Theres no money to take home

Case Profile: Located smack in the heart of Lincoln territory - Springfield, Illinois - this practice is a stone`s throw from the state-capitol building and a busy medical plaza. The 6,000-square-foot office houses one general-dentist owner, an associate general dentist and a part-time orthodontist. Talk about freedom ... there`s enough elbow room here for indoor golf!

Sally McKenzie, CMC

Case Profile: Located smack in the heart of Lincoln territory - Springfield, Illinois - this practice is a stone`s throw from the state-capitol building and a busy medical plaza. The 6,000-square-foot office houses one general-dentist owner, an associate general dentist and a part-time orthodontist. Talk about freedom ... there`s enough elbow room here for indoor golf!

Symptoms: Plain and simple - there`s no money to take home, nothing for retirement, and zippo for practice growth.

Observations: The rent: $8,000 a month! With revenues at $80,000 a month, that`s 10 percent of gross income! And just as staggering is an 85-percent overhead ... talk about capital spending! The other side of the equation is that accounts receivable is three times the monthly production.

Just maintaining the paperwork for managed-care patients has the ladies at the front desk utterly swamped. Time previously spent on maintaining patient contact now is spent wading through the maze of capitation bureaucracy.

Discussion: An underutilized computer system never had identified the number of capitation patients nor the plans in which they participated. After countless man-hours were devoted to nailing down this information, the results were staggering.

The 1,200 patient-recall system, which was assumed to have a ratio of 50 percent managed care to 50 percent fee-for-service, was actually 75-25 ... hard evidence that capitation was overtaking the practice at breakneck speed. We should learn from the words of Abraham Lincoln: "A house divided against itself cannot stand."

To complicate matters, business staff had no knowledge of which procedures required a co-pay, and therefore asked for none. Such unawareness can be dangerous as indicated by the dreadful accounts receivable held in this practice.

Sharing a parking lot with a popular medical-office complex, this practice was given a golden opportunity for growth. As new patients visited physicians across the way, their names were placed on a list and handed to my client! What was done with these lists? You guessed it ... nada!

Treatment Plan: The first issue was to bring the staggering rent down to 5 percent of revenues. If the doctor could get out of his lease, that would have been my recommendation for some immediate relief. Unfortunately, that was not the case. But, since the doctor already was renting space to a part-time orthodontist, perhaps other specialists could be brought in part time to rent space, as well. The next order of business was to bring staff up to speed on co-pay procedures and to file insurance electronically. The individual whose previous job description had been filing insurance now would be free to make patient contact on past-due recall patients.

In an effort to limit practice exposure to the pitfalls of capitation, all managed-care patients now will be seen by only the associate dentist and his hygienist.

Finally, we come to the issue of practice growth. A sophisticated, expensive marketing program was clearly not an option here, but also would have been unnecessary. The new-patient lists received each week from the medical plaza represented an awesome marketing opportunity if used in conjunction with an impressive, professionally-written letter targeted to prospective, fee-for-service patients.

Endnote: Within one year, the volume of fee-for-service patients rose to 65 percent. This is the first time in five years that the doctor has been able to take money home, plus have some left over to invest. Again, in the words of President Lincoln: "If we could first know where we are ... we could better judge what to do and how to do it."

Sally McKenzie is president and chief operating officer of Dental Partners, Inc., a full-service, in-office dental management and practice-acquisition company. She continues to serve as president of McKenzie Management, a division of Dental Partners, Inc. She can be reached at (800) 288-1877; e-mail McKenzie@earthlink.net; or visit her web site at www.mckenzie-mgmt.com.

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