MGE’s Weekly Webletters

INDEX OF MGE WEBLETTERS

New Patient Acquisition, Part I, by Jeffrey M. Blumberg
New Patient Acquisition, Part II, by Jeffrey M. Blumberg
New Patient Acquisition, Part III, by Jeffrey M. Blumberg
All About Associates, Part I, by Gregory A. Winteregg, D.D.S.
All About Associates, Part II, by Gregory A. Winteregg, D.D.S.
The Real Reason Behind Collection Problems, by Gregory A. Winteregg, D.D.S.
Scheduling Problems? by Sabri Blumberg
National Health Care, Dentistry and your Future, by Jeffrey M. Blumberg
Managing Your Overhead and Profitability, Part I, What is Your Overhead? by Jeffrey M. Blumberg
Managing Your Overhead and Profitability, Part II, Overhead Guidelines, by Jeffrey M. Blumberg
Managing Your Overhead and Profitability, Part III, Payroll Expense in a Dental Practice, by Jeffrey M. Blumberg
Managing Your Overhead and Profitability, Part IV, Associate Compensation & Other Overhead Trouble Spots, by Jeffrey M. Blumberg
Managing Your Overhead and Profitability, Part V, Lab Bills, Advertising, Overhead Peculiarities and What to do Next, by Jeffrey M. Blumberg
Suggestions on Training Your Staff, by Sabri Blumberg

MGE’s weekly webletter, Issue 14.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Suggestions on Training Your Staff

By Sabri Blumberg
Deputy Chief Operating Officer, MGE

Staff related issues (hiring, training, etc.) are always a hot topic.  I recently had an opportunity to answer a question about staff training in my “Ask an Executive Column” of our newspaper The Successful Professional.  Due to the general relevance of the subject, I offered it up for our webletter.  The column follows:

Question: What are your suggestions with regards to training staff?

Answer: That’s a great question and a much more important subject than it would seem at first glance.

When you open a dental practice, you are faced with a choice. You can do what many solo practitioners do and make the practice an “extension” of yourself – i.e., you hire some assistants and front desk personnel that “help” you run things, but you ultimately remain responsible for every aspect of the practice. In this instance, your practice is limited by how much you can personally do. Expansion (more new patients, increased case acceptance and production, etc.) will depend on how much you can do and will only end up creating more work for you.

Your second option is to create a real organization, in which the various aspects of your practice are split up and assigned to each of your staff. Each staff member has their own zone of responsibility and is in charge of handling their area of the practice. They are accountable for the success or failure of their area. In this wise you can have an office that is actually manageable. You assign an aspect of the practice to an employee and can expect it to get done, leaving you free to what you are there to do in the first place – practice dentistry. You can see that in this way the growth of your practice is not limited to only what you can accomplish yourself.

Now, regardless of how you operate, it’s still your business, which means you are ultimately responsible for what goes on. And there are some things you cannot delegate – especially when it comes to patient care (unless you add associates). With option two though (a real organization), you end up with a real team who are accountable and responsible for their own zones or areas. This makes for better service, happier employees (in my opinion) and exponential business growth potential.

If you want option number two, then I suggest that you train your staff on their jobs very well – after all, the better they are trained, the better they can be a contributing member of the team, and the worse they are trained, the more they get in the way and create more work for you. In fact, if your staff aren’t trained to do their jobs proficiently, you can’t have option two. So bring your staff along to seminars on subjects such as case acceptance and scheduling for maximum production. Getting your office manager or a Public Relations executive trained on marketing for new patients is also an excellent idea. And it is absolutely vital that you and your office manager are trained to be competent executives.

If you pay proper attention to training your staff, you will find that not only will your practice’s production and profitability increase, but your work load and stress level will go down significantly. If you need help with this, give MGE a call. We offer many services for training staff. Feel free to write me at sabrib@mgeonline.com if you have any more questions or would like more information about MGE’s services.

Next Week: The Four Ways to Improve Your Web Presence, by Jacqueline Verweij.

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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 13.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Managing Your Overhead and Profitability, Part V

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

This article is the fifth and final installment on how to increase practice profitability and manage overhead. To view the first four parts, please go to:

Managing Your Overhead and Profitability, Part I, What is Your Overhead?
Managing Your Overhead and Profitability, Part II, Overhead Guidelines
Managing Your Overhead and Profitability, Part III, Payroll Expense in a Dental Practice
Managing Your Overhead and Profitability, Part IV, Associate Compensation and Other Overhead Trouble Spots

The last two issues focused primarily on the overhead categories that tend to cause the most trouble.  Up to now, we’ve covered payroll, associate compensation and how it relates to your payroll percentage, leases and dental supplies.

We’ll wrap up the series with a look at the overhead categories of lab and advertising, and look at some suggested steps to take overall, depending on your current situation.

Lab Bills

As we covered in the third installment of this series, lab bills should run at approximately 8-10% of your collections. Years back I remember the industry standard was 10%.  In my experience, it can be less, hence the 8%.  More than 10% can be downright unhealthy.

To calculate your lab percentage, you might want to use three to six month averages (i.e., for your total lab bills and total collections).  Using less can really skew your percentage one way or the other.

For offices that pay more than 10% of their collections for lab, the usual culprits are:

1.      You’re a prosthodontist.
2.      Fees are too low.
3.      Too many reduced fee, PPO or HMO plans.
4.      Collection percentage is poor.
5.      The other areas of your practice are underperforming.

I’ll comment on each in sequence.

1. Fees are too low.

Regardless of what you charge for a crown, bridge, denture or partial, your lab fee will be fairly fixed. Of course some crowns cost more than others, but I believe the point is made. One work around here is finding a cheaper lab.  I’m not in love with that idea, but clinically, you’re the boss. For me it’s simple: If you’re happy with your lab or labs that you use – why change?  Ultimately, the most important aspect of your practice is patient care and clinical excellence. If you change labs because you can get the same or better quality at a cheaper price somewhere else – I can understand – it’s a business decision.

If you’re changing labs because you need something cheaper and as a result lower your clinical standards…well…not a good idea. Why? It flies in the face of everything a dental office – or any health care practitioner – should stand for: what’s best for the patient.

