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A start-up in the Pacific Northwest

Sept. 1, 2007
The Pacific Northwest is one of the most beautiful regions of our country. It is also the region that gave us employer-sponsored health and dental insurance.

by Michael Gradeless, DDS

The Pacific Northwest is one of the most beautiful regions of our country. It is also the region that gave us employer-sponsored health and dental insurance. The beauty of this area is unsurpassed with a surfeit of lakes, rivers, mountains, and the beautiful Pacific coastline. It was this confluence of rivers, mountains, and ocean that gave birth to our current health insurance system. The corporation that is today known as Kaiser Permanente originally developed the concept of health insurance as a way to safeguard the families of the men who were engaged in the very dangerous work of building dams. Dr. Kevin Morich began his professional career at a Kaiser Permanente clinic before building a start-up practice. By overcoming several major challenges, Dr. Morich has developed some excellent advice for other young dentists. Here is his story.
- Dr. Michael Gradeless

Dr. Kevin Morich
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I graduated from Oregon Health and Sciences University in 2001. I worked as an associate in a private practice for about a year. Following that, I was employed at Permanente Dental Associates. PDA is a group of dentists in the Portland area that contracts exclusively with Kaiser Permanente. It was a great experience - I was at a clinic that employed eight general dentists and several specialists. The camaraderie and always having another dentist to consult with on a treatment plan is something I still miss. I stayed at PDA for just more than a year before the desire to start a practice from scratch consumed me. After several months of securing financing, leasing a space, and working with contractors, we opened the doors to our first patients in January 2004.

In Portland, there are several early 20th century industrial buildings that have been converted into professional space. I found a space that has great high ceilings with exposed beams and large windows. Esthetically, the architectural style of our office is something that has always appealed to me. Patients love it. They regularly comment on how relaxing our office is because it does not feel like a clinic. My patient base is diverse. But it always amazes me how a steel worker from a construction site down the street and an interior designer from a local architecture firm express similar sentiments about the feel of the office. I have always marketed the practice to the surrounding professional offices - both in our building and to the offices in the area. People are finding it more and more difficult to get away from the office for health-care appointments, and it helps to be close to their workplace. Since late 2005, we have used CEREC technology. Patients love not having a separate seat appointment for crowns and onlays. This system has a steep learning curve, but we took the time to learn it correctly, and the results are amazing!

One of my first pieces of advice for other new dentists would be to find a good marketing firm. Early in the process of opening our doors, I was fortunate to be connected with Tyson Steel Associates. Tyson and his team were most helpful in establishing an aggressive direct-mail advertising campaign. This ensured that we had patients in the door when we opened. This type of marketing was expensive. But in the beginning, external marketing is all you have. Once we had approximately 1,000 patients, we began to transition to mainly internal marketing. Once patients are in the door, the best new patient is a referral.

One of the things that makes the process of a start-up difficult is initial investment versus immediate production capability. With the average start-up cost approaching $500,000 in our area, I would advise any dentist considering this process to keep costs down wherever possible. I was lucky because my supportive wife is also a dentist. She has a great associateship at a pediatric practice so we had an income that we could rely on during the first years. I work with my accountant to track new patient flow, procedure types, and hygiene production. Our procedure mix is diverse, but I do refer most endodontic treatment. While I see a fair amount of cosmetic cases, that area only comprises a small portion of our gross monthly production. Most of the work I perform is restorative dentistry.

Another important piece of advice I would offer to other new dentists who are starting up a practice is to pay more attention to strategic planning. I believe I spent too much money at the beginning, and would have been better served to pay more attention to return on investment. The lenders seemed eager to provide me money, the sales reps were eager to sell equipment, and I thought that - while I was doing this - I might as well get what I wanted. Those “might as wells” pushed my monthly loan costs to $13,000. This was a difficult number, especially the first year. It also surprised me that those lenders who were so eager to loan me money at the beginning were not so interested in refinancing the loan package. Once my numbers increased so that it was no longer an ordeal to make the loan payments, I found a lender who was happy to refinance. I then reduced my loan payments by $5,500 a month.

At first I thought that the lenders and sales reps had not really considered my best interests until I realized that - as the practice owner - it was my responsibility to strategically plan expenditures. I did much better when I bought my CEREC. Before I decided to purchase, I waited until my monthly lab bills were much greater than the monthly payment for a CEREC. Even with the steep learning curve and another monthly payment, I had a positive return on investment.

One of the areas that I think new dentists are inexperienced in is the management of interpersonal and performance-related conflicts in the office. A great deal of time and hardship can be avoided by properly screening applicants. But once they are hired, handling conflicts efficiently is critical. I have been fortunate to work with Jim Kreiss at Kreiss Management Consulting. After earning a law degree, he has developed vast experience as a corporate human resources director. He established our employee manual. The manual covers everything from office payroll policies to personal conduct. Periodically, there are certain employee-related challenges with which small business owners are presented. Having a consultant who can help resolve these issues is invaluable!

I think the most important thing anyone involved with a start-up can do is assemble a great team and work with experienced and reputable people. To get this done, I needed the help of real estate agents, lawyers, designers, contractors, lenders, and suppliers. I also added management consultants, an accounting firm, a marketing company, and then had to hire a staff. Even more important than all of these is the assistance provided by my wife. It is extremely important to control costs while not limiting your growth. Keep in mind that once you become operational, everything absolutely must work.

I love Dr. Morich’s story because it highlights one of the least understood actions required of a chief executive officer. You are, of course, the CEO of your practice. A CEO’s actions fall into four categories. As the CEO, you are responsible for setting the vision, doing strategic planning, building systems, and providing leadership. Dr. Morich’s story hits all four of these points. It takes a strong vision to turn an old industrial building into a thriving uptown dental practice. Dr. Morich had a strong marketing system in place before he opened the doors of his practice. He worked with a management-consulting firm on leadership issues with his staff. His greatest challenge was in strategic planning. A $13,000 monthly payment is a tough nut to crack. Perhaps a better way to approach a start-up is to phase in equipment purchases based on production and profitability benchmarks. With this type of planning, one should also phase in the borrowing. In Dr. Morich’s case, an initial smaller loan with an agreement to add to and renegotiate the loan after achieving specific production benchmarks would have reduced stress for the doctor. The beautiful part of dentistry is that you can almost always produce your way out of a hole as long as the fundamentals for success are there. Dr. Morich is headed for great success because his practice is founded on a powerful vision, strives to improve strategic planning, has an attention to systems, and relies on innate leadership skills that have allowed the dentist to develop a solid supporting team.

Dr. Kevin Morich graduated from Oregon Health and Sciences University in 2001. He practices in Portland, Ore., and resides in southwest Portland with wife, Jodi - who is also a general dentist - and their two sons, Ben and Will. He is a member of the American Dental Association, American Academy of Cosmetic Dentistry, and the Academy of General Dentistry. Reach Dr. Morich by e-mail at [email protected].

Dr. Michael Gradeless, a 1980 graduate of Indiana University, practices preventive dentistry in Indianapolis with an emphasis on cosmetics and implants. He is an adjunct faculty member at Indiana University, where he teaches the Pride Institute university curriculum of dental management. Contact him at (317) 841-3130, or e-mail [email protected].

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