Need business skills?

Oct. 1, 2004
Building a superior dental practice requires a focused approach. The business world has spent billions of dollars trying to refine existing methods to find the optimal way of doing things.

By Roger Levin, DDS, MBA

Building a superior dental practice requires a focused approach. The business world has spent billions of dollars trying to refine existing methods to find the optimal way of doing things. Most chief executive officers do not believe simply having a better product or service is the competitive advantage that secures business success. Instead, they believe having well-run companies with outstanding systems, high levels of efficiency, and effective action plans are the competitive advantages that secure excellent business performance.

While dentists are skilled in dentistry, most have not received formal business training because most dental schools do not offer practice-management training. Too many dentists think their dental skills will be enough to run successful practices.

Such naiveté can delay financial independence by seven to 10 years. Many dentists earn decent livings without using proven business methods, but most of them operate in highly stressed practices that will never achieve maximum profitability. Given the choice, most people will choose to work smarter — not harder — and have the option of retiring a decade sooner.

My goal since 1985 has been to bring the real business world to dental practices. It is no longer about tweaking systems here and there or gaining a nugget of information from an occasional seminar to transform your practice. Instead, it is about using proven business methods that allow practices to develop into well-run businesses with excellent profitability, low stress, and continual team development.

What is a method?

A method is a scientific approach to creating change, or a systematic way of reaching a goal based on a clearly defined set of principles. Both definitions relate to dentistry — the methods used to create change should also allow a practice to develop systematic ways to reach its ultimate goal: profit. Proven, statistically valid methods almost always work, where haphazard, subjective methods do not.

Business methods exist for almost every aspect of operations, including cost control, growth, and new product development. Even 3,000 years ago, scientists used methods to determine distance, measure heights, and understand the concept of time. As the eras changed, methods were introduced that allowed civilization to use electricity, print literature, and rotate crops to farm more productively. Eventually, methods were developed to use the technologies discovered during the Industrial Revolution.

Now, the best companies use specific methods to create their competitive advantages. Dental practices are no different, except methods needed to improve their performances often are missing or inadequate. Why? Most practices lack the management staff and business training required to establish the right methods of operation. Subsequently, the entire burden falls on already overwhelmed doctors, taking away from their production time.

Dental practice-building methodology

During 19 years of working with dentists in more than 8,000 dental practices, Levin Group has developed the Levin Group Method as its approach to practice-building and management. This method is based on significant statistical data acquired from clients and extensive market research. The data is used to build statistically valid models, allowing 98 percent of Levin Group clients to achieve significant growth in one year. While specifics will be given in this article, the main goal is for you to understand the concept of the method and how it can be applied to any dental practice for excellent results.

Five crucial steps of Levin Group Method:

1) Data collection
All practice-management changes must begin with an understanding of the practice. Data must be collected to understand the different parameters and factors affecting current and potential practice performance. Key performance indicators, or KPIs, are critical to any data-collection effort made by the practice. KPIs provide a statistical snapshot of a practice's essential functions. They include, but are not limited to:

• production
• overhead
• overhead percentage
• profit
• revenue
• new patients per year
• average production per new patient
• average production per patient
• percentage of patients with dental insurance
• insurance adjustment
• collections
• accounts receivable
• uncollectible accounts.

While there are more than 40 key KPIs to review and numerous other statistics that need ongoing evaluation, depending on the practice and its goals for change, KPIs give you a starting point for practice analysis.

It may seem like a lot goes into collecting data, but in most practices, this information can be gathered quickly from practice accountants and existing practice software once staff members know what to look for. After the proper procedures have been put in place, most Levin Group clients can collect and report this information in four hours or less — including all doctor and staff time.

After you determine what KPIs are necessary for practice performance, measure and analyze these weekly. A quick review should take a few minutes. Evaluating your KPIs every week makes it possible for you to rapidly identify the most minute performance changes.

By comparing current KPIs to those from one year ago, many practices find that some KPIs are in worse shape than they thought. For example, accounts receivable are growing rapidly in U.S. dental practices as more patients struggle to pay their dental bills. Using KPIs to identify such a trend allows practices to improve their collection policies and avoid significant accounts receivable problems.

2) Development of best models
The next step in establishing a proven method is developing a best model. The purpose is not simply to put the model in place in any specific practice, but rather to have a benchmark or comparison for all practices to gauge their performances. In fact, the best model never fits any practice perfectly, but allows a dentist to understand what can be achieved in his or her practice based on statistically valid, composite data from thousands of practices. Developing a best model helps dentists understand how their practices could run more efficiently and profitably.

Imagine preparing a three-unit bridge, and you only achieve 70 percent of the procedure. Even if that 70 percent were done well, the final result would be poor. For example, if the missing 30 percent included the lab work quality or taking an accurate impression, the end result obviously would be unacceptable.

From a management standpoint, this is what happens in dental practices all the time. They operate and do reasonably well. Nevertheless, most dentists do not have enough business background to properly design all of the practice-management systems necessary to attain desired final results. Failure to make necessary changes, however, leaves most practices running as much as 30 percent below production potentials — meaning dentists have to practice seven to 10 more years than expected to achieve financial independence.

