Take charge of your future

March 1, 1996
Is it possible to run a profitable and efficient dental practice in the managed-care `90s? The answer is yes, but only if you are willing to develop practical strategies, make sound decisions and have a vision for the future.

Having a vision for the future, developing solid strategies and making sound decisions are the keys.

Judy Capko

Is it possible to run a profitable and efficient dental practice in the managed-care `90s? The answer is yes, but only if you are willing to develop practical strategies, make sound decisions and have a vision for the future.

The new decade has brought about the inevitable for dentists, nationwide: whether you like it or not, managed care is here to stay. HMOs, PPOs and IPAs are all part of managed care that impacts the financial health of many practitioners. The combination of reduced reimbursement and increased operating expenses is a major migraine for most dentists.

Faced by these inevitable and unwelcome changes, many dentists begin to feel powerless. While you don`t have complete control over the influence of third-party payers, you can and should take charge of your economic future. The key is to be proactive, not reactive.

It comes as no surprise that the economics of practicing dentistry has changed dramatically over the last two decades. Corporate America, faced with escalating costs of providing health-insurance coverage for employees, has embraced managed care as the most cost-efficient type of coverage.

In 1975, when managed care virtually was nonexistent, dentists could count on generating receipts in the neighborhood of 95 to 98 percent of their total charges. Today, with the impact of managed care, most dentists are lucky to generate receipts over 75 percent.

With talk of health-care reform and market-driven changes leading the way in the managed-care arena, dentists are fast discovering they must take control of their expenses and develop a plan for using their staff and ancillary services wisely.

The first step in regaining control is to analyze four areas of your practice:

- Collection ratio

- Total accounts receivable

- Procedure production and revenue

- Income and expenses

Collection ratio-Analyze your collection ratio for the past three months. If it falls below 90 percent-after contractual adjustments-view this as an indicator that you don`t have control of your billing department.

Also, don`t allow accounts to age more than 90 days. The key to having a desirable collections ratio is to hold your staff accountable and educate them about the importance of collecting accurate patient data. Know your contracts. For example, your receptionist should make sure the patient`s insurance status is up to date. Collect the copayment up-front-even from patients having private-insurance plans!

Are you losing time and income because of inaccurate coding? If so, identify the problem and correct it. Inform your staff about any billing errors. Set up procedures to monitor and control input and output.

Total accounts receivable-This should be no more than two to three times your monthly charges. For example, if your monthly charges amount to $50,000, your total accounts receivable should be no more than $150,000. Review sudden or gradual changes in your accounts receivable. There are a couple of factors that could cause an increase in outstanding charges or accounts receivable. If your staff is negligent in sending out clean insurance claims, you will experience delays in being reimbursed. Also, your A/R could be spiraling downward because a major third-party payer may be experiencing financial difficulties and is taking longer than normal to reimburse you for services rendered.

If you have difficulty identifying the cause of outstanding charges, it may be time to call in an expert who specializes in accounts-receivable analysis, billing and control.

Procedure production and revenue-Examine several months of charges by procedure to learn where charges are being initiated. You also can determine which third-party payers are accounting for most of your charges and which procedures are the most profitable.

In a group practice, you can analyze charges and services generated by individual doctors. Examine variables be- tween the providers and the kinds of services they are performing. Are they in line with your practice standards? That way, any inequities of services or charges by different doctors will show up.

iii Income and expense report- Analyze this on a monthly basis to detect trends and ascertain changes in your practice; i.e., what`s going up or down. If you spot a red flag, look at the itemization of expenses in that category. And, when you find out what is causing the increase, address the problem immediately.

If your overhead is rising constantly, examine your personnel expenses. Has there been an increase of staff overtime; have employees been added; too many raises been given out or is the part-time staff increasing their hours? Before you make any drastic changes, find out if these higher personnel costs were justified because of increased production.

Busy dentists may find this kind of investigative work time-consuming. That is why it is critical that you work in tandem with your office manager and your management consultant. Spending two hours a month on a strategy meeting to review this data will prevent further headaches and lost revenue in the future.

Hire the best staff members you can afford-a well-oiled machine runs smoothly and efficiently. A strong and skilled office manager sets the tone for the success of your practice. This especially is true if your leadership skills are weak.

Do you and/or your office manager have what it takes to be a good leader? A good leader is someone who: respects and appreciates; can give constructive criticism and praise; is well-organized; can take charge but not control; uses diplomacy to deal with confrontation and can motivate.

A good leader has excellent communication skills and respects and appreciates subordinates. He or she tells their staff what`s expected of them, but lets them choose their own path to complete a task. Have confidence in your employees. Let them make mistakes as part of the learning process. A good leader measures and rates the results, not the process.

Dentists and their office managers should delegate tasks whenever possible. Otherwise, they will feel burdened with work and responsibilities that can easily be handled by someone else.