Instead, if you have a great lab that you’re working with and their fees are high, realize that their fees are high most likely because they are a great lab! They do good work. In this case, you may need to raise your fees.

Run the numbers. Check out some of those services or products out there that show various fee schedule percentiles by zip code and see where your fee falls. If yours is too low, you might want it raised.

2. Too many reduced fee, PPO or HMO plans.

Let’s say your fee for a standard crown (semi-precious or high noble) is $1,000 (could be higher or lower – just using a simple figure as an example). Chances are this fee allows for moderate profit and an acceptable ratio to your lab bill for said crown. But, you’re in a few PPOs and your average PPO fee for a crown is $600. That’s a 40% or $400 write-off! The lab bill for the “PPO” crown and fee-for-service crown are the same. For that matter, I have yet to see a lab that asks if the crown you’re prescribing is for a PPO or HMO patient so they can give you an applicable discount. Why? Just like you – their costs don’t change just because your fee did. The only one eating the write-off here is you. The expenses associated with prepping and delivering the crown (i.e., staffing, and other office expenses) are the same. You’re just charging less.

Here’s where the fun begins. Let’s look at just the lab expenses associated with a crown. Let’s say for our example above your lab charges $200. OK, for the $1,000 fee, this is 20%. On the other hand, it’s 33.3% of the $600 crown.  So, who loses here? Again – you. The lab bill, staff and other expenses with producing this crown are paid for first – you’re just getting less on the back end.

Just by the math above, you could see that if you’re doing loads of discounted crown and bridge, your lab bill – as a percentage – would be higher.

So, backing this up, why are you writing this $400 off in the first place? Simple, so you’ll be listed in that PPO’s directory and as a result get more patients. For all intents and purposes PPOs and HMOs are marketing plans. And your write-off is the “marketing fee.”

While some PPOs do have acceptable fee schedules, many don’t. And, in the main, HMO can be downright horrible.

Chances are, using the example above, the doctor who’s writing 40% off of his or her crown fee is writing a similar amount – or more – off of other procedures. They are in a sense spending 40% (or more) of their fees from these PPO patients on “marketing.”

Any way you slice it, 40% is a heck of a lot to spend on marketing. For that matter 30% or 20% is pretty high!  Chances are that if this doctor knew how to market correctly, he or she could spend far less for more new patients, making participation in PPOs like the above unnecessary.  As a side-note, if you’re interested in how to get more fee-for-service new patients, I’d suggest that you look into the MGE New Patient Workshop.

3. Collection percentage is poor.

This is similar to the managed care scenario painted above. Whether a patient or an insurance company pays you (or not), the expenses (payroll, general office, supply, lab, etc.) associated with any given procedure stay the same.

In the dental business model, expenses increase based on the amount of office production – especially lab and supply expenses.

Let’s say an office produces an average of $100,000.  Their average lab bill is $9,000. For whatever reason (sloppy financial arrangements, poor insurance follow-up, whatever) collections for this office run at 85%, or an average of $85,000 each month. Percentage-wise, lab runs at 10.5% for this office ($9,000 divided by $85,000).

Let’s say the office collected at a more acceptable level. And while it should be higher, let’s say this office ran at 95% collections or $95,000 per month. Well, now lab percentage falls to 9.5% — back in range.

4. The other areas of your practice are underperforming.

This one takes some explaining. When corrected, however, your profit and overall practice performance can really soar.

I’ll illustrate with an example:

Dr. Smith is a very skilled and productive dentist. Most of the procedures he performs involve a lab fee. He’s booked out weeks in advance. To get on his schedule for basic procedures (composites, etc.) could take up to three or four months – there’s just no time in the schedule. And very little time is allocated for this type of work. The numbers work out like this:

Monthly Production:

Dr. Smith: $80,000

Hygiene: $10,000

(6 Days, 1 FT and 1 PT Hygienist)

Office Total: $90,000

Lab Bill $10,000 per month – 11.11%

So, what’s the problem? In this case, Dr. Smith is so booked out that he most likely could use an associate. As most of what he does includes a lab fee (crowns, bridges inlays, etc.), his lab bill is high. Most of the “lower-end” dentistry has to wait months and months to get done. Additionally, Hygiene is really under-producing.

From afar, he seems like he’s doing pretty well and in fact he is fairly productive. But again, his lab bill is high – as a percentage.

Let’s say Dr. Smith just straightened out his hygiene production and brought it more in range – which at the low end with 6 days of hygiene would be for our example $25,000.  Here are the numbers:

Dr. Smith: $80,000

Hygiene: $25,000

(6 Days, 1 FT and 1 PT Hygienist)

Office Total: $105,000

Lab Bill $10,000 per month – 9.52%.

Dr. Smith lowers his lab percentage by addressing an area of the practice that has nothing to do with his lab bill – hygiene.

You could expand on this scenario. Patients are booked way out, so Dr. Smith adds an associate to expand and improve service.  The associate works up to $30,000 per month pretty quickly doing procedures with no lab fee (composites and the like).  Now our lab percentage drops even further. And, don’t forget as we covered in our last issue, freeing Dr. Smith’s schedule up with an associate should drive Dr. Smith’s personal production even higher (maybe into the $100,000 per month range).

5. You’re a prosthodontist.

If you specialize in prosthodontics, i.e., your practice is composed primarily of patients referred by GPs, your lab bill would most likely exceed 10%. This would be expected. Most everything you do has a lab bill associated with it, and you wouldn’t have a hygiene department or an associate performing procedures with no lab bill to offset this.

I know I’m speaking to a small percent of the dental profession, but figured I’d add this, as it is after all a valid point.

Marketing, Advertising and Public Relations

I’m all for marketing your business. It makes sense and puts you in control of your new patient flow and income. This assumes of course that YOUR MARKETING IS ACTUALLY WORKING.

How do you know if your marketing is working? Simple: you’re getting an adequate response. Marketing won’t “get you more new patients.” It will get people to call your office. How you handle it from there also has a lot to do with whether your marketing is working or not. I’ve already covered this very subject in depth (marketing and new patient acquisition) in our first three webletters. See Webletter 1, New Patient Acquisition, Part I, Webletter 2, New Patient Acquisition, Part II or Webletter 3, New Patient Acquisition, Part III.

