The old way of doing things just won`t work anymore. It`s time to look at your practice in a different way.
Bill Blatchford, DDS
Old paradigms are impeding profitability in dentistry. As we enter the new millennium, it is imperative to embrace new profit paradigms and shelve what no longer works. If you expect to be on the cutting edge, you can`t do "business as usual." You must make bold, wise decisions to have a thriving, fulfilling dental practice.
Paradigms are the filter through which we view our world. From this view, we create rules by which we live. Some paradigm examples in dentistry include patients will only accept treatment if covered by their insurance, and the doctor never gives the fee or makes financial arrangements. Old paradigms are sometimes held so tightly that they can put a lid on possibilities.
Dental paradigms about profitability and money are especially strong. Our challenge is to recognize these filters and change the ones that are holding us back in dental practice to create new opportunities for dentists, staff, and patients.
Being profitable is one of the several reasons that dentists are in business. When our thinking about profit is based on the old insurance model, we limit our possibilities in the emerging area of "choice," where patients are more sophisticated and aware of the options of investing in themselves.
Strong dental paradigms relate to money. Traditional dentistry holds that patients will not pay for their dental treatment, either because they feel it is too expensive or because they have insurance that they perceive should pay 100 percent of the cost. Staff and doctors perpetuate these old paradigms by continuing to provide in-house financing for patients. The new and more business-wise method is using outside funding to finance cases. Today check, cash, or credit card finances every business, so why should dentistry be old-fashioned? Carrying account receivables costs the dentist 71 percent per year. Where is the profit in that?
Another paradigm concerning money is that if a patient has insurance, we diagnose only to the level of the insurance coverage. The result is your office`s "Crown of the Year Club." A crown every 12 months equals a calendar insurance maximum. We need to speak of insurance as a "gift" or "assistance" and develop skills in creating value with the patient which reaches beyond insurance maximums. We must help patients to grasp the bigger picture of dentistry for themselves and create an opportunity for them to see beyond the lid of insurance maximums.
Accepting, as truth, the philosophies and dictates of the insurance companies create our insurance paradigms. These insurance paradigms keep a lid on dental profits by dictating fees and communicating to patients that your treatment recommendations or fees are "above the usual and customary."
Insurance companies have created a false market by holding dental fees down. Insurance maximums have been at $1,500 for 30 years. Initially, crown fees were roughly $100, allowing flexibility in treatment plans. Patients, staff, and dentists believed insurance should cover everything and accepted the insurance maximum as the level of diagnosis. Over 30 years, fees now are between $700 and slightly more than $1,300, with maximums staying the same.
Profitability is affected obviously when dentists are part of the insurance paradigm. Doctors with clear vision and direction are choosing to become insurance independent by creating plans for insurance freedom. Successfully breaking this insurance paradigm in your practice requires planning and skill-building. An important part is a financial question: What is your current collection from insurance? If you are more than 20 percent insurance-dependent, a solid plan of changing the mix of treatment and learning case-presentation skills is essential for continued profit.
One great advantage of insurance independence is the opportunity to establish your own fees based on your skill level and artistry. All dentists are not created equal. By continuing under the insurance dictates, the public will continue to believe that, since all fees are the same, all dentists are the same.
Excellent dental laboratories and dental suppliers are free of insurance dictates and charge a fair fee. Dentists who practice excellence must raise their fees as well. Not only will this affect profit, but it also will enter you into the free American marketplace of choices. Veterinarians charge $135 for your dog`s prophy! How would your bottom line be affected if you were to increase your fees by 10 percent? Would this small, well-deserved increase allow you to invest in yourself with a great continuing-education course or to purchase a piece of high-tech equipment?
If you decide not to be insurance-free, you still have choices. You have an insurance-approved fee for crown and bridge. Why do you charge the same amount for a unit of cosmetic dentistry not covered by an insurance company? I find it amazing that dentists will have an approved crown fee at $625 and charge only $625 for each veneer unit, which requires more skill and artistry. Our old paradigms have gripped dentistry! We justify our fees based on weight in pounds, not skill.
Another strong, but subtle, paradigm we hold in dentistry concerns making a profit. We have a nonprofit paradigm in dentistry. The last time I checked with the Internal Revenue Service, all dental offices were listed as regular businesses, rather than nonprofit entities. This means, for continued success, we must envision ourselves as a business, design smart business systems, and be proactive in making certain that there is a profit. There is a real difference between greed and smart profitability. A profitable return on a dentist`s investment will keep the excitement and challenge for the bright, well-trained, and committed professional.
Prior to insurance dependence in the early 1970s, dental-practice overhead averaged 43 percent, according to statistics from the ADA. This means net return to the practitioner was 57 percent. Today`s average overhead is 72 percent, and the average net return is 28 percent. Even with this tremendous erosion in profit, there is a paradigm that dentists should not be making a profit.
Because of this nonprofit paradigm, many dentists are not proactive in budgeting and making wise business decisions to create profit. We rely instead upon our accountant to produce a profit/loss statement three months after the occurrence. Most dentists do not know how to read this document, which actually is designed for preparing taxes. We need to become knowledgeable businesspeople. There are great software programs that allow you to create your own profit/loss statement. Use your accountant for taxes. Utilize yourself for monthly cash-flow reports. Benefits to the doctor include being accountable for budgets, making decisions to create opportunities, and being proactive in the profit area.
Dentists need a budget which shows how much it actually costs to produce a unit of dentistry. Accountant-provided profit/loss statements include items that may be legally deductible, but not necessary to operate your dental practice. Examples would be a car for business and a trip to Hawaii for continuing education.
To increase profitability in dentistry, we must shelve the old paradigm that says, "We do not sell." We have now entered the era of optional care. We are no longer in the business of crisis care. What we have to offer patients is largely discretionary. Therefore, our competition is not the dentist down the street, but rather the other optional goods and services being advertised and purchased by your patients. Items that people desire will be placed on their priority lists. Dentists are so discreet and against "selling" that they do not offer their patients (especially their existing patients) the opportunity to choose their dental dreams.
To reinforce that dentists do not have sales skills, we can cite another industry example. American people spent twice as much money on their cars in 1997 (8-9 percent of total income) as they did in 1990 (4 percent of total income). This is an example of discretionary spending, and we need ethical skills to compete for our patients` discretionary dollars.
Because we are in the elective health-care field, we must embrace the new paradigm of sales skills. Dentists owe it to their patients to share the opportunity for a whole smile that looks good, feels good, and lasts a long time. Learning sales skills is the ethical path. Is it not ethical to offer the best choices?
To place your practice in a wise business position for the new millennium, you must recognize the old paradigms that hold you back and keep a lid on your opportunities. Once paradigms are recognized, you create an opportunity for new paradigms. The process is new thinking, more productive designs, and skill-building in sales and budgeting. The result of new thinking will be emotional returns and well-deserved profits.
For more information about this article, contact the author at (800) 578-9155.