One of the main problems in practice management and development is that dentists do not know all of the steps for every system that needs to be in place. If those systems are not properly designed, production and profitability will fall short of this year's goal — or even worse, they could begin to decline.

By evaluating practice data against best models, practices may assess their performances against an ideal blueprint because best models are based on how the best practices achieved their goals. In the business world, consulting firms are paid $10 million or more per client to develop best models for their client companies' managers.

The good news in dentistry is that models can be developed that reflect how practices should run to attain production levels of $500,000, $1 million, $2 million, or even $3 million per year. Models also can show how a $500,000 practice can become a $1 million practice without tremendous upheaval. Numerous Levin Group clients have begun below the $500,000 level and exceeded $1 million to $1.5 million within three or four years through smooth, positive transitions. Best models — not fee increases — are responsible for these types of increases.

3) Customize the model
The benefit of models is that they offer direct comparisons to where any practice is today. Nevertheless, all models need customization to be effective for particular practices. For example, every practice differs in the type of services provided, number of staff, and type of technologies used. Thus, each of these differences necessitates a variation of the ideal model. While the model represents the best industry standards, it is important to analyze the data to understand how the model must be customized for each practice.

Another philosophy Levin Group follows is that of W. Edward Deming, the founder and father of a management science known as Total Quality Management. Deming was an acknowledged expert in business transformation, and one of his tenets was that real systematic change in a business required 12 to 18 months to complete. Similarly, the improvement in a practice using best models also would take 12 to 18 months. The time frame presented allows for systems to be stabilized and the dental team to be fully trained in the method as well as for cultural change to take place in the practice.

Many dentists do not follow through on the necessary systematic changes to their practices because early changes do not provide immediate returns on investment.

The major systems of the practice include scheduling, case presentation, hygiene productivity, practice financial management, patient financing, and customer service. To make effective changes, each of these systems must have step-by-step manuals that document the new systems and scripting for staff to use when necessary to implement systematic changes. A detailed, step-by-step process is the only way entire staffs can learn new systems and contribute effectively to their practices' success.

4) Implement the customized model
Now you must implement the changes. One of my observations during the past two decades is that we never implement a great deal of that which we learn. When you think of a dentist simply attending a one-day course and being able to implement all of the changes, you realize how difficult the process becomes. Dentists and teams go to seminars on practice management, and the next day they have full patient loads. Since there are few practices with dedicated practice manager positions, often what dental teams learn will never be implemented because no one has time for developing, managing, and implementing the changes.

Delineate what actions are needed to build the proper practice systems. What most dentists fail to realize is that small changes do not usually result in significant benefits to practices. Significant changes in practices only come from systems that are defined in a step-by-step fashion that entire dental teams can comprehend. Most attempts at major practice revision are unsuccessful because of the lack of time invested by doctors and teams.

5) Results
Change must achieve positive results. Why make changes unless there is a specific outcome that is desired? For example, Levin Group data indicates that more than 98 percent of practices improve their schedules by using a set of standardized and mathematically accurate formulas, achieving an increase in production of up to 30 percent. This is true even if the dental team in a practice "feels" busy because of a full schedule. It is not organized properly.

Another example is average new-patient production. Many practices still bring new patients in through hygiene departments, or use limited doctor time during initial patient visits. Our data shows these practices will have average new patient productions 67 percent lower than expected national statistics. The way to rectify this problem is during new-patient exams, diagnoses, and case presentations. For example, performing a comprehensive exam on all new patients is an excellent strategy for increasing production. New patients will not be aware of many services you provide unless a staff member informs them. Enhancing staff members' case presentation skills also is important in boosting average production for new patients.

If a practice properly changes these systems, not only will the average number of cases presented dramatically increase, but also the practice will experience three times the original case acceptance rate. This means the practice will need to see fewer patients to ensure greater profitability.

Results are about ROI. Whether it is a monetary return, decreased stress, or less staff turnover, ROI is the ultimate goal for whatever changes are made to a practice.

Get right-side-up

Dentists have struggled too long with making small changes in their practices, only to be disappointed by poor results. Disappointing outcomes arise from not fully understanding the business world and all that is required for any particular change to spark a sustainable increase in practice performance. Practices achieve operating levels that ensure optimal profitability and efficiency only through understanding of the best management systems.

The business side of dentistry is taking the fun out for many dentists. It also restricts the level of production and profitability, which increases the number of years before financial independence can be achieved.

Using a proven business method to change a practice will allow any dentist to transform his or her practice as desired. It requires specific systems, documentation, scripting, refinement, and team training in all aspects of practice operations. In the end, if the practice does not develop specific step-by-step manuals for every system with accompanying scripting and team training, the method will fall short. Lack of success will result from a change not comprehensive enough, nor consistently implemented by the entire team. It also will require 12 to 18 months to make changes.

The time investment is more than worth it when you consider the personal and professional rewards you can attain.

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