50 strategies to boost practice profitability

Jan. 1, 2001
After reviewing more than 250 dental practices nationwide, Dr. Charles Blair and John McGill uncovered dozens of strategies to increase profitability. In this article, they outline their top 50 recommendations.

by Dr. Charles Blair, DDS
and John McGill, MBA, CPA, JD

Through his nationally acclaimed "Profits Plus" workshops, Dr. Charles Blair has developed over 100 statistical monitors to evaluate a dental practice's finances and compare them with industry benchmarks. After reviewing over 250 practices nationwide, Dr. Blair states those most dental practices are missing out on $30,000 to $50,000 in potential profitability each year. Dr. Blair has uncovered dozens of strategies to increase practice profitability. Based on his experience, here are 50 of his top strategies to ensure maximum profitability.

Increasing practice volume

1. Review production reports from the preceding year to make sure all procedures performed were actually charged out and coded to the proper fee, which ensures maximum payment. Consider adding or increasing high-dollar procedures such as endodontics, bleaching, and cosmetic dentistry.

2. Critically review all collection adjustments. While Dr. Blair recommends a 5 percent discount for upfront cash payments, discounts for credit card payments should be reduced to 3 percent, due to the associated bank fees. Furthermore, he recommends eliminating altogether the costly practice of 10 percent senior citizen discounts.

3. Phase out managed-care participation. Replace discounted fee patients with full-fee patients through more aggressive internal and external marketing. Eliminate the highest discount programs, and their associated administrative headaches, first. With proper marketing techniques, practices are usually able to replace the lost volume in the first year, while significantly increasing profitability.

4. If practice volume is still insufficient, Dr. Blair recommends purchasing a competitor's practice and merging it with your own. The added volume brings only a relatively low incremental overhead, and is the most cost-effective means of adding full fee patients to your practice.

5. Increase treatment acceptance rates by providing more flexible financing options. By utilizing general and specialized credit cards, as well as third-party options such as Orthodontists Fee Plan (800-637-7526), The Dental Fee Plan (888-337-4171), and Care Credit Registered (800) 300-3046, ext. 519, doctors can help increase the affordability of "big ticket" procedures. This in turn has helped many doctors dramatically increase their treatment acceptance rates.

6. Doctors operating multi-office practices should consider selling one or more of them and reinvesting the proceeds. With effective marketing, increased efficiency, and higher fees, most doctors can rebuild their practice volume in the remaining location to original levels within 12-24 months.

7. Negotiate with your bank to lower the discount rate on credit card payments to 2 percent or less.

8. Increase practice production by scheduling the maximum amount of treatment needed for each visit. By reducing the number of visits, doctors can dramatically increase their income per visit.

9. Utilize all available operatories for the entire clinical day. Efficient doctor scheduling can greatly maximize profitability.

10. Emphasize the importance of collections when services are rendered with your front-desk staff. Offer flexible payment arrangements, including credit cards, to boost your collection rates to the industry standard of 98-99 percent.

Staffing

11. Recruit and hire the best possible employees, even if it means paying higher than average wages, advises Dr. Blair. Doing do ensures the highest productivity per dollar paid, and also helps avoid costly turnover.

12. Critically reassess personnel needs and determine which employees are absolutely necessary to practice operations. Check for daily, weekly, or even seasonal "slow times" and adjust labor needs accordingly. For example, Dr. Blair advises that only a skeleton crew, with no clinical staff, should be on hand when the doctor is not seeing patients.

13. Carefully evaluate staffing needs following a turnover to determine if that position is vital. It's possible that a part-time employee could maintain the practice equally well, says Dr. Blair.

14. Cross train your staff to fill in for one another during temporary absences. This helps to avoid hiring costly temporary or "floater" employees.

15. Avoid paying overtime by keeping office hours on schedule and staggering work schedules.

16. Hire some part-time employees to take advantage of their greater productivity per hour, flexibility, and lower wage and benefit cost.

17. Pay all employees on an hourly basis, rather than salary. This helps reduce labor costs by ensuring that employees are paid only for the time worked.

18. Implement new technology to reduce staffing costs. Thanks to computerization, clinical staff can perform many functions, such as billing, medical histories, and claims filing, as they render treatment. This helps to avoid costly duplication of effort, and minimizes errors such as failure to charge out procedures or miscoding. New voice-activated technology can eliminate the need for a transcriptionists, while hands-free headsets allow clerical staff to perform other functions during phone duty.

19. Review your staff retirement plan to ensure it is the most cost-effective for your practice. Doctors age 40 or older with younger staff should consider an age-based plan that can increase tax-deductible funding for the doctor while holding down costs.

20. Reduce payroll and retirement costs by providing fringe benefits in lieu of a salary increase. Reimbursing medical expenses (including health insurance premiums) and/or childcare expenses gives employees a tax break. The practice in turn saves the matching payroll taxes and retirement plan contributions.

21. In lieu of monetary incentives, use increased praise and recognition to reward excellence among your staff. Such commendations help retain quality staff, and also help hold down costs.

22. Properly training hygienists in higher-level procedures - soft-tissue management and bleaching, for example - can greatly increase that department's profitability. Make sure that each hygienist is booked for at least one soft-tissue management case per day. Also, Dr Blair recommends keeping broken appointments and cancellations to a minimum, charging out all procedures properly, and that each hygienist treats at least 10 patients per day.

