One Weak Link Can Clobber Your Reputation
Professional business training for the doctor and the business team is necessary for the success of the dental practice.
After many sleepless nights and thousands of dollars, Dr. Quandary (based on an actual case study – not real name), with the help of an accountant, an attorney, a dental business consultant and banking authorities, saved his practice from a total meltdown. “Everything was fine for many years and when Dorothy retired, I hired Judy. She came with glowing references and I was relieved that things would continue as before.”
Judy was a dental assistant without any formal business training. She was liked by the dental team and loved by the patients. Her temperament personality type was a positive factor in developing friendships with patients, but was a detriment in developing business systems to promote the success of the practice. After several years, she could no longer keep up the balancing act of unpaid insurance claims, overdue accounts receivables and bouncing checks, so she just didn’t show up for work one day and never came back.
In the beginning of Judy’s employment, she was instructed to do just as Dorothy did and Dorothy spent a couple of weeks showing her the daily routine of the front office. Judy mastered scheduling because of her dental assisting background and her skills were welcomed by the doctor, dental assistant and dental hygienists. As long as the bills were paid and everyone received a paycheck, all was well in Dr. Quandary’s dental practice.
As time passed, Judy felt compelled to offer 10% discounts to patients that paid with cash, check or charge, no matter what treatment or products were received. She also offered a 20% discount to seniors. She invited her friends in and let them pay small monthly payments on large balances. Many services were given at no charge if the patient showed a reluctance to pay.
Judy had a difficult time with insurance and posting of the checks. She decided not to use electronic claim filing because she didn’t know how it worked and Dorothy never used it. All claims were filed manually which further slowed cash flow. She didn’t know about the statute of limitations on payment of insurance claims or how the unpaid claims drove up the accounts receivables. She had told patients not to pay until the insurance paid and she would send them a statement. As the unpaid claims piled higher so did the AR. Cash flow began to dry up.
Judy’s responsibilities included not only the practice accounts receivables but also the accounts payables, payroll and all banking responsibilities. Dr. Quandary did not know how bad things were until he was turned down for a loan because of a history of slow payment on accounts and bouncing checks to suppliers.
And what about follow-up on recall and unscheduled treatment? It didn’t happen. The cutesy postcard went out, but if patients didn’t respond, no one called them. Unscheduled treatments remained unscheduled. The number of new patients coming into the practice had been in decline for some time because there were no working marketing systems to replace those patients that had moved, passed away or lost their jobs and insurance. What kept the practice going was Dr. Quandary’s skill in diagnosing and motivating patients to accept mostly single unit crowns, fixed bridgework, implants and other restorative procedures.
Was the failure of Judy in her position entirely her fault? Complicating matters was the fact that Judy did not have a written job description and clearly defined areas of accountability. As the dentist CEO, Dr. Quandary had relied fully upon Dorothy, who had gained his trust over the years. He gladly passed that torch on to Judy without question as to her ability to do the job correctly. He never saw it necessary to know what was going on in the business office. He had never had dental business training, so he did not have first-hand knowledge of the mistakes that were being made every day by Judy. Ultimately, it was his responsibility to see that his business had systems in place to prevent a catastrophic loss.
Prevention is a key word in dentistry because as dental healthcare providers, we know what happens when there is neglect in oral hygiene practices and avoidance of necessary maintenance and repair. Prevention is also the key to good business practices. The above case file scenario could have been entirely prevented if Dr. Quandary had known how to successfully manage the business side of his dental practice, and seen that those who work in the business office need to be trained and have job descriptions that clearly define their accountability to the success of the practice.
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Dr. Melvin Black – Case Study #689
Dr. Black has been considering downsizing his practice for the past few years and is wondering, is now the time?
Dr. Black’s practice has been in its present location for ten years. He is buying the building and it has appreciated considerably over the past ten years. He employs six team members: 2 hygienists that work 7 days a week total; 2 business team members; 1 expanded duties dental assistant and 1 certified assistant. His college age daughter also works part-time assisting with the marketing of the practice.
He is presently seeing 20-25 new comprehensive patients a month. In 2008, the practice was averaging $67,000 a month in net production. The first quarter of 2009, he averaged $72,000 a month.
To lower his stress. Dr. Black was working between two treatment rooms. The EDDA was placing composites and taking impressions for crowns and bridges while he was prepping teeth in the other operatory. He felt out of touch with his patients because of the pace he was working under. At times, he was uncomfortable with the quality of the dentistry that was being performed under his watchful eye.
Dr. Black’s practice overhead in 2008 was almost 80%. His employee overhead expenses were at an all-time high of 34%.
Bottom line – What Dr. Black was experiencing was an example of working too hard and making too little after all the expenses for the practice were paid. Did it make sense to reduce the number of employees, perhaps see fewer patients and/or work more efficiently but perform 100% of the dentistry himself in order to net more income?
In order to reduce his employee overhead to 25%, which is still 3% higher than the standard in the industry of 19-22%, he needed to have gross production of $4,544 per day and collections of $4,453 and or downsize staff. Based on the hygiene salaries and what is achievable in the industry, they could be producing $1,200 per day. Last year he and the EDDA averaged $3,409 per day in gross production and the hygienists averaged $850 per day.
Dr. Black determined that he wanted to work on all his operative patients from the beginning to the completion of their treatment. It made him feel accomplished and in control of the quality of dentistry that was being provided. He also didn’t want to work as many days as he had previously felt he needed to, in an attempt to reach the daily goals that were necessary to keep his employee expenses under control. Therefore, he elected to work with only one assistant after his EDDA announced that she was relocating. Since working more days was not accomplishing anything except increasing his employee overhead and incurring overtime, he elected to return to working four days a week and offering evening hours on Mondays. He is now averaging $3,248/day, $161 less than with the EDDA that was costing him over $200/day.
Hygiene is now assessing and selling more interceptive perio treatment and has increased up to $950/day on the average. By downsizing one employee, working more efficiently with his assistant, and training for hygiene, his new salary overhead for the practice is now 18% and his total practice overhead is 67%. These numbers mean an additional $112,320/year in Dr. Black’s pocket, with less stress and happier patients because he is providing all of their care.
Now, is 67% all that great? No. But upon further evaluation of his expenses, there is an additional 7% above the standard in the industry of 5% for his facility cost. The good news here is that he is purchasing the building! If his practice mortgage was not included, his overhead is 54%.
Do you think that Dr. Black made the right decision? He sure does! Are you interested in investigating the possibility of downsizing your practice now?