While there are a number of reasons your marketing budget could go out of control, I’ve found, in my experience, three major reasons behind it:

1. Contracting for marketing services that exceed what you should be spending based on your collections level.
2. The marketing isn’t working.
3. The “quality” of your marketing is exaggerated, resulting in less marketing potential.

Let’s have a look at each of these:

1. Contracting for marketing services that exceed what you should be spending based on your collections level.

This is pretty basic – and common. We’ll take a dentist, we’ll call her “Dr. Jones,” who’s collecting an average of $20,000 per month. She wants to increase productivity and new patients and decides to do some marketing. She signs a one-year contract with a marketing company for a marketing campaign to be done via mail and the internet. The cost is $5,000 per month (25%) which is way too high. She expects revenues to take off. They improve to $30,000 per month – not quite what she expected.  Added to this, she finds out that this contract did not include postage costs for mailings (as this is paid to the US Postal Service), which is an additional $3,000 per month. Our total monthly marketing tab is running at $8,000 per month. With her $10,000 per month increase to $30,000, she’s still running in the 25% range (26.7% to be exact), which is way out of range.

The problem started with her initial monthly commitment, which should have been in the $2,000-2,500 range at the maximum – depending on her practice circumstances (i.e., new practice, established, etc.).

The moral? Marketing services can be great. Just ensure you understand all of the expenses associated with the marketing that you’ll be doing.

Now, I really didn’t break this down very much, but let’s say Dr. Jones had 1,500 charts and was getting 20 new patients per month. Sure she should be marketing, but with that many charts to collect $20,000 per month she has other problems – namely case acceptance, to start with.

2. The marketing isn’t working.

OK, this is pretty simple. You’re spending money on mail, a website, display ads, TV, radio, etc. but no one’s responding. As I mentioned earlier when referring to our first three Webletters on the subject of new patients, your problem might be internal. But nonetheless, spending money on marketing with no or little recompense isn’t going to work. Something has to change. And of course, this added marketing expense with no additional income will make marketing appear as a nasty “wart” on your overhead sheet, both as an amount and a percentage.

Now, I’ll say this as I’ve seen this messed up more times than not: The answer to “marketing isn’t working,” is NOT “stop marketing.”

Instead, the answer should be “do marketing that works!”

3. The “quality” of your marketing is exaggerated, resulting in less marketing potential.

This concept was a little difficult to put into one sentence.  Let me explain. You decide to market for new patients in your local area. You design a beautiful brochure, envelopes, etc. The cost for each mailing (including postage) is $4.50. So, to reach 1,000 potential new patients it would cost $4,500. Now, I’m exaggerating a bit as I explain this, but my concept is simple: Yes, your promotion should be smart looking and high-quality, but don’t go overboard to the point where you can’t afford to do it in an effective quantity.

My thought process on this is usually pretty simple and I work promotion expense on an “inverse-ratio” based on to whom I’m marketing.

For example:

I’d spend the least per piece on mass mailing to potential new customers. This way I can get more out. Notice I didn’t say do something cheap or that looks bad. I just said this is where I’d spend the least per piece.

From there, I’d spend more on direct promotion to existing customers. As there are less of these than there are “non-customers,” or people who “aren’t customers yet.”  For instance, you could spend a few bucks creating some beautiful promotional material for high end treatments at your office – i.e., implants, veneers, etc.  I know some of these already exist; I don’t know whether they work or not (never really looked into them enough to be able to give you a real evaluation).

Using the above, just run the numbers. You could spend $4 a piece on a DVD and other promotional items promoting different types of cosmetic dentistry and send them to specific patients of record or hand them out in the office. How many would you – in reality – be giving out? Several hundred maybe? OK, let’s say you gave out 500 over the course of a few months. In that case we’re looking at $2,000 at $4 a piece. Not bad. And if it’s done well it should help to “sell” these services. Turn that around and you’d see that sending it to 10,000 potential patients in your area could get very cost prohibitive. In that case, you’d be better off spending .50 a piece max (including postage), for a nice newsletter, flyer, etc. You could hit more people.

I think I’ve hit the basic concept here.

Lastly, you might be well served to have your marketing budget carved out as a percentage.  Then it grows as your office does and it begins to feed itself. More marketing should lead to more income, which would lead to more marketing money, which in turn should lead to more income and so on.

What to do now?

If you’ve made it this far (through all five of my newsletters) without excessive coffee or 100 ccs of adrenalin – I congratulate you.  I know they’ve been long. I thank you all for reading, and your positive feedback and I hope they have been helpful.

OK, so if you’re ready to put some order into things financially, here’s a list of suggestions:

1. Complete your overhead sheet. Download We detailed exactly what to do with it in Part II of this series.
2. Work out your overhead percentage by using the average of your last three months of collections (divide overhead figure by collections).
3. If it’s high, two things should happen:

a. You need to increase collections. I’d suggest the MGE Communication and Sales Seminars along with the MGE New Patient Workshop.

b. Compare your completed overhead sheet by category to the guidelines given in Part II of this series. Spot the areas which are out of control (i.e., too high).

4. Suggestions about how to address high percentages in the categories of lab, supply, payroll, marketing & loans are covered in newsletters III – V.
5. If you run into a particular issue that you’re having trouble with (i.e., not sure how to handle what you’ve run into or a high overhead category not covered in last few newsletters, etc.), feel free to email me at jeffb@mgeonline.com.

And with that I leave you to “get into action” on the subject. I wish you the best and again, feel free to e-mail me with any questions.

Next Week: Suggestions regarding staff training, by Sabri Blumberg.

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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 12.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Managing Your Overhead and Profitability, Part IV

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

This article is part four of a five part series on how to increase practice profitability and manage overhead. To view the first three parts, please go to:

Managing Your Overhead and Profitability, Part I, What is Your Overhead?
Managing Your Overhead and Profitability, Part II, Overhead Guidelines
Managing Your Overhead and Profitability, Part III, Payroll Expense in a Dental Practice

In last week’s article, we covered the overhead category that usually causes more trouble than all others combined – payroll. We looked at the reasons your payroll percentage could go out of whack and some potential solutions.

