Improving Profits and Services in 2000

The only way to increase the quality and quantity of services is by leveraging time and hiring and keeping quality employees.

The only way to increase the quality and quantity of services is by leveraging time and hiring and keeping quality employees.

Ira S. Wolfe, DMD

Knock, knock.

Who`s there?

It`s dentistry, standing in the entry of its most prosperous era ever. And just our luck - so much to do and not enough people to help us.

From coast to coast, classified ads are going unanswered, patient care is being delayed and employee morale is declining - due in large part to a lack of employees, from hygiene to the front desk. The shortage is real in both quantity and quality ... and sometimes both!

Some doctors are closing their practices as the search for dentist-associates, partners, and potential buyers screams to a deafening silence. But while dentists are becoming more and more frustrated as they attempt to hire replacements for vacated positions or add additional staff to satisfy a backlog of patients, they are overlooking several key strategic questions. (See list of questions in boxed article.)

The question becomes: How can you grow your practice and meet the escalating needs and demands of patients with an untrained assistant, a lack of hygienists, and a receptionist with an attitude?

The answer is you can`t. Dentistry is time-intensive. Everything we do takes time. Time is limited. If you are cleaning teeth, you can`t be preparing a tooth. If your assistant is cleaning trays, she (or he) is not with a patient. If your hygienist is filing charts, she (or he) is not providing care or education.

The only way to increase the quality and quantity of services is by leveraging time. Let`s look at how one example of a shortage of hygienists or a poorly managed hygiene-maintenance program will allow profits to evaporate when time is factored.

Mr. Diligent is scheduled for a six-month hygiene appointment. Six months rolls around, but you have no appointments available. You have been looking for a hygienist for months now and you have had few, if any, applicants. Your first available appointment is three months away. Mr. Diligent reluctantly agrees to wait. (In addition to lost revenues, patient satisfaction declines.) For many practices, these delays are becoming more and more common.

Your average hygiene fee per patient is $100. If the patient is appointed and seen at his recommended six-month intervals, Mr. Diligent pays the practice $2,000 over a 10-year period in return for your hygiene services (excluding adjustments for inflation and additional services). If Mr. Diligent is appointed at nine-month intervals over this same 10-year period, the number of recare visits drop to 13 and the revenues provided are $700 less.

This might be insignificant if Mr. Diligent is the exception. Unfortunately, three-month delays in many practices are only a wish. Many patients - despite the need to be seen more frequently - are scheduled as late as six to 12 months or more past their recommended appointment interval. Some patients are lost altogether!

Many of the practices I visit or speak with talk about hygiene backlogs of hundreds of patients. Even as few as 100 patients who are postponed a minimum of three months account for $70,000 in lost revenues over a 10-year period. How many tuitions would this pay? How much would this be worth at age 60 if each year that additional income could be invested in a retirement account? How many additional days off would this allow without a drop in income? Mind-boggling!

More than lost income

The impact of a lack of employees and skilled job applicants goes well beyond lost income and delayed appointments. When scheduling appointments is difficult or inconvenient, patients become much less satisfied. Patients feel rushed and they begin to question your fees. You begin to come in earlier and stay later to accommodate special or angry patients. You miss a few lunches to fit in an emergency or make a quick adjustment.

Your employees are demoralized at covering for employees on vacation and at working short-staffed. You begin to tolerate poor performance and disruptive attitudes because you are fearful of losing another employee.

Managing your practice now has become drudgery. You begin to spend more time in staff meetings and on your days off defusing upset employees and unhappy patients and interviewing unqualified job candidates. You are emotionally and physically exhausted. For those of you who have figured it out, managing a dental practice is no longer a "by-the-book" activity!

The credibility of your six-month recommendation to your patient also is reduced when the urgency to return in six months (or whatever interval you recommend) is delayed for months. What does this mean in terms of referrals, by far the most cost-effective and valuable source of new patients?

A recent study by the Picker Institute indicated that less than half of all patients who rated their care as "good" would recommend their health-care facility, as opposed to 97 percent of patients who rated their care as excellent. Only two-thirds of "good" or "satisfied" patients will remain loyal to your practice. Delays in appointing patients - one of their pet peeves - not only costs you in lost incoming dollars, but it increases your marketing and advertising budget. You must spend more dollars to find new patients to replace the patients who are leaving. You also need to spend more on growing your patient base.

The cost of acquiring a new customer is at best a minimum of five times greater than the cost of retaining existing patients. For every one patient not referred by a "good" patient, it costs you five times more to find the same type of a new patient using advertising. By improving the delivery of your service (from good to excellent), you get free advertising and a referral.

Exchanging war stories

Okay, so how is a dentist to survive? One solution is to call your dentist buddy and hit the golf links. Or, you might schedule a nice dinner with your dentist-friend and your special someones. That way, you could share your frustrations. The empathy and sympathy will be overwhelming! I assure you your dentist buddy will have a story to top yours: "You think you`ve got problems? Wait `til I tell about what my assistant told me about my receptionist, who told my hygienist about the extra Christmas bonus I gave them."

You both will vent and be relieved that you can share your burden with someone who understands. Employees today just don`t understand how difficult and expensive it is to run a practice. And, oh yes, don`t leave out the different work ethic and the bad attitudes of the younger generation. You may or may not feel better, but at least you know you are not alone.