Remember, as your practice`s revenue-producer, you should be using your time efficiently. If you are performing a task that can be done by a staff member-delegate it. For example, your staff-not you-should be discussing finances with the patient. And, you should not be bogged down with cost comparisons and ordering supplies, when your assistant and manager can easily handle this responsibility. You never will be able to generate more revenue for your practice unless you are willing and confident to delegate tasks to your staff.

If you don`t have confidence in the delegation process, it simply may mean your staff needs additional training or you may be delegating to the wrong person. An important aspect of delegation is the follow-through. Hold your staff accountable: Did they complete the task?

A common-problem area for dentists experiencing economic crisis within their practices is that they are not using their resources-staff and equipment-wisely. For example, some doctors buy a state-of-the-art computer system; yet, only use 30 percent of its capabilities. Keep in mind that, initially, it may take extra staff time to enter data or learn a new program. However, the extra effort will pay off if it reduces staff time and improves efficiency, enabling them to work on other tasks.

Some doctors jump on the latest health-care trends by purchasing expensive clinical or office equipment. Before purchasing expensive equipment, analyze whether it will increase revenue or productivity. Where is your break-even point?

Are you using your staff to full advantage? A skilled office manager can spare you valuable time gathering data or information to assist you in the decision-making process. For example, if you are considering purchasing a new computer system for the office, have your manager conduct the initial investigation-making contact with computer-company reps, gathering brochures, etc. Then, she can meet with you to provide analysis and recommendations.

One of the best ways a dentist can navigate the turbulent waters of the managed-care environment is by being proactive rather than reactive. On an ongoing basis, analyze the viability of the insurance plans you accept or are considering carrying. This is necessitated by the volatile and complicated nature of third-party carriers.

For example, you may discover that only 10 percent of your patients belong to Headache Insurance Co., yet their paperwork and red tape takes up 40 percent of your staff time. You need to evaluate whether keeping this plan is conducive to your practice`s financial health.

By the same token, because of the volatile nature of the health-care industry, you must keep a constant pulse on health-care programs in your community. Because, if a major employer in your community suddenly switches to Headache Insurance, you will have to seriously study whether your practice can afford not to accept the plan.

Being a proactive practitioner means being adequately informed about your patient mix and the third-party payers involved. This will help you to pinpoint any changes in your practice. Armed with this data, you then will be able to develop strategies to create the kind of practice that most likely will give you the greatest financial rewards and the fewest head- aches.

Patients, today, are far more assertive about their dental care than their counterparts of the 1970s. Because third-party payers frequently place restrictions on the coverage they may receive, educate your patients about their insurance-plan`s limitations in a positive way. By communicating this information, you can help them take responsibility for their dental care and make an informed decision. Dentists also need to stay abreast of their patients` insurance-plans` limitations.

While it is easy for dentists to feel powerless when their practice is continually being pressured by the constraints of legislative and third-party payer regulations, they can take charge of their future.

Keep abreast of any changes in your practice by having annual strategic-planning meetings with key staff members. Make future decisions based on hard data rather than emotional responses.

A new trend for dentists this decade is to strengthen their position in the marketplace by merging with other practices or entering some form of collaborative arrangements, such as newly erupting IPAs. There are many advantages to this approach, including potential gain in market share and having more negotiating power with third-party payers. To oversee such a complex operation, practitioners need the guidance of a skilled administrator or practice-management consultant.

For those dentists who prefer practicing solo, it is essential that you hire and keep a top-of-the-line office manager. Here, the old adage generally is true: You get what you pay for. Today`s office manager is a multiskilled individual who must keep continually abreast of the latest developments in industry changes. Your office manager must remain on top of these changes by keeping current: taking seminars, reading journals and networking.

It will come as no surprise that the No. 1 expense of running a practice is payroll. Some dentists react to increased personnel expenses and reductions in reimbursement by downsizing their staff. Instead of this kind of knee-jerk reaction, take a look at your current staff to see if you can make changes to make them more productive and efficient.

It is worth noting that if you are concerned that your personnel expenses seem way out of line, do research to see if your practice expenses fall within the norm. The Society of Medical-Dental Management Consultants (SMD) at 800-826-2264 has statistics on income and expenses for general dentists and specialty practices.

For most dentists, the heady days of the income-generating `70s went out with polyester leisure suits. Yet, with thoughtful planning and execution, it still is possible to practice good dentistry and make a profit in the managed-care `90s. Yes, health-care delivery and management will continue to change; but, by being informed and being proactive, you can have a say in your future.

Begin today by taking the necessary steps to ensure your economic survival. Address any problems within your practice immediately, rather than letting them get out of control. Have a vision for the future!

The author is a practice-management consultant and national lecturer with The SAGE Group, Inc., a management and marketing firm with offices in Los Angeles, San Francisco, Chicago and Philadelphia. She can be reached at 800-SAGE-654.

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