This week, we’ll continue to look at a couple of other overhead “trouble spots,” and we’ll also cover associate compensation, along with how it relates to your payroll percentage.

Compensating Your Associate

If you’ve read the prior three installments of this newsletter, you’ll know that:

1. The first thing you should do to reduce your overhead percentage and increase profitability (barring the presence of any unusually ridiculous, wasteful expenses) is to increase productivity and collections.
2. Your payroll percentage should not exceed 22.5%.
3. This 22.5% does NOT include you as the owner/doctor, or any associates you might have.
4. It does include all of your other staff (administrative and clinical, part-time and full-time).
5. Ideally, a solo practitioner who’s been in practice for at least seven years, has paid off their practice loan and isn’t carrying a huge amount of debt for build-out and equipment should be running between 50.6% and no more than 60.6% overhead. And if it’s lower than 50.6%, that’s OK too!

This brings us to the subject of associates.

If you have questions about how to find, interview, pay and integrate an associate, and the like, I’d recommend you read Dr. Winteregg’s Webletter
articles on the subject All About Associates, Part I and Part II.

When it comes to profitability and expense, there are a few things about associates to keep in mind that will monitor the impact they might have on your profitability.

1. If you add an associate, your production should increase.

Now, some offices add associates to free the owner/doctor up to manage or present treatment. If you have that type of an arrangement, then this would not apply. This idea refers more to the conventional model, where you add an associate to free up your booked out schedule. Moving the fillings, less productive procedures, single unit crowns and possibly endo to an associate’s schedule should create more time on your schedule to be more productive. Instead of booking that four-unit bridge out for two weeks, you get to do it in a couple of days. Two things should happen when adding an associate in this manner: a) Your associate should become productive and b) by freeing your schedule up, you should become more productive. A solo-practitioner doing $80,000 per month ($60,000 him or herself and $20,000 in hygiene) should see a jump in their production (to say $70-$80,000 or more) with an additional $30-$40,000 from the associate. This takes an $80,000 per month practice and turns it into a $120,000 – $140,000 per month practice (i.e., $70-80,000 owner doctor, $30-$40,000 associate and $20,000 hygiene).

This setup doesn’t work if you add an associate and give them work, while you sit idle. If you’re scheduled to work this morning, but there is nothing on your schedule but a denture reline, while your associate is booked up – then something is wrong. The primary purposes of bringing in an associate are to a) To improve patient care by getting them in quicker and b) to free you up to become more productive. Sure there’s also emergency coverage and the like, which is great. But, if your production stays the same same  (or worse, goes down) to “keep the associate busy,” it defeats the main reason you would add one in the first place.

2. The associate must produce enough to make employing them worthwhile.

Associate pay plans can vary. The primary plans I’ve seen are:

a. Percentage of production or collections.
b. Straight per diem amount.
c. Per diem plus some type of production bonus.
d. Per diem plus production bonus after a certain production level is hit.

The primary variance in a-d above is the amount of the per diem and the percentage paid.

Regardless, if you’re paying an associate a per diem of $500 for a 17 day month to produce $15,000, it’s not going to work very well, just on numbers alone.

Depending on your locale, fee structures can vary wildly, so I’m not going to throw out that an associate must produce $X amount to make it worthwhile. I leave that up to to you to decide. Minimally, I would say that regardless of their pay plan, paying them anything over 30% of their collections (I guess you could push that to 35% if you really wanted to) doesn’t make much sense. Using the figures above ($500/day to produce $15,000 on a 17 day month), you’ll see that you’d be paying them 56.7% ($500/day X 17 Days = $8,500. $8,500 divided by $15,000 = 56.6%). To make it worthwhile, that $500 a day or $8,500 a month associate would at least have to collect $28,333 ($8,500 is 30% of $28,333).

3. If your associate has no case presentation duties, their compensation percentage should reflect this accordingly.

How an associate is paid should be based on what they are expected to do. If you’re presenting all of the treatment and they get to come in and produce all kinds of high-end dentistry, 30% of their production or collections is way too high.

On the other hand, if the associate is expected to present treatment and is given the more simple treatment to free up your schedule, then 30% might be justified.

Ensure you factor all of this in when formulating associate pay. Why? Acquiring new patients costs money. So do dental supplies and the assistant you have to hire to work with them. Ultimately, you’re on the hook for all of these expenses.

4. Your associate should be paid on collections.

I get some odd looks at times when I mention this at a seminar. To me it’s pretty simple. You can’t pay your associate (or staff and bills) with production. You can only pay them with real money – collections. Basing it off of anything else, such as production can open you up to any number of issues, such as the time factoring in write-offs for PPOs and finance plans, so you’re not paying for what you didn’t collect.

Again, for more information on the whole associate picture, I recommend Dr. Winteregg’s articles titled All About Associates, Part I and All About Associates, Part II.

Other Overhead Trouble Spots

As we covered two issues ago, the top six overhead categories that I’ve observed cause the most trouble are: Payroll, Advertising and PR, Loans/Leases, Supplies (Dental and Office), Lab & Credit Cards.

We covered payroll last issue. To finish this issue off, we touch on Loans/Leases and Supplies (office and dental).

Loans & Leases

From time to time, especially with expensive equipment, you need to take out a loan or do some kind of a lease. Fine. It goes with the territory.

Here’s where you can get into trouble doing this:

1. If you’re a newer office and your production and collections are not up to snuff.
2. If you build out, expand, add rooms, move, etc., expecting this to magically make you more productive – and that bump in production never comes.
3. This is the most common issue – you purchase a cool new piece of equipment that is not really justified by your current level of productivity.

1 and 2 above are pretty easy to think with.

If you find yourself in #1, you need to become more productive. This might include increasing the number of new patients and learning how to present treatment more effectively. For information on how to get more new patients click here. To find out how to improve case acceptance, click here.

