Feeling Overwhelmed by Overhead?
When you first became a dentist, you dreamed of owning a thriving, successful practice full of patients who are happy to not only accept treatment, but to also refer you to their family and friends. Unfortunately, that dream is nowhere near your reality. You have not reached the level of success you know you’re capable of, and it’s fair to say your practice is struggling. Overhead costs dictate your every move, keeping you from investing in the upgrades your practice needs. You’re overworked and overwhelmed, and if something doesn’t change soon, you’re not sure if your practice will survive.
Your overhead costs should be no more than 55% of collections, which sadly isn’t the case in most practices. I know dealing with out-of-control overhead costs is frustrating, but the good news is I’m here to help. Here’s a look at some of the factors contributing to your skyrocketing overhead costs, and moves you can make to turn it around so you can finally meet your full potential.
1. You have too many employees. You might think hiring new employees will make your team more efficient and even increase your production numbers, but I’m here to tell you that usually isn’t the case. Hiring new team members can, however, increase your overhead costs.
Just because you know certain tasks aren’t getting done doesn’t mean hiring a new team member is the answer. It might mean your current team members aren’t properly trained and don’t know which tasks they’re responsible for completing. Creating detailed job descriptions that outline responsibilities as well as your expectations will help give your team members better direction, increasing production numbers and helping you reduce overhead costs.
How can you tell if you actually do need to hire a new employee? Look at how much time patients spend at the front desk. Check in and check out takes about 10 minutes per patient. There are 480 minutes in an eight hour work day. If your practice sees 15-22 patients a day, the front desk is spending 150-220 minutes with patients, which is a workload one front desk person can easily handle.
If the practice is working a normal 8-hour day and one front office person is spending more than 240 minutes with patients, then it’s time to analyze what is actually going on, not only with the employee but the possible inefficiencies of your business operational systems.
2. You give raises just because. If you give out raises to employees every year no matter what, you’re not giving them any incentive to improve their production or their efficiencies. In their minds, if you’re giving them a raise, they must be doing something right. All you’ve managed to do is increase your overhead costs and hurt your practice.
Payroll costs should be between 20-22% of your revenue, with an additional 3-5% to cover payroll taxes and benefits. If you’re giving out raises without any increase to your revenues, I can guarantee your payroll costs are well beyond that benchmark.
I know you want to keep your employees happy, but you have to stop justifying yearly pay increases because “Sarah” has been a loyal employee, or because you know “Dan” is struggling financially. Take the emotion out of it, and give out pay increases based on clearly established performance measurements.
3. You ignore recall. This is a big one. Recall is one of the most important practice systems, yet it’s also one of the most neglected. My advice? Stop ignoring your recall system and start tapping into the thousands of dollars in potential revenue it represents.
Empower your Patient Coordinator to activate the recall system. Instead of only turning to recall patients when there’s a last minute cancellation or no-show, have your Patient Coordinator call a specific number of overdue patients each day, and get them on the schedule. When you make the effort to get these patients back to your practice, you’ll find you’re scheduling more treatment as your patient retention numbers rise, helping to reduce those overhead costs.
If you’re ready to take back your practice, it’s time to make some changes. It takes commitment, but with the right attitude and a little guidance, you’ll finally be the proud owner of the practice you’ve always wanted.
Next week, 4 ways to get overhead under control.
For additional information on this topic and more, visit my blog: The Lighter Side
Interested in speaking to me about your practice concerns? Email firstname.lastname@example.org
Boomer Dentists Not in a Hurry to Retire
I would like to take this opportunity to thank you for your trust and confidence in permitting me to take care of your dental needs through the years. It is with mixed emotions that I am announcing my retirement from dentistry. Because I want to be certain that my patients continue to receive the best possible care, I have carefully evaluated a number of candidates who were interested in assuming my position…
The “announcing I am retiring” letter is less common than it used to be, with more dentists postponing retirement for more years or never officially retiring. I recently spoke with a young dentist who told me about the retired dentist he purchased his practice from who still drops by to visit patients and help with lab work. “I love dentistry and wish I hadn’t retired so soon,” was his lament.
Health care advancements are allowing many of us to live longer, and with that the question of whether our retirement nest egg will last till the end. It isn’t always about money, according to www.TheStreet.com . “In fact, six in 10 say they work for nonfinancial reasons -- because they want to, not because they have to. Those surveyed cite such reasons as staying mentally sharp (18%) and physically active (15%), as well as maintaining a sense of purpose (15%).”
But then again, it often is about money – and dentists who are healthy enough to continue working are in greater numbers. With that, the mindset must change from retirement mode to keeping up on all the changes happening in dentistry including technology, materials, practice management, insurance and the Affordable Care Act. Chances are the practice needs some updates to meet the demands of staying open another five to ten years. You must decide whether to invest in updates or just use what is already there for another few years.