23. Establish clear job assignments and delegation to ensure that higher paid workers are not performing lower paid work. By outsourcing billing and collections, payroll, and accounts payable, a higher paid office manager position could be reduced to part-time status or eliminated altogether. Furthermore, make sure hygienists are not doing clerical work, making appointments, or routine clean-up procedures, says Dr. Blair.

Supply and lab costs

24. Establish an annual budget for clinical supplies equal to 6 percent of the prior month's gross collection (7 percent for orthodontists). The office supply budget should be based on 2 percent of the prior month's gross collections. Appoint one staff member to order supplies and maintain this budget; base this employee's future raises on the ability to stay within the budget.

25. Negotiate a volume discount with lab and supply vendors. Further increase your leverage by agreeing to do business solely with the one vendor.

26. Negotiate a 2 percent discount from vendors for payment within 10 days. Most doctors pay vendor bills every 30 days; a 2 percent discount represents a 36 percent annual investment return.

27. Maintain no more than a 30-day supply inventory. This helps eliminate costly losses due to theft, spoilage, waste, and obsolescence.

Telephone

28. Replace costly telephone answering services with an in-office answering machine. Voice mail capability and remote access will improve customer service and drastically reduce costs.

29. Renegotiate business and personal long distance telephone rates. Secure a rate of at least 8 cents per minute or less during all hours.

30. Reduce or eliminate Yellow Pages advertising. Replace lost patients by expanding internal marketing. Become more aggressive in asking for patient referrals. Dr. Blair recommends paying a $50 bonus to staff members who attract new full-fee patients.

Legal and accounting

31. If you have more than one retirement plan, merge them to obtain the maximum allocation to the doctor and eliminate the additional legal and administrative costs.

32. Move preparation of routine monthly financial statements in-house. Utilize a third-party retirement plan administrator to reduce outside CPA costs.

33. Utilize an outside service for payroll, as well as income tax preparation. This reduces outside CPA costs and also provides greater confidentiality and protection from penalties.

Facilities and equipment

34. Purchase, rather than lease, all dental and office equipment. Purchasing helps avoid higher retail costs, higher interest rates, hidden fees, and penalties incurred by breaking nonbreakable leases.

35. Schedule your operatories to ensure maximum utilization. If practice volume does not utilize your entire space, consider a sublease of your main or satellite office building. Alternatively, consider a merger with another doctor in general practice or the same specialty to reduce operating hours and minimize overhead.

36. Critically review all maintenance and service agreements on telephone systems, computers, and copiers. In most cases, says Dr. Blair, dentists are better off without these costly agreements.

37. If current or projected practice volume exceeds current capacity, retain the services of an architect or space designer with dental practice experience to assist with expansion or new facility design.

38. Add an unbooked operatory to increase clinical efficiency. For approximately $42 per day, the added operatory will lower stress and accommodate emergency patients and additional doctor or hygiene procedures.

Debt management

39. Consolidate practice checking, savings, and payroll accounts into a single account. Negotiate with your bank for an interest rate of at least 4 percent on balances maintained in excess of those needed to offset service charges.

40. If sufficient home equity exists, refinance your mortgage in an amount sufficient to pay off all practice-related debt. This results in lower interest rates and eliminates the inherent risk in variable rate financing.

41. Refinance higher-interest debt to a rate of prime or better. In today's financial environment, dentists are an excellent risk and deserve the best rates available.

Insurance

42. Drop key man life insurance, and buy out life and disability insurance policies in group practices, since practice buyouts can be internally financed. Also, Dr. Blair recommends eliminating group term life insurance and staff disability coverage, since these are not cost effective.

43. Review current personal life insurance coverage needs and replace older, more expensive policies with term life coverage. Dr. Blair recommends a 10- or 15-year level policy to lock in the cheapest coverage available.

44. Bid out all business insurance (auto, business interruption, fire, and casualty) at least every two years. Consider extending elimination periods on disability and business overhead coverage to reduce premiums.

45. Reduce malpractice insurance costs by attending risk management continuing education courses that qualify for discounts.

46..Reduce staff health insurance costs by raising deductibles and co-payments, and covering only full time employees not covered under a spouse's plan. Alternatively, simply allocate a fixed dollar amount annually to a medical reimbursement plan and allow employees to be reimbursed up to their limit for their uninsured, out-of-pocket medical expenses. This could include personally paid health insurance premiums, co-payments, deductibles, and items not covered by the health plan.

Other expenses

47. Increase practice volume and decrease subscription costs by establishing and maintaining a practice marketing notebook summarizing your services, education, experience, and staff information in the reception area. This will also decrease the number of magazine subscriptions within the office.

48. Avoid hiring a new doctor until you have raised fees, dropped managed-care participation, increased efficiency, and maximized delegation to other employees. Hiring a new doctor should be a last resort in solving practice profitability problems.

49. Set up a cash bonus program to reward staff for suggestions that are implemented to reduce practice operating costs.

50. Sign all practice checks and review related documentation to better understand practice finances, rectify out-of-control costs, and avoid potential embezzlement.

Dr. Blair urges all doctors to invest in the best clinical and business advice available to maximize returns. Like "The Millionaire Next Door," he finds that those who are most successful have sought help from competent professionals - and implemented their advice.

This article was reprinted with permission from The Blair/McGill Advisory, a monthly newsletter dedicated to tax, financial planning, investement, and practice-management articles exclusively for the dental profession. For more information on The Blair/McGill Advisory, call (704) 424-9780

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