Uncover the practice profit killers

You know how the hairs stand up on the back of your neck when you’re staring at those practice financial reports that are telling you something isn’t right? Or that chill that washes over you when you realize that you may not be able to pay yourself this month? Then, seemingly without warning, there is so much red ink the books look like a crime scene. Time to bring in the investigators.

The industry standard for overhead is 55 per cent of collections. If you are currently at 60 to 65 per cent, you probably don’t need to notify the authorities. If yours is higher, you may be looking at doin’ hard time. Some practices report their overhead as high as 80 per cent. They are making a mere 20 cents on the dollar! Now that is criminal. The first step in arresting the profit killers is to lay down a few financial laws.

Establish the following budget targets:

• Dental supplies = 5 per cent
• Office supplies = 2 per cent
• Rent = 5 per cent
• Laboratory = 10 per cent
• Payroll = 20 per cent
• Payroll taxes & benefits = 3 per cent
• Miscellaneous =10 per cent

While there are several factors that influence overhead, look first at the most frequent offenders: high expenses, inconsistent production and low collections.

Still paying for the ‘Good Ol’ Days’?

One of the probable high expense culprits is rent that is tipping well over 5 per cent of monthly collections. You say you have an alibi, but it’s probably not going to hold up during cross examination. Your story is this: You moved into this gorgeous new space that you were certain the patients would absolutely love. At the time, before the economy collapsed to be specific, you convinced yourself that a little boost in production here and there would cover the expense. You ran the numbers, did the math, it all added up just fine, at least the way you looked at it. You reasoned that you simply had to take the plunge, it was now or never. Unfortunately, now you’re wishing it had been never.

Many doctors convince themselves that because the space looks good and it’s in a good location, they will be able to improve productivity. They don’t conduct a careful investigation of the area. Worst of all, they simply disregard the importance of the 5 per cent parameter.

For example, let’s say you produce $25,000 per month. You collect $21,000 per month and you want to move into a new facility with a total rent of $2,500 per month, which would be a $1,450 increase over what you are paying now. You justify the increase by telling yourself that a couple more crowns per month will take care of it, not a problem. If only it could be that simple.

With a $2,500 per month rent bill, you will have to collect a handsome $50,000 each month to stay within the 5 per cent guideline. Therefore, you will have to increase collections by a whopping 29 grand to cover that itty-bitty, little $1,450 per month rent increase. Feel like you’ve been robbed?

Moreover, there is no guarantee that the bigger, better space will bring in more patients, particularly when times get tough … unless you develop a plan for how you will attract new patients and, most importantly, keep the patients you already have.

If you’ve already signed your profits away for the next 30 years or more, consider renting a portion of the space to another dentist. Consult your attorney for necessary legal guidance, but consider asking the renting dentist to pay a specified amount each month or a per centage of his/her production or collections. Determine if the renting dentist is to provide his/her own staff and telephone lines and what hours the incoming doctor will work. But don’t be too quick to take the money and run. Remember, the new dentist now appears to be associated with your practice. Make sure you are renting to someone whose standards are consistent with your own and will reflect positively on you and your practice. In addition, regularly check the interest rates, this may be an excellent time to refinance.

They don’t do the time, so you pay the crime

Would you knowingly allow someone to steal $40,000 from you? The logical response is, “Well, of course not!” OK, so explain why you’re allowing no-shows and last minute cancellations to take at least that amount from your practice every year.

Broken appointments are the bane of virtually every practice, and one of the most expensive profit pinchers. Admittedly, you may not be able to absolutely eliminate broken appointments and no-shows, but you can take steps that will go a long way in reducing the impact of this income slayer. The easiest and most efficient means is to confirm all appointments. It is also the most cost-effective method of ensuring that patients are in the chair when they are supposed to be. Here’s how to effect this.

Guidelines: First, make sure everyone is on the same page. Establish guidelines for broken appointments. Once you define the policy, be sure to communicate it clearly and regularly to both new and existing patients.

Training: Next, designate and train the appointment coordinator to handle confirmation calls. This should be viewed as an essential personal phone call from the practice, not a routine chore that some poor employee is stuck with. The importance of dental care is the focus of this phone call. Emphasis is on both the value the practice places in the patient as well as the value of the appointment to the patient.

Pay attention to your choice of words when speaking with patients. Terms such as 'routine,' 'regular,' even 'cleaning,' can minimize the patient’s perception of the need and importance of the appointment. In addition, be careful not to 'invite' cancellations.

For example, “Mrs. Jones, this is Mary from Dr Wheeler’s office. I just was checking to see if you planned to keep your appointment tomorrow.” That approach gives patients a clear opportunity to back out at the last minute. In fact, it almost sounds as though the caller hopes the patient does cancel. Instead, use the confirmation call to emphasize the significance of this appointment and that the doctor is expecting the patient at the designated time.

Personal contact: Make personal contact with the patient 48 hours in advance of the appointment and resist the temptation to leave a message. If a message is left, the appointment cannot be considered confirmed until the practice makes contact personally with the patient. To avoid telephone tag, request a daytime phone number and/or cell phone number from patients. In addition, schedule time for the coordinator to contact patients after hours at home for those who are difficult to reach during the day.

Electronic contact: Explore e-mail and text messaging appointment reminder services as well. Today’s busy but always wired patients are much more likely to respond promptly to text messages and e-mail reminders than many practices realize.

Be specific: When making appointments, state the day, date, time and length of the appointment. For example, “Mrs. Smith, your 45-minute appointment is on Tuesday, April 28 at 9:50 am. If you are unable to keep this appointment, please call us at least two days in advance to allow another patient the opportunity to see the doctor at that time.”

Take note: Be prepared to take steps to fill gaps in the schedule when they occur. Ask patients if they would consider changing their appointment if one becomes available sooner. Keep a list of those patients willing to move their appointments to fill unexpected voids in the schedule.

Additionally, keep a list of patients who cancel, don’t show or don’t reschedule appointments and follow-up with those patients. Contact 'no shows' within 10 minutes of their appointment time. Indicate concern for their absence. “Mr. Smith, this is Jane from Dr Carol’s office. We were expecting you for a 3 pm appointment today and were concerned when we had not heard from you. Is everything OK?”

But don’t let the last minute cancellers dictate your schedule. After two 'no shows,' you should consider the patient unreliable. Tell the patient you will contact her/him when an opening is available, and she/he can determine if that time will be convenient.

Implement a few key steps to ensure that your No. 1 line of income — the patients — is in the chair and paying for your quality dentistry. By doing so, you’ll ensure that 'no-show' patients and last minute cancellations won’t rob your practice profits.

Author info

Contact Sally McKenzie at sallymck@mckenziemgmt.com.