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2.17.06 Issue #206  
   
The Cost of Control


Sally McKenzie, CEO
The McKenzie Company
sallymck@mckenziemgmt.com

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If you want something done right, you have to do it yourself. That saying has been around a long time. How many employees were never given the opportunity to shine because the boss pledged allegiance to that tired maxim? How many CEOs took their companies and themselves to an early grave living those words daily? How many dentists are stressed to the extreme, working and working yet never able to actually get ahead because they simply can’t relinquish control of even the most minute details? And the staff has simply come to expect that doctor will handle it …eventually. How many dental teams envision opportunities that will never be realized because the dentist is simply unwilling or unable to let them do their jobs?

Take the wholly un-empowered collections coordinator for example. Dr. Smith is not happy with collections; they are not where they should be. When Dr. Smith took over the practice, the patients were accustomed to receiving statements in the mail and were never asked for payment. Even though the majority of dental offices no longer engage in this practice, even though the team is trying to implement a strategy to apply a new policy, the doctor, often without even realizing it, is continually usurping the collections coordinator’s ability to address the problem.

Patient Mrs. Jones comments to Dr. Smith that sending statements was never a problem for the other dentist. Patient Mr. Jackson asks Dr. Smith if he’s having cash flow problems and needs to get money from patients right away. So Dr. Smith makes exceptions for the patients, one-by-one. He justifies his actions thinking a few exemptions can’t have any real impact.

Before long, Dr. Smith has a line of exceptions that could snake around the block, down the street, and into the next county. And that collections coordinator who’s supposed to address the collections “problem,” her chances of success are fading fast. She’s been given a responsibility to carry out, however, she does not have the authority to get the job done. Consequently, she cannot be held accountable for the system and its failings.

Then there’s Dr. Edwards who spends an inordinate amount of time explaining post-op procedures and other basics of patient education that his assistant has repeatedly encouraged him to allow her to handle. But he’s so convinced that the patients really want to hear it from him that he is sacrificing hours upon hours of production time each year. 

Or take the case of Dr. Collins, her practice has needed a new patient packet for months, but she insists on handling this responsibility herself rather than assigning it to a capable member of the team. She wants the documents that cover certain policies to be “carefully worded,” she wants to introduce her staff a “certain way,” answer key questions “just so,” convey a “certain feeling about the practice” – and she’s convinced no one can do that as well as she can. But Dr. Collins, understandably, does not have time to take care of it. Even though something would be better than nothing, she simply cannot hand over control. New patients, meanwhile, inevitably cause unnecessary bottlenecks in the scheduling system because information must be explained that could have been covered in detail in the new patient packet. Forms must be completed, routine questions must be asked and answered, and what should be an efficient, seamless system is fraught with inefficiencies.

Dentists are legendary for their need to control. Trusting that others can perform a task as well as they can is no small barrier for many to overcome. But there are only so many hours in a day and superior clinicians need to focus on those activities that enable them to demonstrate their clinical excellence, and not on presenting treatment plans, bartering over payment plans, providing basic patient education, or developing marketing materials.

Facing both the fear of relinquishing a sliver of control and accepting the potential for some measure of failure in delegating certain tasks is a challenge many doctors must overcome if they are ever able to take their practices to the next level. Certainly when delegating authority to manage specific systems in the practice the dentist has ultimate authority, but capable employees crave the opportunity to address challenges, they want the chance to demonstrate their competency.

Next week, determine the “who,” “what,” and “how,” of delegating.

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A McKenzie Management Case Study
Are You Kidding? Where Did All My Patients Go? Quicksand?


Nancy Caudill
McKenzie Management
Senior Consultant
McKenzie Management
877-777-6151
nancy@mckenziemgmt.com

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This case study is an illustration of a family dental practice that may be similar to yours.  The names have been changed to protect the guilty!

Dr. Murray’s story:

Dr. Murray called to inquire about how to determine when to add another day of hygiene to the schedule since his hygienist was so busy and there was no place to put new patients.  He remarked, “My phones are ringing, patients are paying and I am busy for the next two weeks.  My hygienist is working two days a week and is booked for the next six months – Life is Good!”

“Kathy, my schedule coordinator is asking me to add more hygiene days because she can’t get appointments for the new patients that we see.” he explains.  “Do you have any guidelines on when the correct time is to add additional hygiene days?”  My first thought is:  Dr. Murray has another problem going on that needs to be addressed first and he isn’t even aware of it!

Let’s review some facts:

Practice History:

  • Dr. Murray has been practicing in the same location for 10 years
  • The practice is seeing 20 New Patients a month
  • Sandra (the hygienist) works 2 days a week and 50 weeks per year

Get out your calculator…this formula can be applied to your practice just as it was applied to Dr. Murray’s.  It is very simple. 

The formula:

Sandra sees 8 patients per day
x
She works 100 days a year (2 days a week x 50 weeks)
= 800 appointments per year available

Dr. Murray said that he sees 20 New Patients a month and has been averaging this for the life of the practice (10 years).

20 NP x 12 months x 10 years = 2400 patients

(Dr. Murray’s practice was a start-up so he had no existing patients in his practice.  Obviously, if you have purchased an existing practice, you will have your new patients plus the patients that were established prior to your purchase.)

Let’s apply some additional math:

800 hygiene appointments available for the year
x
2 (the minimum # of recalls per year per patient)
= 400 active patients

What this is saying is that Sandra can only provide regular hygiene visits to a maximum of 400 active patients per year, based on her working schedule.  What happened to the other 2000 patients that are in Dr. Murray’s practice?

