3.19.10 Issue #419 Forward This Newsletter To A Colleague

Nancy Caudill
Senior Consultant
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Is Your Practice Infected?

Dr. Jeramy Close – Case Study #211

Do you find yourself looking at your business bank balance and wondering where all the money is? You are busy, the business team is on their toes and you have the best clinical team in town.  What is the problem? You have no idea where to even start to perform your due diligence. Dr. Close called us with this very concern. On the surface, his practice appeared to be healthy and successful. However, his financial statement was not reflecting the same health. How could he learn what disease the practice was suffering from and what was the cure?

Where To Start?
It is impossible for a dentist to know the answer to this.  If he/she did, there would be no practice management firms successfully resuscitating ailing practices from an early demise. The first step in healing a suffering practice is to contact a professional practice “detective.” This is exactly what Dr. Close did – smart man!

I arrived at Dr. Close’s beautifully landscaped office first thing Monday morning. I was armed with my magnifying glass, my calculator and 30 years of experience in detecting the source of a practice’s financial disease. His business team was more than helpful in escorting me to a quiet area equipped with a computer holding the practice software and a ream of paper. I began my search.

Where Is The Disease Contracted?
In most cases, members of the business team were taught by the employees whom they replaced.  Those previous employees were taught by those before them, and so on.  In the “old days” there were no computers, making it impossible to maintain statistical data on the health of the practice, including outstanding insurance claims, aging reports, past due recall and production-relevant reports. Insurance claims were tracked manually by keeping a copy of the claim in a file until the check was received and the EOB (explanation of benefits) was attached to the claim and marked as “paid.”

Patient ledgers were maintained by the use of a “3-way” posting system, using a day-sheet, carbon paper, a ledger and a receipt. Statements were generated by making copies of the ledgers in the copy machine and mailed in window envelopes. It was extremely time consuming to determine the total Accounts Receivables, let alone the ratio of the A/R compared to the net production. Unfortunately for many team members, many of these protocols are still in place, in spite of the fact that the results can easily be obtained utilizing the software. As a result, there are many system failures that go undetected.

In Dr. Close’s case, he had no idea what his Accounts Receivables were, whether or not the insurance claims were being paid or if statements were being generated and how. As far as he knew, post cards were being sent to his recall patients but he hasn’t seen any of them since he stopped selecting them himself 15 years ago.

What to Look for:
The health of a practice is not difficult to determine when one knows what to look for, as well as what is the “standard in the industry” for a financially success practice. Here is a list of what I found in assessing Dr. Close’s practice statistics, based on the information retrieved from his practice software.

  • Aging Report – revealed that the total A/R, NOT including credit balances, was 1.6x the net production of the practice. The goal should be 1x or less. This was an excess of $68,000 that was unpaid to the practice.
  • In addition, there was 20% that was over 90 days, instead of a healthier amount of 12% or less. Here was $34,000 not working for the practice.
  • As part of the Accounts Receivables, there was $9,500 in outstanding insurance claims over 60 days uncollected.
  • The largest loss to the practice was unscheduled treatment.  After generating a 56-page report just for the past 12 months, over $760,000 worth of treatment was diagnosed and presented to his patients but never “sold” and completed! He had always “felt” like he was effective in his treatment presentations because the patients were always nodding their heads when he told them what he found.
  • The second largest loss was in the area of past due recall patients. Dr. Close’s practice was over 15 years old but he still employed only 1 hygienist working 4 days a week. The past due recall report revealed 421 past due patients, just in the past 12 months. He wondered why he was storing so many patient records in his garage attic at home!

At an average of $123 per hygiene appointment and not including the exams, this is a loss of $51,783. There is a good chance that this bleeding has been occurring over the past several years as the practice aged.

How to Establish a Cure?
Now that the diagnosis has been made, business systems must be put into place to begin the healing process. Monthly statistics must be monitored to determine the degree of healing that is taking place month after month. Training is necessary for the business team to manage the systems. Daily and monthly team meetings are imperative to protect the practice from new “diseases” by engaging everyone in the well-being of their practice. Call us today to invite one of our consultants to take your practice’s temperature and confirm that you are disease-free or infected. Don’t wait – if you are infected, it only gets worse!

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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