This option, unfortunately, is a very bad solution to the problem, although validation certainly is the most commonly used solution to dealing with difficult practice-management challenges. Relying on this method is about as effective as re-arranging the deck chairs of the Titanic while it is sinking! The problem will not go away ... and it will likely get worse as the labor shortage catches up to dentistry!

Bigger is no longer better

So, if commiserating with a colleagues doesn`t work,what will? One potential solution is to streamline your practice. Although it is highly improbable you can remove every unprofitable patient from your practice, it is absolutely necessary to minimize the number of unprofitable patients you see and the number of unprofitable services you provide.

The cost of providing care will only continue to increase. The largest share of overhead is labor. With the current shortage, labor costs are beginning to rise for skilled labor. To hire and retain competent people, it will cost more. In a recent survey by USA Today/CNN/ABC, 38 percent of the people received a bigger raise this year than last, and one-third of these expected even a bigger raise this year.

The margin of error in managing dental practices in the past has eroded. Providing charity care is morally and socially rewarding ... unless you provide it unwillingly to a majority of your patients! One study of profit margins in business showed that 75 percent of all profits is derived from 25 percent of the customers; 25 percent of all profits is derived from another 25 percent; and nearly 50 percent of customers provide no profit or an operating loss. Based on a random survey, this holds true for many dental practices, especially hygiene departments.

Imagine what your practice would be like if you didn`t have the overhead associated with servicing unprofitable patients. Instead of looking for more space to accommodate a growing patient base, could you practice in a smaller, less expensive space? How many less employees would you need? If you only treated hygiene patients who were profitable, would you really be affected by the hygienist shortage?

Solution Number One: Minimize the non-profit 50 percent.

Profitability of services

Many dentists provide care while disregarding the costs required to deliver a particular service. Identify the costs involved with performing your most commonly provided services, as well as the labor, time, and/or lab-intensive services. Make sure the fees you are charging cover your costs and include a profit margin.

The answer to improving profitability is not always to raise fees. Just as often, the solutions might be to refer out high-cost/low-profit procedures or infrequently provided services. Look at ways to provide each service more efficiently, or ways to lower the costs involved in delivering the service without compromising the quality. Training or retraining employees may be needed to improve skills and minimize errors or remakes due to inexperience. More effective and efficient supply-ordering and inventory control is no longer a spare-time activity for staff members. Controlling costs and inventory is a strategic imperative for the successful 21st century practice.

Solution Number Two: Identify ways to improve the profitability of your most common services.

Poor employee performance

Poor performance and bad attitudes are contagious. Dollars invested in employee salaries that provide you little return - yet a lot of aggravation - lead to one of three things:

More turnover

(1) Loss of good employees

(2) More stress

What happens when the staff is pushed to turn rooms faster, process more insurance claims, or schedule more people? You hire more employees to help out! If your team is operating at peak performance, the investment in an additional employee is warranted. But what happens when you have a few people who give you mediocre results, and you hire an additional person to make up for the inefficiencies of your current employees?

The cost of inefficiency

Here is an example. Your current production is $500,000 and your overhead is 65 percent ($325,000).

You decide to add an additional employee at $20,000 per year. Your overhead has increased to $345,000. How much production is required to pay for this new employee without cutting into your profits? An additional $30,000-plus, or the equivalent of three weeks of production! The higher your overhead, the harder you need to work.

But the bad news doesn?t stop there. The cost of a $20,000 per year employee extends well beyond the cost of the salary and benefits. You now have one more employee to manage. Will this new employee do the job well? Will the bad attitude of the others rub off and will you end up having one more underperforming employee? How will the current team respond to the new employee and the new employee to the current employees?

Another danger of retaining underperformers is that, despite your best efforts to encourage them to leave, they stay. Worse still, your best employees leave instead.

Our studies with the results of the OQuality of Motivation QuestionnaireO indicate that inefficient, less-energized people like to surround themselves with efficient, high-energy people. The high-energy folks might attempt to pull up their followers at first, but eventually they will end up ignoring them or withdrawing from the environment. A perfect way to lose good employees is to tolerate poor performance from their co-workers.

Solution Number Three: Hire and retain high performers.

Tolerating poor performance from employees and non-compliance from patients reek of financial irresponsibility as we enter the 21st century. It adds costs to managing your practice, which drives up fees to accommodate this nonproductive ? and even counter-productive ? behavior. These costs are passed on to your compliant patients and performance-driven employees.

Tolerating both financial and employee nonperformance in your practice almost always requires the addition or retention of employees that cost you as much ? if not more ? than you can produce.

Adding or retaining employees based on production alone ? without considering profitability ? is a business killer for sure! It makes identifying profitable patients, profitable services, and top performers must strategies for the 21st century.

For more information about this article, contact the author at (800) 803-4303.

Minimizing the impact of the labor shortage

x Do your loyal, long-term patients use profitable - or unprofitable- services?

x How well are you doing at retaining your most profitable patients?

x How can you retain these profitable patients and acquire more like them?

x Which services do your most profitable patients use?

x Which services do your most unprofitable patients use?

x Do your unprofitable patients use mostly unprofitable services?

x How many employees do you need to provide the profitable services?

x How much of your payroll is invested in providing dental care for profitable patients or unprofitable services?

Visit Success Performance Solutions online at

www.fordentistsonly.com

More in Overhead and Profitability