Breaking the downward cycle

April 1, 2003
Inquiries from dentists worried about their financial stability and retirement savings are on the rise. The impact of the sluggish economy is their chief concern.

by Jim Pride, DDS, Amy Morgan, and Pam Haffner

Inquiries from dentists worried about their financial stability and retirement savings are on the rise. The impact of the sluggish economy is their chief concern. Economic factors can affect one's practice; however, dentistry is relatively recession-proof. Even in tough economics times, practices can flourish. While some statistics show that a large percentage of small businesses fail in their first year, most dental practices succeed. Why? Dentistry is a needed commodity supported by a large population of patients and serviced by a decreasing population of dentists. This translates into a tremendous demand and a diminishing supply.

During economic downturns as well as upswings, it is important to understand and implement the basics of practice management to achieve a controllable, healthy lifestyle and a financially viable future.

No dentist should have to struggle with low production and debt. The best way to demonstrate how practice management can set you free from such worries is to show you an actual example. The following story demonstrates how one of Pride's Institutes clients broke the cycle of low production and debt. The same problems that she faced hamper many dentists throughout the country today, and the same solutions apply.

In the spring of 2001, Dr. Dorothy Reed (the client's name has been changed to protect her privacy), a dentist practicing in the southeast, attended a Pride seminar on pensions, investments, and taxes presented by Dental Economics contributor Brian Hufford. Despite 11 years in practice and an MBA degree, this mother of two young children had no retirement savings, owed $30,000 in back taxes, had acquired other debt, felt exhausted by long days of operative dentistry, and took no steady salary from her practice. She paid herself "whatever was left" after paying the bills. "For years, I thought I could fix this myself," she says about her practice. "I wanted to save money for my retirement as the seminar described, but I wasn't getting there on my own, so I spoke to Brian Hufford. When he saw my numbers, he told me that I would need to generate more income before he could help me. I was so distraught that at first I cried on the way home, but then I resolved to change my situation." Dr. Reed sought Pride's assistance in transforming her struggling practice into a financially sound business.

Dr. Reed's consultant directed her focus to three factors. These same factors could be the keys to your practice thriving during this time of financial uncertainty.

1 Establish a "break-even point" that allows you to fend off further debt and to meet expenses consistently and comfortably. The first step the consultant recommended was to stop the bleeding and stabilize the situation. Establishing a "break-even point" — the amount of monthly production needed to pay all expenses, including a regular salary to the dentist without incurring any further debt — achieved this goal. This break-even point became Dr. Reed's production goal for the first three months of her management- improvement program.

Too many dentists create goals based on feelings or intuition, which intensifies the loss of control over their practices. The consultant guided Dr. Reed to create a truly meaningful goal by tallying all of the monthly expenses and calculating the amount of production needed to pay the doctor's and hygienist's salaries.

This monthly production goal was then broken down into daily production goals. These goals were further broken down to calculate how much significant dentistry (crowns or other higher-fee procedures) must be performed each day to meet the goals, yet still leave room for other, more routine services. Dr. Reed found that she would need to perform three units of significant dentistry per day to meet her goals. She felt confident that she could achieve this goal. Calculating the break-even point, then breaking it down into a daily production goal and defining the kind of schedule needed to achieve it gave Dr. Reed a tremendous sense of relief and freedom. She now had a plan that eliminated the guesswork.

Lesson No. 1 from Dr. Reed's practice:Be aware of your break-even point so that you can have the freedom of knowing, during any given month, when your minimal needs and commitments have been met. After the practice reaches the break-even point for the month, you can enjoy focusing on providing ideal care to your patients, secure in the knowledge that your practice is profitable.

2 Change your attitudes about dental care. "I thought I was doing more crown and bridge than I actually was," recalls Dr. Reed. "When we calculated it, I was surprised to learn that I was doing less than one unit a day. No wonder I was so stressed!"

While Dr. Reed had more than enough patients who needed significant procedures, she seldom performed the type of dentistry that she thought would be best. "I was trying to be all things to all people," says Dr. Reed. "I wanted to please my patients, but I was really doing them a disservice. I wasn't recommending the quality of care that they needed to have healthy teeth for the rest of their lives. When a crown was needed, and a patient said, 'I can't afford that. Can you just patch the tooth for me?,' I'd give in. Then, a few weeks later, the little bit of tooth structure left on the MODFL amalgam would fracture off, and I'd have a lot of emergencies. I wasn't doing myself or my patients a favor by patching them up. I had to learn how to say 'no' when they asked for treatment that was not in their best interest."