Number 2 above, expanding/adding more facility (rooms, space, etc.) hoping to become more productive, really depends on your situation. If you’re busting at the seams with patients, this can work well if done right. For example: You have a two chair office, with a full time hygienist in one of them and both you and the hygienist are booked out six weeks. You decide to add a chair. Well, in this instance, that extra chair could add at least an additional $100,000 or more per year – or more. It’s a good move.

Conversely, let’s take a doctor who has a nice four chair office that’s paid for. He or she decides that moving to a prettier five chair space will “raise revenues,” and provide a happier work environment. He or she is not overbooked, doesn’t need to add any additional providers, etc. The office, while productive, is not really growing and has collected the same amount the last two years. Well in this case, unless you get the place expanding, the primary things you’ll add with a move are debt and stress.

The new office is most likely more expensive and now you’ll have to add the debt service for it to your overhead. And, you’d better hope that revenues don’t go down. I write this as I’ve seen my share of doctors who move for no other reason than to move. There was nothing wrong with their location or physical plant and they expect that the half million dollars they take out in loans to build out and equip the new place will attract people because it’s pretty. This very rarely works out the way you might hope. Sure, you might eventually pay everything off – after seven years of unnecessary stress and ulcers.

The moral: Don’t do this unless a) you’re expanding and the need for space in the relatively close future (not ten years from now) is clear or b) you find an opportunity that you feel you shouldn’t pass up – i.e., owning your own space, etc., and even then you should really crunch the numbers and be certain that it will work.

Number 3 above, purchasing new equipment that isn’t particularly justified by current productivity, is, as I wrote above, the most common of these issues. How does this happen? Let’s say you go to a trade show. You see some really cool piece of equipment that you desperately “need” and go ahead and lease or take out a loan for it. Need is the key word here. What’s the different between “need” and “want”? As a businessperson, “needing” something, would mean, in my opinion, that:

a) Not having it compromises clinical quality in some way, or adding it would really improve the level of patient care or

b) Having it would raise revenues and make you additional profit. And by raising revenues, I don’t mean just enough to cover the payment. If you purchase a piece of equipment and spend $1,200 to lease it every month, I would expect that having it would – at least – make you an additional $5,000 per month.

Look, I want you to have a beautiful high-tech office. I would hope that it’s everything you’d ever dreamed of. I don’t, however, want you stressed out financially because you’ve loaded up on equipment that’s hardly being used, or wasn’t really required to improve or maintain clinical excellence. Before buying something, really examine whether it’s a “need” or a “want.” If it’s a “want” item, see if you’re really in the position to swing it financially, at your current rate of revenue, not hoped for future revenue increases. Chances are, that piece of equipment you “want” now, will eventually become a “need” as your office grows.

Supplies (Office and Dental)

The problem with supply expenses is one of control.

I wouldn’t suspect that you would leave your office checkbook lying around and allow just any employee to write a check for whatever expense he or she thought necessary. Even then, while not completely secure, one of the fail-safes with a check is it requires your signature.

With the way supply accounts are set up (either directly with your supplier or attached to your credit card), the potential liability is someone can just order what they want or feel is needed without authorization.

This area becomes problematic when no hard budget has been set. In other words, your Lead Dental Assistant (or whoever does your dental supply orders) would ideally know that the supply budget for this month is X amount and no more.

When he or she does the supply orders for the month, they are responsible for keeping within your budgeted amount and are not authorized to exceed it.

You could even, if you wish, carry over whatever money they didn’t use a prior month to the following month. This really gives the person in charge of ordering the ability to have some fun with it. They can save money here and there to buy some particular item or items that the office has been looking to get.

The plus here is that you allow the individual to be responsible and give them a degree of power and control. You would also have to set this up with a few conditions in mind:

1. You can’t run out or run dangerously low on supplies that are needed to operate – i.e., you don’t want to have to call a colleague down the street to borrow impression material because not enough was ordered.
2. If something expensive breaks (hopefully not due to poor maintenance or misuse) and you need to exceed budget, the person in charge of this should be able to come to you and sort it out to get the needed funds to handle it.
3. If production jumps spectacularly one month or more, you may have to quickly adjust your budget, especially if you’re doing a lot of implants or crown and bridge. Implant supplies and impression material can be expensive.
4. The supply budget you set must be REAL. Meaning, if you need $4,000 a month for supplies, don’t give your assistant a $2,000 budget and tell them to “figure it out.” That’s a recipe for disaster.

You could apply these same rules to your office supply accounts and whoever handles the ordering.

Well, that’s it for this week. Next week, we’ll wrap up the series with more on how to address our final troublesome overhead categories, along with a summary of steps to take based on your situation.

Next Week, the final installment of Managing your Overhead and Profitability, Part V – Lab Bills, Advertising, Overhead Peculiarities and What to do Next.

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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 11.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Managing Your Overhead and Profitability, Part III

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

This article is part three of a five part series on how to increase practice profitability and manage overhead. To view part one, click here. For part two, click here.

In last week’s article, we did a basic review of overhead categories and percentages. For a copy of the MGE Dental Overhead & Expense Sheet, click here. We also identified the six overhead categories that tend to cause the most trouble.

In this week’s article, we’re going to cover the overhead category that in my experience causes more trouble than all others combined–payroll and staff compensation. We’ll look at the primary reasons it may be higher than it should be and how you could go about getting it under control.

Staff Payroll Percentage

As I mentioned in last week’s webletter, staff pay should not exceed 22.5% of your monthly expenses. Let’s get into specifics:

This 22.5% WOULD include:

1.  All of your administrative staff (office manager, front desk and other, including part-time bookkeepers).

2.  Your clinical staff—namely assistants and hygienists—full or part-time.

3.  Any payroll taxes associated with paying your staff.

The 22.5% WOULD NOT include:

1.  The doctor’s salary.

2.  Associate’s salary—unless you are employing an associate in lieu of a hygienist to do hygiene at a flat rate per diem.

Are you paying too much?

Determining this is pretty simple.

