09.01.06 - Issue # 234 Forward This Newsletter To A Colleague
Accounts Receivable
Location & Success
Office Managers

Computer Reports: Your Practice ‘GPS’
by Sally McKenzie CEO
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Technology is amazing. Take global positioning systems, for example. If you are a runner, walker, or biker, you can purchase a GPS to wear on your wrist. This handy little device not only helps you map out your course and guides you home if you’re lost, it will monitor your heart rate and determine if you’re over or under exerting yourself. It will analyze and customize your workouts. It can be your virtual training partner, tracking your time, your pace, your distance, and your goals. It will even race you against a digital competitor. Amazing.

Wouldn’t it be great if you had a GPS for your practice. Strap the instrument on to your wrist, it will monitor your production, overhead, collections. Check your scheduling efficiency. Provide regular reports on patient retention. Sound the alarm when the hygiene department is producing below its specific goal and so on.  

To a certain extent, your computer software system is rather like a practice GPS. No you can’t fasten it to your wrist, but the reports - if you pay attention to them - can give you a good idea where you are, if you’re on course, heading off course, and, if so, just how far astray you’ve gone. The key is to regularly check your status. And therein lies the challenge. Most practices have access to key reports and data but many don’t use the information to monitor and adjust practice systems.

For example, accounts receivable. Are you familiar with this report? As important as it is to the financial health of the practice, few dentists really know what their accounts receivable is. Yet the AR report shows how much money is owed to the practice from patients, insurance companies, or other third parties - a rather important detail.

It should never be more than one month’s production. In other words, if you typically produce $80,000 per month, patients/insurance should never owe you more than that amount at any given time, and preferably, they owe you less.  If patients owe you more than one month’s production, your alarms should be sounding and your heart rate should be increasing.

“Oh yes, Sally, I checked my accounts receivable and my practice is just fine.” Okay, you looked at the numbers, but did you do the math? Let me explain. Before you take those figures at face value, make sure you are reading them correctly. Otherwise, you may be thinking you’re heading due north when your practice is goin’ south. 

 To give you a truly accurate picture of where your practice stands, the report should include every account with an outstanding balance, the date of last payment, and a note indicating if payment was from the patient or the insurance company. To ensure you have the complete picture run the Outstanding Insurance Claims report. This report is exactly what the name indicates – it lists all those insurance claims that haven’t been paid and are just sitting there. If a claim has been denied, zero it out, so that it goes off the report. Otherwise, you’re getting faulty information. 

The AR report also should “age” the receivables showing the “current” column, which is revenues produced in the last 29 days that have not been collected, as well as a breakdown of accounts that are 30, 60, and 90 days past due. The goal is to have a minimum of 45% over-the-counter collections for the month, and no more than 55% in the current column awaiting insurance reimbursement.  If you don’t accept insurance assignment, you should be collecting 100%.

Be sure to add credit balances back to the total accounts receivable. Finally, total all monies over 90 days delinquent. The percentage should not be over 12% of your total accounts receivable. If accounts receivable exceeds your monthly production, that’s a red flag to you and your Financial Coordinator indicating that problems need to be addressed promptly in one or more of the following areas:

• Insurance system
• Billing system
• Financial policy
• Presentation of financial arrangements
• Inability of Financial Coordinator to ask for money

Not only is the information essential for the doctor to monitor cash flow, the accounts receivables report provides the Financial Coordinator with necessary information that enables her/him to customize the messages on patient statements and when making necessary collection phone calls.

Next week, what else are those reports trying to tell you? 

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com.

Interested in having Sally speak to your dental society or study club? Click Here.

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“Location…Location…Location”
A McKenzie Management Case Study


Nancy Caudill
Senior Consultant
McKenzie Management
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Dr. Fred Potter

The e-mail arrived to McKenzie Management late Monday afternoon from Dr. Potter.  “My practice collections have been declining for the past 12 months!  Help!”

