Critical Factors of the Business of Dentistry

Jan. 1, 2002

Establish a foundation for the financial health of your practice.

by Cathy Jameson, PhD.

One of the challenges that many dental professionals face is balancing their commitment to being a health-care provider with being a successful businessperson. There is no question that your main purpose is serving your patients and serving them well. You went into dentistry because you wanted to be in health care and you wanted to make a difference in people's lives. Then, you realized that running a practice takes a great deal more expertise than performing dental procedures. Running a business takes an entirely different set of skills.

You have spent a great deal of time, study, and money in school and in practice to master your clinical skills. You always will be working on improving those skills, as well as learning new and better ones. The same commitment must be given to the business aspect of your practice. A great deal of time, study, and money must be invested in learning how to successfully run a business. Both investments must and will pay for themselves multifold if applied appropriately. In both your clinical and management development, there never will be a day when you "arrive." Rather, you always will be "arriving."

Many doctors tell me that they just want to come in and "do the dentistry." They feel that the management of the business and personnel is the most stressful part of the practice. Some doctors say that they would love dentistry if it weren't for the challenges related to business and personnel. However, there they are — those challenges. And there they always will be!

The bottom line is that if you don't run your business as a business — a healthy, profitable business — you won't be able to stay in business. If you aren't in business, you certainly can't serve patients. Most of you do not have advanced degrees in business or management; however, you expect yourselves to be masters at these skills. Great people and great businesses reach out to coaches — experts in various fields — to provide assistance and training in specialized skills. Without this kind of advanced training in the intricate area of management, you will not reach the "ideal" practice.

There is no reason not to have your ideal practice — whatever that is to you. Life is much too short and much too valuable to settle for anything less than the ideal. Take a little bit of time to think about and write down what you would see as the "ideal practice" in your mind's eye. Next, give yourself permission to pursue that ideal. Identify any barriers that might be getting in your way and eliminate them. Don't let anyone (including yourself) or anything keep you from being all that you can be and fulfilling your career goals.

The critical factors
Understanding the critical factors of the business of dentistry include:

  • How to construct effective systems
  • How to develop a super team
  • How to nurture open, constructive communication among team members and patients
  • How to create monitors that accurately measure the health and well-being of your practice

These are essential if you are to access success. Let's look at a few of the major critical factors. Please know that these are not all of the critical factors — but some of the major ones. You, of course, may be "on top" of many of these. If you are, pat yourself on the back. However, please ask yourself this question: "How can we do this better?"

Ask yourself: "Have we established 'minimally acceptable' as well as 'desirable' goals — goals that assure the health and well-being of the practice?" Then, determine if tracking monitors are in place to measure your success (or the lack thereof) in each of these areas. If you are not at your desired goal, have you established proactive methods of improving performance?

1. Production. Calculate your production goal carefully. Don't just pull a figure out of the sky. Perhaps with the help of your accountant, analyze what the costs of running the practice are on a monthly basis. Add to that your required — as well as desired — salary and compensation. This should be your minimally acceptable goal. This goal must go up every year or as your cost of operations climb.2. Collections. Establish a goal of collecting a minimum of 97-98 percent of all dollars produced. You will, certainly, have some months that exceed this minimally acceptable goal. You might collect a total fee before treatment begins, or you might collect some outstanding accounts. These will push those collection percentages over the minimally acceptable — which is great!

The national collection average in dentistry is 96 percent — four percentage points of lost revenue. That 4 percent loss is horrific! Multiply 4 percent times the total amount of your production and you probably will feel sick about the loss. You work too hard to absorb those kinds of losses. So, monitor this carefully. If your collection ratios are out of whack, investigate the reasons behind this "glitch." Then, develop specific protocols to correct it. Collection experts will tell you that if an account is 120 days old, and the person who owes you money has made no effort to pay or to negotiate a settlement, then that account is uncollectable. Plus, carrying an account on your own books is expensive and time-consuming. Low collection ratios will drive your overhead percentage out of proper alignment. Watch this critical factor carefully. It can be managed.

3. Accounts receivable. Right along with production and collections is the critical factor of accounts receivable. I encourage you to get out of the banking business! Instead of carrying accounts on your own books — which means that you are "loaning" money to your patients — consider getting involved with patient financing programs. Learn how to use them effectively.

