Patient Value a new game with new rules

Aug. 1, 1999
There is a new game in the dental profession with new rules of competition. The new game has to do with creating patient value. With this game, good no longer is good enough.

In today`s competitive environment, business-as-usual practices have the most to lose.

Robert H. Maccario, MBA

There is a new game in the dental profession with new rules of competition. The new game has to do with creating patient value. With this game, good no longer is good enough.

Historically, a practice could be in one of three positions in the dental community. In the top 10 percent, you found the very successful practices, those with excellent profitability and the resources to stay on top. In the second position was the business-as-usual practice. Most diligent, hard-working practices filled this position in the competitive dental-practice environment. In the bottom 5-10 percent were the practices that were constantly struggling to make ends meet or were outright failing. They occupied this position for a variety of reasons - marginal clinical skills, poor management practices, or possibly just bad luck.

Today, there are only two positions in the competitive environment - a practice is either winning or losing. No longer is business-as-usual a competitive approach. Indeed, good no longer is good enough. The business-as-usual group is quietly, but very rapidly, polarizing to the winner or loser ends of the spectrum. As for the bottom end, a few of these practices are becoming winners. Unfortunately, some never will leave their current position. This changes the entire game and creates opportunities and threats for all of the participants.

For the practices in the top 10 percent, there is the opportunity to move even farther ahead and retain their position as leaders. With the proper allocation of their solid profitability, they can buy the future and stay at the leading edge of training and technology. The threat for these practices is understanding that, as the rules change, if they don`t pay attention, other practices can move ahead and push them into the business-as-usual role.

The business-as-usual practices have the most to lose. Trying to compete with aging equipment and not-so-current skills can erode their patient base and profitability. Their patient base is a prime target for competing practices that have acquired the new clinical skills, state-of-the-art technology, and superior staff-training approaches. Their opportunity lies in the fact that they have a good, stable practice with which to make the leap into the new game. With the right investments in continuing education, technology, and marketing, they can assure their future.

As the game changes, the bottom 10 percent have the most to gain and the least to lose. If they put together the resources to invest in the new clinical skills and technology, while accelerating their service skills, they have an excellent opportunity to reinvent themselves into a successful practice.

The new game that is prompting this turmoil is based on creating customer value. No longer is it just a game of attracting patients to a practice based on clinical skills or even an increased marketing presence. These are just two of the attributes of the "value proposition" your practice must offer to the consumer. To simplify, the formula is: the product (clinical care) plus customer service defines the patient`s perception of quality.

Quality, relative to price, determines the patient`s perception of value. The higher the patient`s perception of value, the more consumer loyalty exists. Loyalty is defined by the patient`s intention to repurchase (retention) and to refer. Long-term patients are more profitable because they tend to buy more, are less price-sensitive, and they refer new patients at no direct cost to the practice. With increased loyalty comes increased profit. The increased profit gives the practice the resources to reinvest in clinical training and the skills, equipment, facility, and marketing to continue to increase the value to the patient.

Creating patient value is the new game. High patient value increases loyalty and results in higher practice profit. Profit buys the future. Successful practices can use their strengths to leverage themselves into this new game and the not-so-successful practices now have an opportunity to reinvent themselves. To do this, a practice must discard some of the old rules and move quickly to adopt the new ones. Practices need to recognize that good no longer is good enough.

Rules of the game

Rule 1 Cost and quality are enemies vs. efficiency and excellence go hand-in-hand - The old rule was that to increase the quality in a practice you have to raise your cost. Although in some cases this can be true, in many instances this does not hold. Cheap lab work can eat up expensive chairtime with major adjustments. Cutting cost on materials only to have them fail is false economy. Low-cost labor is expensive because it leads to marginal productivity, a patient perception of incompetent staff, and a lowering of the value of the practice. Patients begin to seek care elsewhere. The lifetime value of a good patient is thousands of dollars in care and referrals. The bottom line is dollars spent on increasing quality should raise the value to the patient and reduce the cost.

Rule 2 Subcontractors (supply houses, labs, etc.) must be price-conscious vs. value-sensitive - The day when a practice thinks it should be out there alone fighting the battles is over. A practice`s strategic alliances are critical. Today`s practices must develop a network of subcontractors - educators, mentors, consultants, accountants, laboratories, supply house, etc. - that understand how to contribute to the value proposition for a practice`s patients. The game is too big and complex to go it alone. You don`t get access to these resources if you just buy purely on price.

Rule 3 Patients buy on price (or insurance coverage) vs. patients buy on value - How is it that Starbucks is able to charge more for a cup of coffee than the little coffee shop on the corner? It has to do with the value proposition offered. Starbucks offers a consistently high-quality cup of coffee in an engaging environment. Fee sensitivity from your patients is primarily caused by the lack of differentiation of your practice from the practice down the street. If a consumer cannot tell the difference from one product to the other, he/she will buy on price. A practice needs to invest in the things that highlight a unique benefit to the patient and deliver it with skill and finesse like a concierge does in a fine hotel. Do not market your practice as the best in town and then price it low. You send a mixed message and are wasting your marketing dollars.

Rule 4 Training is expensive vs. training is a must - Training your team is one of the best investments a practice can make. You must keep team members stimulated and at the top of their game.

Continuing education in a practice should be mandatory and a part of each team member`s job description. If a practice has an individual who is not motivated by continuing education, it probably has the wrong person for the new game. If a practice has staff members who think they are at the "expert" stage in their careers and can`t learn anymore, that is the first sign of a top practice moving into decline. It is a sure sign of a practice in the business-as-usual role.