$$$ Woes Holding You Back? Help is Here.
It’s the skeleton in the closet that few doctors want to talk about. They may lament that the schedule has been spotty. They may acknowledge that treatment acceptance isn’t within striking distance of the pre-2008 heyday. Those are areas over which they feel they have had little control. But bring up the issue of “doctor debt” and most want to change the subject to just about anything else. Why? You probably know the answer. Many dentists are carrying between $300,000 and $500,000 in debt, from business credit cards, equipment leases, lines of credit, loans, mortgages, and the list goes on. In some cases, it’s simply been the cost of doing business; in others; it’s poor financial management. But that doesn’t mean that achieving peak performance is a dream never to be realized.
Consider the case of Dr. Tom. He has been in practice for more than 20 years in the upper Midwest. His practice has been pounded by monthly debt obligations that were topping out at nearly $8,000. Dr. Tom said that over the past couple of years, the only thing he could count on in his practice was writing check after check after check on a seemingly endless string of debt obligations. Overhead was pulling him under. He had to make significant changes - not only in his debt obligations but in the way he ran his practice. It’s the latter that often proves to be the greatest challenge for doctors to come to terms with. They are eager to get their financial obligations under control. But the real work of digging into practice systems and improving the daily operations is what will ensure that the doctor doesn’t find him/herself drowning in red ink down the road.
Early on in their careers, many dentists lock into a pattern of running their systems that consistently yields lackluster results. During robust economic times, the inefficiencies are masked. But living and working through the challenges of the last few years has stripped away the veil and revealed serious system shortfalls that practice bottom lines can no longer absorb.
Many dentists will sense that “things just aren’t right,” but it isn’t until they stand toe-to-toe with serious financial struggles that they realize the way they’ve always done things no longer works in the new economy.
More and more dentists are eager to gain control of their finances and thereby regain control of their practices. The key is to address the situation before it gets out of hand. At McKenzie Management, we advise doctors that the first step is to come face-to-face with reality. It begins with conducting a cash flow assessment in the practice. That means logging the numbers for net production and collections over the last 12 months, the percentage of accounts receivables over 90 days, total monthly payments on leases, loans, and business credit cards. In addition, look at average monthly payments to the lab, dental supplies, salaries, taxes, and benefits as well as monthly facilities costs and all those miscellaneous expenses that tend to add up.
From there, it is a matter of evaluating each individual dentist’s situation. Joe Flumian, McKenzie Management’s Practice Financial Expert, may look at consolidating all of the doctor’s loans and refinancing them at a lower rate. In some cases, it is more cost effective for a dentist who is leasing an office to purchase the space. When refinancing, we encourage dentists to look for loans that allow for additional principal payments, which will effectively lower their interest rate over the long term.
The key is to be proactive. Once the stress of the debt obligation is reduced, then the doctor can focus on improving practice systems. For Dr. Tom, who was shelling out close to $8,000 per month, he has reduced his debt obligation payments to just over $5,000 a month and is in the midst of overhauling his management systems, which is expected to increase his profits considerably. When the practice management systems are running at maximum efficiency, the typical practice can expect to increase revenues from 25-35% within 60 days.
Next week, addressing debt is only part of the journey to peak performance and financial freedom.
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Do YOU Owe Your Patients Money?
Part of a practice owner or administrator’s job is reviewing the Credit Balance Report monthly to make sure patients are not owed refunds. However, as consultants we find that there is often a lack of understanding when it comes to the information relative to your Accounts Receivables (money that patients or insurance companies owe you).
How is an Account Balance Created?
Mrs. Jones is seen in your practice for a 2-surface tooth-colored filling and she purchases a tube of toothpaste. A fee of $275 is posted for the filling and also a fee of $15 for the toothpaste. She pays for the toothpaste in full and pays an estimated “patient portion” of $100 for her filling, in hopes that her dental insurance will cover the balance.
2-surface tooth-colored filling: $275
At this point, if an Aging Report is generated, Mrs. Jones’s name will appear, illustrating a current balance of $190.
Determining the OTC Payment Amount
There are various ways of determining what the patient’s OTC amount is when insurance is involved. As an example:
With any of the above applications, it is all still a “guess” on how much the insurance company will reimburse the practice for the service provided.