1.  List out all of your staff as noted in #1 above.

2.  Figure out what they make each month.  A note here when you work out employee payroll: remember that there are more than 4 weeks a month. I say this based on years of asking doctors and other business owners what they were paying a specific employee and getting the wrong answer—i.e., “What are you paying Jane the receptionist?” Reply: “$2,000 per month.” “How much per week?” “$500 per week.” If you’re paying Jane $500 per week, you’re actually paying her $2,166.67 per month. Figure out employee monthly compensation as follows:

a.  Employee hourly pay multiplied by hours worked per week (assuming this is more or less fixed).

b.  Multiply “a” by 52 (weeks in a year).

c.  Divide by 12 (months in a year).

Example:

a.  Jane makes $12.50 per hour for a 40 hour week = $500

b.  $500 x 52 = $26,000

c.  $26,000 divided by 12 = $2,166.67

So, you would do this for each and every one of your staff that would be included in the 22.5%.

3.  Take the total from #2 above (all of the staff’s pay) and add 7.65%.  This is the amount you have to match for FICA (Federal Insurance Contributions Act Tax which covers Social Security and Medicare).

Example: Your total employee compensation (managers, front desk, assistants, hygienists, etc.) comes to $12,000 per month. Add 7.65% of this figure to the $12,000.

Step 1: $12,000 x 7.65% = $918

Step 2: $12,000 + $918 = $12,918

$12,918 would be total employee compensation for our purposes here. Note that there may be other taxes depending on your situation or locale. Unemployment percentage is not included here as this varies by state and your history. Ask your accountant for more information.

4.  Now we want to know—is our payroll too high?  Well, we’re going to do two things here:

We’ll first a) figure out what our payroll percentage is.

b) If it’s too high, we’re going to figure out how much we should be collecting to justify such an expense.

“a” (our actual percentage) is figured very simply:

We take our payroll amount $12,918 as above and divide it by our average collections for the past three months. Let’s say we’ve been averaging $40,000 per month. So,

$12,918 divided by $40,000 = .322 or 32.2% – too high by almost 10%!

Now if it’s too high, let’s take a look at what we should be collecting if we’re paying that much.  I’m going to do this the old fashioned way:

1.  We take our payroll amount and divide it by 22.5.

2.  We then multiply this figure by 100.

Using the numbers above, here’s an example:

1.  $12,918 divided by 22.5 = $574.13

2.  $574.13 x 100 = $57,413

In other words with a payroll of $12,918, we should be collecting at least $57,413, which is $17,413 more than what the office has been collecting. If you find yourself in this boat and were wondering where your profit has been going— you now have some idea.

So, what do we do about it?  Depends.  You could fire people—which I loathe to do unless justified.  If someone is really underperforming this may be an option. I wouldn’t keep someone who refused to get the job done and didn’t improve despite efforts to get them to do so. As I mentioned in our first issue of this series (click here), I’d rather get the office producing to its potential.

In my experience, high payroll usually traces back to a few basic reasons:

1.  Treatment acceptance is low, or the office is disorganized and as such isn’t reaching its potential.

2.  You’re paying the person—not the position.

3.  Someone (or two) on your staff (and therefore the office) is underproducing.

4.  Your staff are misallocated.

We’ll take each of these up separately.

1.  Treatment acceptance is low or the office is disorganized and as such isn’t reaching its potential.

I spent a good amount of time on this one in the first issue in this newsletter series. To read it, click here.

2.  You’re paying the person—not the position.

Ideally, compensation should be linked to value. How would you measure someone’s value or potential value?  This breaks down to two factors:

a.  Their position in the office.

b.  How well they do their job.

With one decision, a corporate CEO, who really knows his or her job, can make tens of millions of dollars for their business. Due to their position, they have sweeping impact on their organization. Now, this can of course be good or bad (i.e., remember “new” Coke?).  The point is: the higher up you go, the more responsibility you have, the more your decisions and actions affect the activity. Generally (you would hope), people in these positions would also have more skill, knowledge and/or ability than the people that work for them (history does not always agree with this unfortunately).

Due to their potential impact, skill-set and ability, they are compensated more than say—the guy in the mail room, whose decisions—while not unimportant—do not have the same impact or potential exchange value for the company.

Using a dental scenario, let’s say you have a great office manager. He or she really keeps the office booked, hires great staff and makes your job a breeze. As a result of their work, practice revenues are up by $600,000 per year or $50,000 per month. This gives you some insight into their value to your office in dollars and cents. You notice that when they’re out for vacation, things don’t run as well and collections drop (which as a side-note they shouldn’t if they were a great executive—but that’s another subject).  Based on the numbers, someone like this should be well compensated. You’re making a lot more (as proven by statistic) than you would if they weren’t there.

You could apply this to just about any staff member. Look at it this way: If you were to hire a Schedule Coordinator, what would you expect?  I would expect that the office would produce a lot more. If production didn’t go up and no-shows didn’t go down, then what would be the point?

This, by the way, is why we teach MGE clients how to use statistics to grade performance. Statistics are unbiased—they don’t have opinions—they are what they are. They are based on nothing more than performance. Using statistics to decide on promotions makes life easy—the people who do their jobs move up and those that don’t do their jobs don’t, or they may move out.

Looking further we see that someone’s position in the office has a lot to do with how they can impact the place. A receptionist is a very important position. We go into this in a number of these newsletters. But, if you were compare the greatest receptionist in the world and the greatest office manager in the world—the office manager would have more impact and thus more value to the business—just based on their position alone. Again, this is not to minimize the receptionist’s importance—it’s just that from that position they don’t have the same responsibility as the office manager. As such, they are compensated differently.

Where this goes off the rails is when I see somebody complaining about profit and they’re paying their receptionist over $70,000 per year. Unless you’re charging $2,500 for a crown—I wouldn’t see how this could work. I don’t care how “great they are.” If they’re making that much money, they should have more responsibility and hence more potential impact. Maybe they should be manager or junior manager—or something! A receptionist has a certain value. How they are compensated usually has to do with your locale. A receptionist on the upper west side of Manhattan is going to make more than a receptionist in Wyoming due to cost of living adjustments. When clients have questions about what to pay, I usually, due to variances by locale, refer them to an applicable website like www.salary.com. These sites lay out, based on your zip code what the low, median and high rate of pay is for various positions and can help you gauge wage levels for your area.