Your accounts receivables should be no more than one (1) times your average monthly production — and that is only if you are accepting assignment of benefits of insurance. If you are not accepting assignment of benefits, then you should have no accounts receivable.

4. Patient-financing programs. I am an enthusiastic advocate of patient-financing programs. My dentist husband, Dr. John Jameson, has been involved with patient-financing programs for the past 17 years. We were one of the first practices in America to participate in patient financing and have helped to lay the foundation for how these programs can work — both then and now. We have not and do not carry accounts on our own books. However, our production continues to go up every year, case acceptance goes up every year, and our cost of operations remains in an acceptable overhead percentage.5. Overhead. Overhead control is an ongoing critical factor for any business. Obviously, when overhead is held in an acceptable and comfortable alignment, profit margins also are acceptable and comfortable. It is from profit margin that salaries can be increased for any team member — including the doctor — and where additional benefits can be developed. If a salary increase or an increase in benefits is distributed, but there has been no increase in profit margin, then those distributed dollars come out of the doctor's pocket — which is not healthy. When the entire team begins to work cohesively toward controlling overhead and increasing profit margin, then the doctor's salary and compensation can be increased as well as your team members' compensation.

Sharing rewards of work well done can only come from increased profits. There are three ways and three ways only for a practice to increase profit margin and lower overhead:

  • Increase production
  • Decrease costs
  • Increase fees

I recommend that you work on all three of these areas. When you combine your efforts for all three, you will see significant increases in bottom-line dollars.

6. Scheduling. Scheduling is a complex and multi-faceted critical factor and system within your practice. I don't really think that any system is (or can be) more challenging. Scheduling must respond to production needs for the practice, physical needs of both the patients and the clinicians, and the challenges that come with today's busy people.

Base your daily production goal on the monthly production/collection needs of the practice. Whatever you need to produce and collect per month will be divided by the number of days you will be working within that month. The result is your daily production goal.

If you schedule carefully toward that goal in an organized and streamlined fashion, you will reach the goal most of the time. Equitable days will lead to equitable months. Take out the roller coaster effect that comes with the "highs and lows" of unequally scheduled days and months. Stress relief and business stability will result.

In evaluating the effectiveness of your scheduling system, ask the following questions:

  • How far out are you solidly booked?
  • When can you schedule a new patient?
  • When can you schedule a long cosmetic or comprehensive restorative case?
  • When can you schedule a hygiene patient?
  • Can you see a periodontal patient quickly and regularly?
  • Do you run behind schedule?
  • Are you delegating responsibilities where possible according to the laws of your state?
  • Are you exhausted at the end of the day because you have seen so many patients?
  • Are your days smooth-flowing as well as productive?
  • Do scheduling difficulties create stress on a regular basis?

There is no reason not to have excellent and effective control of your appointment book. It is a difficult and challenging system, but it can be mastered. It is one of your most critical factors.

7. Broken appointments and no-shows. Are you tracking these difficult challenges? If not, I encourage you to do so. Track how many appointments are being broken or cancelled. Are these patients being rescheduled and are the voids in your appointment book being filled? Do the same for your no-shows. Unanswered and unevaluated no-shows and broken appointments can be debilitating to a practice.

Only when you track these critical factors can you have the hard data necessary to make appropriate decisions related to adjustments that you need to make.

8. Case acceptance. I encourage you to do comprehensive treatment-planning on all patients. Enter these treatment plans into your computer. Then, carefully and regularly follow up on all patients who have dentistry diagnosed but untreated. You will be evaluating several areas when you begin monitoring this critical factor of your practice. They include:
  • You will be determining how well you are presenting the cases in the first place. Are patients accepting your recommendations ... or do you need to work on your case presentations?
  • How well are you following up on dentistry diagnosed, but not accepted?

And, how many of those patients are you converting into active treatment?

The fulcrum of your practice is comprehensive diagnosis that is carefully documented, excellent case presentations, and follow-up. These three systems are intricately tied together. Everything else will springboard from this series of systems.

9. Hygiene. The hygiene department is the lifeblood of your practice. It is, of course, where you help people get healthy and stay healthy. And, this is where much of your patient education will take place — not just education about how to brush and floss, but education about and validation for any diagnosed restorative treatment. In addition, the hygienist (who usually has a very close bond with patients) can introduce new treatment modalities or begin talking to a patient about new areas of concern since the last visit.