Just so you will know, Dr. Potter keeps impeccable spreadsheets relative to the statistics of his practice.  However, he admitted that he does not fully understand how to interpret the information or what to do about it if he did.  This makes sense to me…otherwise he wouldn’t be calling us!

Here is what I discovered when I arrived at Dr. Potter’s office.

Dr. Potter’s Office Facts:

  • He has a “start-up” practice of a few years.
  • He is leasing the space for the practice because the price is right and it is close to his home.
  • There is ample room to have 4 operatories, plenty of storage, lots of business office space and a nice area for the reception room.
  • The location is in a shopping center that has no “name brand” anchor store, many of the office spaces were vacant, there was an auto repair shop, a social services assistance office, etc.
  • Dr. Potter has made major investments in high technology tools such as digital radiography, intra-oral cameras, computers in all the operatories, a television in the reception area, etc.

The first question to Dr. Potter was:
“How would you describe your patient base?”

Thinking about this, his answer was:
“The majority of my practice is comprised of patients with state financial assistance in order to receive dental care.”

The next logical question was:
“OK…and what is your practice philosophy?”Now this was a much harder question for him because it required some thought.   

  • “I want to provide excellent dental care to patients that appreciate my skills and I can feel comfortable with my fees in exchange for my services”
  • “I want to be profitable enough to be able to reduce my debt load and provide for my family”

Again, these are reasonable expectations from his dental practice BUT……………and this is a big “but”……the location that he has chosen will limit his ability to achieve his practice goals.  Certain statistical steps are necessary in order to make this determination.

Step 1. – Evaluate your practice overhead, using the industry standards.  A total overhead percentage for a single-doctor general practice is around 50-60% of the net collections.  Dr. Potter was running at 80% with limited staff and no hygienist.

Step 2. – Determine what your net collections need to be in order to have a more profitable practice, using the same expenses that were used in Step 1.  Supplies, lab, etc. will increase incrementally with increased production, but we are only going to look at the big picture and keep it simple.

Step 3. – Based on your newly determined net collection figure, increase this amount by the average dollars of production adjustments that you experienced the previous year.  (If you feel that you are not going to post as many adjustments, then make an educated guess.)  ADD this dollar amount to your collection dollar to determine what your gross production goal will be.

Step 4. – Divide the new production goal by the number of days you will be working for the next year and this will give you a daily gross production goal.  Divide this by the number of hours you work per day and now you have…..

Your Daily Hourly Goal!

Step 5. – Review some of the more common procedures that you perform.  Determine how long it takes you to perform each one and see how it compares to your hourly goal.  For example:

Let’s say that it takes you 1 hour to complete a 2-teeth 2-surface posterior resin procedure.  Your fee is $200 per tooth x 2 teeth = $400.00

Your hourly goal is $380.  You are fine here.

Let’s look at a crown and cementation procedure.  90 minutes to prep and place the temp (you only have 1 assistant so you make your own temps) and another 30 minutes to cement the permanent crown.  This is a total of 120 minutes and your fee is $650.  $650 / 120 minutes = $5.41 per minute x 60 minutes = $325 per hour.  This is below your hourly goal.

How much will you be paid for your services?

The amount that you charge and the amount that you actually collect can, in many cases, be very different.  Let’s take the composite example above.  If you are only going to actually receive a reimbursement of $175 for your services, you are NOT fine!  Understand?  We won’t even think about the crown…

Recommendations:
All is not lost for Dr. Potter!  He has options:

  • He can sell the practice to another doctor who can afford to operate with less overhead.
  • He can consider bringing in an associate who can practice with a lower hourly goal.  Dr. Potter can open another office in a location that is more conducive to his practice philosophy and financial needs.
  • He can invest in a marketing campaign and attempt to attract more “fee for service” patients.  However, his location is a deterrent.