Quicksand got them!  All those patient charts on Dr. Murray’s shelves were giving him a false sense of security because only portions of them are “active” patients.  An “active” patient is a patient that is being seen on a regular basis in his hygiene department.  It is not a patient that was seen on an emergency basis or a patient that hasn’t been seen in over two years.  These patients have no effect on the growth of his practice.

Recommendation to Dr. Murray:

  • Determine how many “active” patients are in the practice by using the McKenzie Management’s methodology and use this number as your baseline.
  • Monitor the # of new patients that are seen vs the # of patients that are inactivated to determine the growth of the practice.
  • Track the # of patients that are “lost in quicksand” through the hygiene department by running past due recall reports and assign an employee to “dial for dollars”.
  • Add additional hygiene days as needed by using the McKenzie Management’s methodology to avoid adding hygiene days unnecessarily and discovering that your hygienist is now not busy enough!
  • Work with McKenzie Management for 12 months to help him grow his practice and implement new systems to monitor his growth.

Conclusion:

Providing consulting services across the country, we find that small country town practices as well as large metropolitan practices suffer from this deep hole of lost patients. 

The loss of hygiene patients = loss of practice growth

It is true that the hygiene department is the lifeblood of a practice.  Calculating properly the # of hygiene days needed on a quarterly basis and adding additional days as required is a direct result of a healthy retention of patients.  If your practice is like Dr. Murray’s and you have maintained the same number of hygiene days for the past 12 months…your practice is sinking in quicksand!

If you have any questions about this information or would like to share your solutions, feel free to contact me at Nancy@MckenzieMgmt.com or call me toll-free at 1-877-777-6151 x 31.

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Qualified Retirement Planning for Your Dental Practice - Affordable and Necessary


Bruce Bryen, CPA
Partner, The Snyder
Group, LLC

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You are earning a reasonable amount of money in your dental practice. You know that you need a retirement plan to secure your future. You have met with your consultants year after year and the only response you get to your questions is “If you want an IRS qualified retirement plan, you must not discriminate against your employees. They must have the same coverage as you.” After weighing the options that you have been given, you have come to the conclusion that your dental practice can not afford a retirement plan because of the additional costs needed to ensure that your employees and you are in the same position based upon the advice of your advisors. You have reviewed the studies that have been prepared for you and they reflect a large share of the deductible contribution allocated to your employees as well as to you. At this point, the decision to provide for your future and to reduce your current income tax problems have been put on hold because you can not afford the cost that you have been told is necessary for your employees’ share of the payment to a qualified retirement plan. You are frustrated and confused. Your personal income taxes keep getting higher and you have considered talking to an attorney about other areas of savings that are complicated and restrictive as to the control of the funds, such as irrevocable trusts and family limited partnerships. You don’t know what to do.  

The following is intended to make you rethink your position concerning the ability to pay for and afford a qualified retirement plan contribution that you know is necessary to ensure your retirement.

If you had the advisors with the experience to design a qualified retirement plan that would provide for your future and that you could afford, it has been my experience that you would accept it.  Designing a qualified retirement plan for a dental practice is a challenging and rewarding experience. An interview should be held between the dentist and an experienced retirement planner to discuss the ability to use eligibility requirements such as dates of birth, years of service, job classification and other areas of testing to determine who does not have to be included in the design format of a qualified retirement plan. Rather than starting with the theory of who must be included in the plan, the idea would be to develop a plan that meets all discrimination tests but works with the reverse concept of “ who does not have to be included” .

Once the determination has been made of the eligible employees, a study is prepared to see what contribution would be needed and the allocation of the contribution per employee, including the owner and key employees of the dental practice.  Since there are many variations of retirement plans, the contribution level and its affordability are then discussed with the dentist-owner. It is important to keep in mind that a good planner does not merely look at the dental practice and its cash flow.  The overall financial picture of the dentist is also needed because the concept of pretax funding is critical to the total well being of the dentist. The qualified retirement plan allows the ability to fund a retirement plan with the use of before tax dollars and most times substantially reduces the overall federal and state tax burden of the dentist who will contribute the largest share of the retirement contribution and should receive most of the benefit. Without knowledge of the personal financial picture of the dentist, the overview is missed and dollars will be wasted.

These retirement plans are not “boiler plate” designs for submission to the IRS. These are customized qualified retirement plans that are carefully designed for the dentist who wants to use every tool available to defer as much income as possible, build wealth as quickly as is affordable and live in a comfortable manner while the years of funding the retirement plan take place.

The advisor and dentist should discuss concepts such as the need for large personal savings accounts or investments. Retirement plans are immune from creditors. Personal investments and savings accounts are not. Retirement plans do not pay income tax on the accrual and accumulation of income and growth in their investment portfolio. As we all know, with a personal investment, unless it is a tax free bond or similar asset, the income is taxable when it is available to the investor. The ability to act as your own trustee and make all the investment decisions of the retirement plan is another feature that gives wide flexibility to a qualified retirement plan compared to an irrevocable trust, as an example, whereby you probably are prohibited from the investment control of the funds that you have advanced to the irrevocable trust.

Talk to an advisor who knows how to design a qualified retirement plan that is for the benefit of the contributing dentist and your ability to afford what you need will be available for you and your future. This is one tax shelter that the government wants to enhance. Many large businesses today are doing away with their retirement plans. You have an opportunity, using an expert in this field to be creative and start what others are ending in order to secure your future.   

Bruce Bryen, CPA has successfully assisted dentists with their personal and financial matters for over thirty years. As a partner in The Snyder Group, he delivers creative strategies and prudent financial strategies to help dentists build and protect wealth at every stage of their careers. His extensive expertise includes financing, debt restructuring, retirement planning, and tax advising to help dentists keep more of what they earn.  He can be reached at bbryen@snydergroup.net. 1-800-988-5674.

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