2-surface tooth-colored filling: $275
INSPMT, Insurance Payment: $225
As a result of the insurance payment paying more than what was anticipated, there is a credit balance on her account. Now what happens? The “wrong” answer is…this credit balance sits on the patient’s account until either the patient has additional work done or until the patient realizes that they “overpaid” and calls the office and requests a refund.
Good Customer Service
“Mrs. Jones, find enclosed a reimbursement in the amount of $35. We are happy to report that your insurance plan submitted more than anticipated toward your recent dental treatment. As a result, we are pleased to be sending you the difference.
Requirements of Your State Board
More importantly, when a patient pays you in good faith, provide the customer service that they deserve and refund their credit. It is much more fun to send a patient a check opposed to a statement, and they will think so too!
Dental Business Coordinator Wanted, Will Train
Speaking to dentists across the country, we know it is difficult and sometimes near impossible to find qualified and experienced dental business staff. This shortage of skilled candidates forces dentists to consider the hundreds of available applicants with experience ranging from corporate middle management, real estate sales, banking, marketing and customer service. The foundation of customer service, banking, marketing and management would certainly make for a great dental business manager, the only component missing is the “business of dentistry.”
“I can teach her and my dental assistant can help with terminology and insurance coding,” says Dr. Doesntknow. Taking time to train is essential for the success of the new employee. Without training, you are setting this person up to fail and costing the practice in lost patients and revenue. If the dentist and the dental assistant are busy with patients, who is going to do the training?
Take this case scenario of Dr. Doesntknow who hired Mary Marketer, a cheerful, educated and enthusiastic woman. Dr. Doesntknow relied heavily on his former business coordinator to enter all the treatment plans and do the insurance narratives and attachments to electronic claims. Now that she was no longer employed there, he knew that he had to either do those tasks himself, or delegate them to someone else. He would have to train himself as he didn’t know what his former business manager did all day at the desk. His dental assistant was not happy to hear that she was to train Mary Marketer and also take on entering all treatment plans.
Mary Marketer was getting the scheduling down and struggling to learn everything as fast as she could. As expected, she was making errors such as making appointments but forgetting to enter them into the computer. On the fourth day she was tired and knew she would have to spend the weekend studying teeth numbers and ADA codes. A pep talk was not coming from Dr. Doesntknow or his assistant.
As expected, Dr. Doesntknow fell behind on getting claims filed. His assistant did not have enough experience with the system to train Mary, but did make an effort to help her with scheduling. Denied claims started to come in as Dr. Doesntknow had omitted information necessary to file claims successfully. Cash flow started to suffer. Patients who needed to make appointments for treatment but wanted some questions answered first became names and numbers on a legal pad. Calls were not being returned in a timely manner, so customer service started to suffer too.
After careful consideration, Dr. Doesntknow admitted that even though Mary Marketer was great with the patients, she was in dire need of training by someone other than himself. His biggest concern was insurance processing, collections and building the practice.
A large percentage of dental practices rely on insurance payments to survive, so obtaining prompt reimbursement is critical. Correctly coding procedures is crucial to being paid, and also to avoid an audit by a contracted insurance company. Important as it is, most dentists receive little or no instruction on documenting and properly coding claims. Because of this, most rely on their administrative staff for this task. It would be a while before Mary Marketer would have a clear understanding of this process.
Hopefully Mary was given a realistic explanation of what was expected of her, along with a written job description to back it up. It would typically take from 3-6 months to correctly train a person with a solid business background to present treatment plans, code and document insurance and schedule to production goals, manage patient flow and deal with difficult patients. With this in mind, you must have a written training protocol for your business staff. Booking the time into the schedule and committing to spending that time in training is crucial for its success. Investing in Dental Business Training with emphasis on insurance and collections would certainly get Mary Marketer going in the right direction.
People who do their jobs well make the job look easy. When replacing a key person on your staff, have a clear picture of everything this person brought to the position and what you would like to add to the position. The business of dentistry requires detail, structure, follow through, excellent people skills and knowledge of dentistry.
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