Conclusions:
Needless to say, Dr. Potter was not exactly excited to see the statistics.  However, it has helped him to map his career path for the next several years.  He elected to work on an exit strategy over the next three years and sell the practice.  He wants to stay in the area because it is close to his home.  He will look for a retiring doctor that wants to bring in an associate to transition his practice to.

The success of a practice can be determined on the location.  It is wise to have a marketing study or community overview report created for a location that you may be considering.

If you would like more information on how McKenzie's Practice Enrichment Programs can help you IMPLEMENT proven strategies….. email info@mckenziemgmt.com.

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“You’re Not the Boss of Me”
The Challenges of Staff Management


Belle DuCharme, CDPMA
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In my last article I touched on the challenges of gaining respect from your fellow team members if you have been given the title of “Office Manager” or “Business Manager.” While in “the learning curve” of trying to establish yourself as a manager you are put in a vulnerable position unless you are fully supported by the CEO Dentist.  Many Dentists hire someone that they feel will “take charge” where they have failed.  Embracing the position is difficult without the skills and knowledge to see it through.

If the team is established, there may be office politics in place that are unknown to you.  In McKenzie’s Advanced Business Training course, we work on mastering information and training that insures that you are skilled in areas necessary for the success of a great manager.  When encountering a problem with a team member that is under your supervision there are guidelines to consider especially if you are new to the practice. 

Describe the problem.

What is the situation or behavior that is bothering you?  At this moment in time, it is your problem to solve. Is it that the assistant is talking to another co-worker, or is it that the patient was on time and now has to wait?    By removing the emotional charge from the issue you can look at it simply and design a solution.  As a Business Manager, you are in charge of accountability for all systems that run the dental practice.  Problem solving skills can be developed when one has a clear understanding of the operating systems of a dental practice.

After describing the problem, the patient is not being seated on time, vocalize how if affects you and others in the practice.  Remind the assistant that patients are told to be on time. When they are left in the reception room too long, they begin to doubt the importance of customer service and they complain about the wait.

Be specific with a solution.

State clearly what you would like to see happen, firmly and concisely.  For instance, tell the assistant, “please seat the patient as soon as you see the light (or other type of signal).  If you cannot seat the patient, please tell me when you will be ready so that I can explain to the patient about the wait or so I can get someone else to seat the patient.”

Studies show that most patients are willing to wait up to ten minutes without saying anything but at fifteen minutes begin to become agitated and may ask about the wait.  It is far better to anticipate this behavior and acknowledge the patients’ concerns.

Describe the consequences.

Articulate the positive consequences that come with fulfilling your request.  The patient will be happy and probably refer friends and relatives to the practice.  The practice will stay on time and everyone will get to lunch on time.

In delivering any request it is important to be pleasant and to say thank-you.  Staying composed and calm under pressure is mandatory for management of other people.  This behavior instills confidence in other people and teaches the team members that you can “handle” any situation.

As the Business Manager, it will be your responsibility to create office policies if they do not exist or to change policies that don’t work or are outdated.  Knowing what to change and when to change is important to the success of any business.  Understanding the numbers and systems that run a dental practice is the core of The Advanced Business Course.  There is an old saying that “Knowledge is Power”. I have many testimonials from my students about the confidence and power they feel after completing the Advanced Business Training course.  One of my recent students went back to her office after attending the course and created job descriptions and set up training sessions on the computer software for her dental team. “I want everyone crossed trained correctly so that there is consistency in how we answer the phone, make appointments and collect fees.  Before attending the course, I did not know where to start to get everyone going in the same direction.  By making a written system for all to follow we now have understanding instead of chaos.”

Does your Business Manager need to be empowered to make the changes necessary to take your practice to a higher level of success?  I challenge you to make a difference and join us for The Advanced Business Management course.  Call today for more information and let’s get started.

For more information on McKenzie's Advanced Training for Front Office, Office Managers or Dentists email training@mckenziemgmt.com, call `-877-777-6151 or visit our web-site at http://www.mckenziemgmt.com/.

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McKenzie Management
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1.877.777.6151
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