Strategic management in dentistry

Management articles often assert that there is one right way to conduct a dental business or some discreet "system" to implement, regardless of what is happening in other areas of the business. To advocate the one right way is as dangerous as saying always and never. It certainly covers the bases, but is it the right action for the circumstances?

Since each business is different, shouldn`t a management analysis be unique?

Grant Staley, DDS, MBA

Management articles often assert that there is one right way to conduct a dental business or some discreet "system" to implement, regardless of what is happening in other areas of the business. To advocate the one right way is as dangerous as saying always and never. It certainly covers the bases, but is it the right action for the circumstances?

To be successful, any business - including a dental practice - needs to be correctly aligned between the owner`s goals and the environment in which it operates. Only by understanding the relevant internal and external environments - and by implementing and monitoring a properly designed business strategy - will any business be successful.

I have owned and operated nine dental offices in three states. These have been solo offices, partnerships, an HMO office, group practices with and without specialists, mostly managed care, partially managed care, and no managed care. Is there a single strategy that optimally addresses these diverse situations? Similarities may exist in the operations of these distinctly different types of office, but there also are important differences.

Individual practice owners must have specific and individual solutions for their unique situations. This requires an analysis of the capabilities of a practice and the environment in which it operates. It demands an analysis of the strengths and weaknesses inherent in the business, as well as opportunities and threats to the practice.

To advocate a standard business plan for everyone is next to useless. Likewise, reciting a list of strategies for a practice to implement is not an integrated plan for future success.

A case study

This is the story of a one-man general practice in a small, rural town. The practice was doing about $400,000 annually, with a net of $210,000, working four-day weeks.

Sounds pretty good, so why change anything? There were many reasons for change. Charting was inadequate, X-rays were incomplete, and many patients were seen only when a problem emerged. Equipment and facilities were tired, and the hygienist, who had been there 20 years, was spending her time changing bibs.

The practice was a "blended practice," meaning there was a private fee-for-service component and a managed-care capitated program (approximately 20 percent of the revenue). Moreover, this capitation plan was for welfare patients. In the course of 20 months, many changes took place in this practice, with each change involving an adaptation to the environment and, most importantly, to the goals and desires of its owner.

The owner sold the practice to a mid-career dentist. The seller was retained as an associate for two days per week for five months. The new owner also worked two days per week. Demand for services increased, and the owner began working a third day.

A large block of additional managed-care patients was available, and they were added to the practice. This increased the practice income $12,000 per month. The new owner worked a limited schedule, because he was easing back into practice. It certainly would have been more profitable for him to work five days a week, but that was not what he wanted to do.

When the seller retired from the practice, the owner was left with an excellent income ... and a large patient load! The owner sought out an associate, but was unable to recruit one. The owner did not want to work five days a week, so he cut the workweek to four days and closed the cap plan to new enrollees. This still proved to be too much of a load, so the capitation plan was dropped altogether.

Concurrently, an office manager was hired, a new hygienist was recruited, a part-time front/back office person was added, systems were refined, comprehensive treatment-planning was initiated, and the equipment and facility were improved.

So what was the outcome of all this?

In 1998, the practice did $575,000 on a four-day workweek - and it has no managed care! The practice was able to do this as a result of a proper alignment of the owner`s goals and market conditions. Had the new owner eliminated managed care the first day of operations, he would have significantly shrunk the practice. By acting strategically, with an integrated plan, he was able to build the fee-for-service segment and then drop the capitation plan with no loss of income.

Understand objectives

Managing strategically is a repetitive process; it is a process that must occur over and over again. It is not an exercise to accomplish once and adhere to forever. Circumstances, capabilities, competition, desires, and goals can change. That`s why it is mandatory for dentists to constantly scan the horizon for change and clearly understand their own objectives.

The paramount factor is the dentist`s personal goals and desires. A dentist may want more net income ... or more leisure time. To optimize a plan to achieve goals, the dentist must perform an analysis of his or her specific and unique situation. Then, by understanding the internal environment of the business - and the external environment in which it operates - an integrated strategy can be created for attaining these goals. To adhere to an archaic plan is foolhardy. Ignoring your own goals is pointless.

Lastly, business owners must possess the tools, techniques, and management principles to lead their business. This area is all but ignored in our dental education. Most dentists only gain their business education through experience and trial and error. This is not a very efficient way to acquire these important skills.

Again, while there are many similarities between various practices, there also are crucial and important differences that define each business and its owner. These require a different viewpoint for each set of circumstances. Generalized practice-management principles presented to the masses are about as valuable as a single treatment plan used for every patient!

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