While I don’t object to paying someone well or even a little high for what they do if they perform well, grossly overpaying by position because the person is “great” or they’ve been with you for umpteen years is a fast way to cause overhead issues. Rather pay them well and have a bonus system. Bonus systems offer you a potentially unlimited means of compensating someone. The better the staff does their job, the more the office makes. The more you make, the more the staff makes and everyone wins. If you’d like a sample office bonus system based on collections, you can send an email to info@mgeonline for a copy.

3.  Someone (or two) on your staff (and therefore the office) is under-producing.

Here’s the kicker. You have six staff and four of them are running around working themselves half to death. One is indifferent and doesn’t get much done and the other is actively counter-productive to the organization. All of this results in a stressful working environment and struggling office barely paying its bills.

Why?

Let’s use an analogy. You’re part of a team in a tug-of-war contest.  You have six people on your team, including yourself. You and three of your teammates are in there pulling. While some are stronger than others, the four of you are giving your all. The fifth teammate is standing next to the rope—staring at the team, having a coffee, secretly thinking about joining another team, explaining how “tired” they are and how they’ll be “right there.”  Teammate five is a distraction. The four of you are annoyed with him or her, but you keep pulling. The sixth teammate is pulling the wrong way (while pretending to pull the right way) and sabotaging the four of you who are working your hearts out. With teammate six, some of you suspect something is wrong, but you can’t quite put your finger on it.

Whether your team wins or loses depends on the combined effort of the group to pull harder than the other team. You and three others are working towards that objective. One isn’t really helping and another is actually working against the objective. You could get rid of “teammates” five and six and the overall effort would actually improve. Why? Two reasons:

a.  The obvious one, teammate six (who’s pulling against you and making it harder for the four of you to pull) would be gone—making it that much easier and

b.  The annoyance associated with teammate five (which is counter-productive in and of itself) would be gone, making the rest of the team happier and less distracted.

Better yet, cutting teammate five and six loose gives you an opportunity to get a new teammate five and six who can add their effort to winning the tug-of-war. With the addition of these two new “pullers,” your team has more power.

Now, transpose the example above into an office setting. The only thing worse is you’re paying teammate five and six for their lack of work or downright counter-productive activity.

The activity of teammates five and six result in lower productivity, income and morale. Eventually, you’ll have an overhead problem because your income is too low and your payroll percentage goes up.  Again, here’s where statistics are invaluable. Teammates five and six would be found out fast and would have to change their ways or move on.

So, keeping non-productive personnel on board will not only keep your office from reaching its potential (as discussed in the first newsletter in this series, click here to read it), you’ll have a hard time making it in general.

4.  Your staff are misallocated.

By misallocated, we mean that people are placed in the wrong positions of the organization based on workload.  It could also mean that some areas are to a small or large degree overstaffed (too many personnel based on workload).

Example: Dental office with one doctor, one assistant, two chairs, 500 active charts, an average of seven patients per day and three full time staff up front.  In a small one-provider office like this, you don’t need that many administrative staff. There’s not enough for them to do. If they seem busy all of the time, especially if you’re not very productive, you probably have one of these counter-productive types causing trouble and creating work for the other two to do. Regardless, you’d be better served moving one in the back to work as an assistant.  In this scenario, one front desk person would probably suffice.

Let’s look at the reverse: Eight-chair office, five thousand active patients, two doctors and four full time hygienists, five dental assistants (four for the doctors and one for hygiene), with one full-time person up front. In this case, the inadequate administrative staff can’t keep the doctors and hygienists booked.

Both of these examples illustrate a misallocation of staff.  This is solved in some cases by reassignment (to another area based on workload) or in more drastic cases, potential lay-offs/dismissals.

Again, I’m not a big fan of getting rid of people—especially productive people. If you have a productive, performing person, you can usually find something worthwhile for them to do at your office. Non-productive, non-performing personnel are an entirely different matter.

Misallocation happens a good amount of the time due to poor organization—not malice. Lack of a good organizational structure opens the door to inefficiency, duplicative work and any number of things. For this reason, we spend a good amount of time with MGE clients teaching them how to set up an effective organization structure that allows for stable and profitable growth.

All right—that was a long one! I’ll leave you til next time.  In our next issue, we’ll start off with a bit on associate compensation and then we’ll cover some of our other overhead “troublemakers”: advertising, loans and supplies.

See you next week!

Next Week — Managing your Overhead and Profitability, Part IV—Associate Compensation & Other Overhead Trouble Spots
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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 10.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Managing Your Overhead and Profitability, Part II

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

This article is part two of a five part series on how to increase practice profitability and manage overhead. To view part one, click here.

In last week’s article, we covered lowering overhead by realizing your collections potential and thereby increasing revenues.

In this week’s article, we’ll cover overhead and expense basics, including general overhead categories, along with suggested percentages for each. We’ll also detail common overhead trouble spots.

What’s Your Overhead?

Normally, the small business or practice owner thinks of their overhead in monthly terms – i.e., “My overhead is $30,000 per month.” We usually arrive at this figure by asking our accountant for a Profit and Loss statement or getting the same or similar report from our financial software.

Then using what was collected the past month, we calculate a rough estimate of profit, “We collected $50,000 and my overhead is $30,000 so my profit is around $20,000.”

Often, these rough calculations are way off the mark.

Calculating Your Overhead

Technically, your overhead will fluctuate (to some degree) month to month. Here are a few things to keep in mind:

1) You have fixed and variable expenses. More on this later, but for now, the variables are primarily dependent on how much you produce or collect. The more you produce or collect, the higher your variables go. So, if you’re estimating an overhead figure, you could get pretty close as long as that figure was based on a certain production and collection figure. For example, someone’s overhead is $40,000 as long as they are collecting and producing $70,000. If they produce $100,000, the overhead for that month would go up (due to more lab, supplies, additional staff or hours, etc.).

2) Basing projected expenses off of what you’ve already spent in the past can be a major error. Sure, using your Profit and Loss statement for the 1st Quarter could help you figure your monthly overhead out. But, what if you overspent in certain areas? Let’s say your assistant went wild with supplies and over-ordered? If you used this information, you’d project too high of an overhead figure into the future for dental supplies. So, while past expenses are helpful to determine future expense, they are not the final word. Don’t blindly transfer your P&L information to an overhead sheet and think it’s all nicely taped. Ensure the amounts you’ve been spending are the amounts you should be spending, which leads us to the next point.