I visited an office that has been at the same location for 35 years. The other dentists in the building had long since sold their practices and moved on to retirement or other endeavors. The décor in the office was frozen in time to the late 1980s when it was last decorated in a southwestern design. Amazingly they still used the old x-ray processor Peri-Pro. They were using a high end dental software system in the front office but still used paper charts for clinical charting. “I could use some new patients, a lot of my patients have been with me for decades but the numbers are shrinking. I am seeing more holes in the schedule.”
If you are a dentist who is not planning on retiring soon, it is recommended that you decide whether you are going to let your practice patient base dwindle into decline, or make improvements to attract new patients and net a sizeable profit when you sell. Or perhaps you have thought about managing the practice while other dentists do the actual treatment?
The perception in your community may be that you will be retiring soon because your practice is outdated and lacks newer technology. It will be necessary to do some updates and marketing to make sure you get new patients. Tell your patients that you are not retiring soon and you welcome new patients. Continue to be active in the community and with the local dental society so you maintain visibility and keep abreast of changes in dentistry. Instruct your staff on what to say to patients when they ask about your retirement plans. Scripting the response would help all to be on the same page. When asked, “When is doctor planning on retirement?” you might have the staff say, “Doctor has not made plans to retire. He enjoys his work and his patients and plans to work for many more years.”
Need help with assessing the value of your practice or help with management while you transition into a retirement plan? Call McKenzie Management and we can help you get the full value out of your practice.
How to Collect More at the Time of Service
Collecting from patients after treatment is an ongoing struggle for many practices. Lack of training of the person collecting the money paired with no system and no protocol often results in poor collections numbers.
Over the Counter payments are credit card, cash and check payments made at the time of service for those services provided that day. All other payments are made after the time of service, such as insurance payments, checks received by mail, credit card payments by phone, and cash payments brought in to pay for a previous service. The term Over the Counter can be misleading; to clarify, there are times that a payment is taken over the counter for services that were provided at an earlier time. Yes, it physically came in over the counter, but this is not an “OTC” payment because the service was not provided on that date.
What percentage should your OTC be? Standard in the industry is 45% of NET production for the month. This may seem too high to you if you are an insurance-driven practice. If you want to confirm exactly what yours should be, do this simple math equation:
Total insurance $ for the month / total of all $ for the month = % of insurance payments. 100% minus insurance % = patient payments. The practice goal should be that whatever is not paid by the insurance companies is paid at the time of service, better known as Over the Counter. Now that you know what percent you should be collecting OTC, how do you know what patient payments are made OTC vs. mail, walked in or by phone? You will need to set up specific payment types to track this such as check OTC, check by mail, etc.
Post the payment properly in order to calculate the percentage accurately. At the end of the month, here is the formula: Total of all the OTC payments / net production = % of OTC payments. How do you get this information? Two reports must be generated. A Payment Summary, Collections Summary or Accountants Earnings Report, and a Production Summary, Monthly Daysheet, or Register.
Calculating the “net” production can be tricky because if you don’t have your adjustments set up correctly, your net production may not be accurate. If you are not aware of how to obtain your “net” production, contact your computer software support staff.
The purpose of not comparing your OTC collections to total collections is if you are doing a good job of collecting old debt, your collections this month may be higher than your net production. As a result, this indicates there was more money coming into the practice that was not OTC as a result of production. It will reflect a lower percentage of OTC than it really is.
You now have the tools to calculate what the OTC should be. Here are some tips for how you can improve OTC:
1) Inform your patients and re-educate them. If you have been allowing them to mail their payments in for the past 20 years, you have to change the way you do things at the front desk. When making an appointment for Mrs. Jones, the Schedule Coordinator says: “Mrs. Jones, here is the appointment card for your next visit. Your portion at that time will be $167 and as a courtesy, I wrote it down on the back of your appointment card for you.”
2) How do you know how much to ask Mrs. Jones to pay? You guess. Too many front office employees get bogged down in insurance statistics. They lose focus of what they are really trying to do, which is treat patients with kindness and fairness, be as efficient as possible, and collect 45% OTC. It is all simply a “guesstimate” of how much the insurance company is going to supplement. Base the patient’s portion on 30-35% for fillings, perio and extractions, 60% for C&B and 90-100% for preventive. Throw in an additional $50-$100 at the first of the year as a deductible for everything except preventive.
“Mrs. Jones, I have no idea how much your insurance is going to help you with this. How about you and I agree that your portion today will be $167 and if there is any difference after I hear from them, I will let you know. Does that work for you?”
Your Financial Coordinator does not need to be an insurance expert. Determine what your OTC should be…and increase your cash flow!
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