a third-generation general dentist and the chairman and CEO of Levin Group, a leading dental management and marketing consulting firm. To learn more about the company’s training and consulting services, visit levingroup.com.
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