Within this department are multiple systems and critical factors. A few of these to monitor and evaluate include:

  • What is the hygiene production? — daily, monthly, yearly?
  • What percentage of the overall production of the practice is coming from hygiene?
  • Hygiene retention: What percentage of your active patients are participating in your hygiene program?
  • What percentage of your hygiene production is nonsurgical periodontal therapy? (Use your procedure-analysis report to obtain accurate information on this critical factor.)
  • How much restorative treatment is coming out of hygiene?
10. New Patients. As a business, generating new business is a critical factor. New patients bring not only themselves to your practice, but, in many cases, their entire families.

The number of new patients you need to generate per month depends on many factors. For example:

  • What type of treatment are you providing? For example, if you are doing large cosmetic, implant, or reconstruction cases, you will not need as many new patients to fulfill production goals as you would need if you are a general family practitioner.
  • How many doctors are in your practice?
  • How far out are you already booked?

Preblock your appointment book for new patients. Establish these reserved times according to the number of new patients you are seeing or would like to see. Hold these preblocked appointments until about one week in advance. If you have not filled those reserved time slots one week in advance, you can let them go and fill those spaces with other types of treatment.

Set a goal of seeing your new patients within two to three weeks from the time they call. Having preblocked appointments will make that possible.

Develop an awesome new-patient experience. Determine what you believe would be the best new-patient experience a person could have. Then, make that happen — every single time!

11. Team. There is no question that no other critical factor, system, or protocol in your practice can work effectively if you don't have a great team working together to accomplish your practice goals.

Having a great team established and working cohesively can be the key to productive, fulfilling, fun days. On the other hand, a team that doesn't get along or one that is in constant conflict, or that is just there for the paycheck, can be the most stressful part of dentistry.

Do whatever it takes to establish an environment that focuses on healthy teamwork. Answer these questions:

  • Are you well-staffed? Do you have the appropriate number of team members in the right positions so that patient care doesn't suffer, production is not limited, and stress is controlled?
  • Do you have current, well-defined, workable descriptions of position responsibilities? Do these descriptions focus on key responsibilities, expected results, and accountabilities?
  • Do you have a current personnel policy manual? Has everyone read and agreed to the policies outlined in the manual?
  • Are your team meetings and morning meetings productive and effective?
  • Do you have equitable salary, benefit, and incentive programs in place? Are these healthy for the practice, as well as for team members?
12. Attitude. I would hire attitude over any other characteristic. Give me a person that has a willing spirit and a positive attitude and we can provide instruction for the skills required (in most cases). A person with a great attitude brings harmony and joy into the day-to-day activities of the workplace, while a person with a negative attitude will "bring down" the enthusiasm and energy of everyone else, including patients.

Life is much too short not to be surrounded by people who are willing to walk the extra mile to make sure that things go well. There is no reason not to have your ideal practice. Make a choice to surround yourself with people who are willing to work at maintaining a positive attitude. Ask yourself these questions:

  • Is my team cohesive?
  • Is my team goal-oriented?
  • Is my team supportive of practice-building and practice development? Or, are team members comfortable with the status quo? — the "kiss of death." You are either going up or going down. There is no status quo!
  • Does conflict among my team members cause stress for me or any other member of the team?
  • Is communication effective among team members?

Today is the first day of the rest of your life ...
These 12 critical factors are foundational to your practice health and well-being. As you look toward the new year, take the time to evaluate. How effectively have these systems been functioning over the past year? What is going well? Do more of that. Then ask yourself, "How can we do this better?" Be about the business of improving each one of these critical factors and systems. The path of continuous improvement leads to the road to success!

Get involved with patient financing and use the program extensively in your practice.

Patients will benefit in many ways:

  • They will be able to receive treatment that you recommend.
  • They will be able to spread out their payments over a period of time and keep them small enough to fit into their family budget.
  • They will not owe you any money.
  • They will understand their financial obligation and responsibility.
  • They can afford to take better care of all members of their families on a more regular basis.

The practice will benefit in many ways:

  • You will receive your monies in a timely fashion.
  • You will gain a much higher level of case acceptance.
  • You will be able to do the dentistry that you love to do.
  • Your costs of operation will be reduced because bankers are running the credit portion of your business — your money is not tied up.
  • Patients will feel better about you because they won't owe you money.

Financing is a critical factor and a critical system in your practice.

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