When Dr. Reed changed her way of looking at dentistry and her role in patient care, she altered her presentation skills accordingly. "I couldn't continue letting my patients dictate their treatment when I knew there was a better standard of care," Dr. Reed explains. "So I started saying things like: 'Nothing we patch and watch ever gets well. This tooth needs protection with a crown.' I asked them to schedule an appointment right then and there. My patients trusted me. So, when I presented the proper treatment to them, they were willing to accept it. To actually get the treatment done, my philosophy of care and presentation skills had to change."

Dr. Reed quickly increased her crown and bridge procedures and soon achieved her goal of three units per day. The consultant helped Dr. Reed and her staff examine their payment options to make the treatment affordable. The practice adopted a dental credit card and extended payments for three months. For the first time, they placed financial arrangements in writing, which greatly improved their control over accounts receivable. The effort to break even was successful, and Dr. Reed and her staff soon advanced to incrementally greater production goals.

Lesson No. 2 from Dr. Reed's practice: Establish a vision for the kind of care you want your patients to receive. Then, determine the way your procedures need to be scheduled each day to achieve your vision. Finally, make sure you ask your patients to accept the treatment that reflects the level of care in your vision.

3 Gain your staff's commitment. Dr. Reed announced the practices' new direction to at a meeting held off-site. She gave each staff member a silver bracelet engraved with the words, "Vision," "Superior," "Journey," and "Trust." The team loved their bracelets and the meaning they embodied. They felt excited and empowered by the new vision.

However, the staff members were also nervous about heightened expectations. Change creates uncertainty, so it is natural for teams to have misgivings initially, but a an unusual event occurred that further challenged Dr. Reed's enhanced leadership role: following the September 11 tragedy, none of her staff would board a plane and travel for training.

"Just as I had never told my patients 'no' when they asked me to patch their teeth, I had never refused my staff anything," explains Dr. Reed. "My entire team was adamant about not going for training. I was mortified!" Dr. Reed offered to accommodate anyone who wanted to bring her family along, or to take a van instead of a plane. But she empahsized that everyone must attend. Ultimately, all of the staff did attend — except for one staff member. This employee was replaced, and the move proved to be mutually beneficial.

Explains Dr. Reed, "Through this trying experience, my staff realized that I was serious about the new direction for the practice and that they had to make a commitment, too. There has been a real sense of unity among us since that incident. They cared about the staff member who left, but they made a different decision." The staff has also benefited tremendously from the changes in the practice, with a reduced, four-day work, increased salary and benefits, a more organized and less stressful office environment, and opportunities to improve their skills."

Staff often will test a doctor's commitment to change. Dentists must be firm in their resolve. Such assertiveness was difficult for Dr. Reed at first. But she rose to meet this challenge, and it became a turning point for her and the practice. As a result, she has learned to handle conflict. She has become skillful at listening and negotiating with her staff without compromising her vision. She truly has become a more effective leader.

Lesson No. 3 from Dr. Reed's practice:Make your quest to achieve your vision invincible, and you will more readily gain your staff's commitment to your new direction.

Were these the right lessons for Dr. Reed? The statistics are proof of her success. Prior to beginning her management improvement program, Dr. Reed's total office production was $613,371 for the year, while total doctor production per hour was $228. After the first year of management training, total office production rose 21 percent to $744,467, with doctor production per hour increasing to $274. Also, more efficient scheduling made it possible to implement a four-day workweek, which reduced stress for the entire office. Within the first year, Dr. Reed paid her tax debt in full. She also significantly reduced her other debt, while her compensation increased.

Now that her practice was on a profitable course, Dr. Reed met Brian Hufford a second time. After all, it was his presentations that had brought her difficulties to the forefront and prompted her to seek help. But now, she was no longer overworked and worried about her financial future. When she left the meeting, she had a sound pension program in place for her and her staff as well as a plan for contributing the maximum amount to her retirement.

So much is possible to dentists like Dorothy Reed. By gaining control of the business side of her practice, she freed herself from low production and debt. And she did this during an unprecedented year of economic downturn. She now operates a clinical practice that makes her proud. In a year in which economic forecasters are predicting little, if any, growth for businesses, how successful do you plan to be?

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