Revenue Opportunity Assessment
by Sally McKenzie CEO
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First allow me to thank you for your LOYAL readership. I have been sharing practice management tips and information through this newsletter for 5 years. It is an honor and a pleasure to be able to do so.
As I write this, I’m on a plane heading back home to LaJolla after having spent the last week in a dental practice along with one of my consultants in what I’ll call Anytown USA. As I was waiting to board the plane, I decided to read the Wall Street Journal, Weekend edition, June 7-8, 2008. The headlines: Markets Slammed by Oil; Oil surge is Fresh Hit to Economy; Recession Fears Ignited. The first paragraph of one of the articles read: The likelihood that the U.S. is in a recession increased Friday following weeks of hopes that the country might be skirting one. If this is indeed a recession, it is the second I’ve seen in the 28 years that McKenzie Management has been helping dentists improve their practices.
What I’ve learned from the various economic highs and lows that we’ve seen over the past three decades is that doing nothing is disastrous. You may not be able to impact what happens at the gas pump, nor can you lower the cost of groceries, but you do have the ability to make sure you’re not among the financial casualties of 2008 … IF you’re proactive. If you’re not, well, make sure you have your water wings ready and waiting, because the sea of red ink may just carry you away.
The dentist whose practice I visited last week is being proactive. This doctor is a general dentist who has been practicing for 19 years. Last year, his practice revenues were just over $1 million. Although he’d noticed a few more openings in the schedule, he hadn’t linked it to current economic conditions. He just thought that something wasn’t right.
When he called me, he said he “felt” that the recall system wasn’t the best. While I’d like every dentist to know if their recall system is effective, when in doubt trust your instincts. If you feel something isn’t right, follow up on that hunch, chances are very good that you are right. Yes, this doctor had a sense that there were problems, but he had no idea their extent. Read on.
Over the past 12 years, nearly 8,000 patients had come to his practice. However, only 1,194 remained active. That’s an 85% patient loss! From January 2004 through May 2008, he had 2,267 patient charts in the file yet barely half were currently active. So in that shorter time frame he retained only 53%.
In the first 5 months of this year, he treated 20 new patients a month but 40 patients left the practice every 30 days. The loss of patients DOUBLED in the first 5 months of 2008 as compared to 2007. Unfortunately, the carnage didn’t stop there.
The unscheduled treatment plan report revealed an average of $86,000 a month in 2008 vs. $42,000 a month in 2007, another figure that DOUBLED in the first 5 months of 2008 over 2007.
However, this doctor didn’t sit back and ignore the situation. He may not have known exactly where the shortcomings were, but he made the effort to find out. The good news, and there is plenty. With proper training, we anticipate his practice will begin capturing a minimum of 75% of this unscheduled treatment within the next few months, providing an increased revenue potential of $65,000 per month.
In reviewing the hygiene department, we found that its potential for appointments thus far in 2008 was 1,565; however, hygiene actually treated 1,060 patients for a loss of 505 appointments or 3.1 openings per day for two hygienists. This is lost revenue potential of $215,036 per year. We found 219 patients were past due for recall appointments. Based on two appointments per year this translates to a $77,964/year in potential revenue opportunities. We project that with some system corrections, the likelihood for major income gain in this area is significant. But the work doesn’t stop there.
Hygiene produced a dismal 6.4% of their production in perio. Assessment, time needed to do so, education, scripting and communication are all lacking. Putting this in place should provide an additional $40,000/ month in revenue potential.
The practice collected 98% of production last year and this year so far, BUT accounts receivable over 90 days were at 35%! With training and system improvements the practice is looking at retrieving another $20,000.
Clearly the practice needs to tighten key systems. Improvements also are necessary in employee training, organization, and communication. This doctor is very fortunate in that his team has a sincere desire to improve and is genuinely motivated.
As this example illustrates, you cannot control the economy at large but you do have powerful influence over your own financial situation. December is a mere six months away, and the decisions you make today will determine whether look at the year that was and count it as one of your worst or one that tested you and your practice to become your best.
Give me a call and learn more about our Revenue Opportunity Assessment, two days, $4,895. Don’t tell me you can’t afford it. You can’t afford not to, just look at the thousands that little investment brought in for the doctor we just visited. Rather than waiting for the government’s next economic stimulus package, create your own! It’s just a phone call away.
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