3) Financial planning for a business should be done in this sequence:

1. Earn money.
2. Determine/plan how you are going to spend this money or which expenses you’re comfortable incurring.
3. Incur expense. You’re planning AHEAD.

How it’s usually done is:

1. Incur expense
2. Get money
3. Pay bills
4. Now figure out what you spent on what.

The earlier sequence is planning. The latter sequence is reacting. You wouldn’t go on a trip with no idea as to where you were going. Similarly, you’d want to plan what you were going to spend money on before you spent it. We’ll get into this more as the newsletters continue, but for now let’s use the dental supply example. Do you have a budget? If your assistant orders does he or she know how much they can spend per month? Or, do they just order whatever they want or think you need and you pay the bill? Maybe they have to exceed their budget one month – do you find this out before or after the money’s been spent? I think you see what I’m getting at.

4) Last point: Weekly and monthly expenses are usually added in to someone’s overhead figure. What about expenses that are less frequent? Malpractice and other insurances, major maintenance and repairs (i.e., replacing a compressor) and some tax bills are not paid on a monthly basis. But, they add up. Technically, even if they’re not paid on a monthly basis, it should be built into your overhead and expense figure and this money should be set aside for when the bill is due. For example, if your malpractice is $4,800 per year, $400 per month should be built into your overhead to cover this when the bill comes due. This deserves attention – I’ve seen plenty of doctors who thought their monthly overhead was 40K find out it was actually 45 or 50K when you factor these expenses into the mix.

Overhead Categories

The MGE Overhead and Expense sheet covers just about every category of expense. (For a copy of this Overhead and Expense sheet, click here.) It has two parts: The Worksheet where you figure out all of the expenses for each category and the Summary Sheet, where you bring it all forward and come up with a final overhead figure.  The break down of categories with some explanation follows:

RENT & MORTGAGE EXPENSE

This would include any rent and association dues (if you’re in an office condo, etc.) that you might pay on a monthly basis. If your office owns the building itself, which I’ve found to be rare, you’d include the mortgage expense in here. If you own the building and rent it to the practice, you’d include your rent – not the mortgage – since you as the landlord pay the mortgage.

LEASE EXPENSES

Self-explanatory.

LOANS & LINES OF CREDIT

Again, self-explanatory. If you’re newer in practice and your loan payment will graduate higher in the years to come, keep in mind that you’ll need to adjust this category.

CREDIT CARDS

We include this category if you’re carrying any credit card balances. With clients, we work to get these retired quickly through increased profitability. Nonetheless, you have to service the debt whether you like it or not. If you use your credit cards for supplies or lab and pay them off every month, these would be lab and supply expenses respectively (which are covered later), not credit card expenses. This category is here just in case you’re carrying balances.

INSURANCE

Self-explanatory.

OUTSIDE SERVICES

Accountant, hazardous waste disposal, janitorial services, etc.

UTILITIES

Self-explanatory.

COMMUNICATION & PHONE

Self-explanatory. However, if your yellow page ad is included in your phone bill, break the amount off for the ad and include under advertising.

DUES
LICENSING
SUBSCRIPTIONS

Are all self-explanatory.

PAYROLL EXPENSE

This would include employee compensation, along with any employer related payroll tax or unemployment contributions.

ADVERTISING

Any advertising – mail, billboards, TV, radio, etc.

PR & PROMOTION

Birthday cards, sponsorship of local organizations, etc.

CONTINUING EDUCATION

Self-explanatory.

OFFICE EXPENSES

This is primarily office supplies.

BANK & CREDIT CARD CHARGES
DENTAL SUPPLIES
LAB EXPENSES

All self-explanatory.

BACK BILLS

We added this category in the event that a business is behind on bills. If this is the case, we’d want to ensure that this was factored into overhead to ensure that the office catches up to where they should be quickly.

OTHER EXPENSES

The catch all! If we’ve forgotten anything, here’s where you’d add it.

Overhead Percentages

Using the categories above, we’ve calculated some projected percentages. These percentages were calculated with a solo GP who’s been in practice for at least seven years. These are NOT written in stone and can fluctuate due to a number of factors (more doctors, newer in practice, etc.) that I’ll detail afterwards.

EXPENSE CATEGORY ESTIMATED PERCENTAGE

Rent and Mortgage Expense 4-5%

Lease Expenses **

Loans and Lines of Credit **

Credit Cards **

Insurance 2%

Outside Services 1.65%

Utilities .6%

Communication & Phone .6%

Dues & Licensing **

Subscriptions **

Payroll Expense 22.5% (1)

Advertising 3-5% (2)

Continuing Education 1-5%

Office Expense 1.25%

Dental Supplies 6-7%

Lab Expenses 8-10%

TOTAL 50.6 -60.6%

GROSS PROFIT 39.4 – 49.4%

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** = not listed as a regular expense, or amount less than .3 percent.
(1) – Does not include doctor or associate pay.
(2) – Marketing budget can be higher depending on the doctor’s desire for new patients or expansion.

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Now, as I said earlier, this is not written in stone. Percentages could be higher.

If a practice is newer, it’ll be carrying more leases, loans, etc. If there are multiple doctors, the profit will be lower (as you’re paying additional doctors) but you should be more than making this up in volume. There are a number of other variables, most of which I’ll cover through the balance of my newsletter series. For now though, we have a start.

Fixed versus Variable

Defining which expenses are fixed and which are variable depends in a large part on who you’re talking to. I’m giving you my view on this. Whether you use it or not is up to you (this is why I have that cool disclaimer).

Fixed expenses:

Using the categories above, you could say that the following expenses are for the most part fixed. They don’t change or they change very infrequently (i.e., every year). It’s a good idea to periodically review these categories (possibly quarterly or at least semi-annually) as phone plans & loan payments might change and some insurances adjust more frequently than annually, etc.

1. Rent and Mortgage Expense
2. Lease Expenses
3. Loans and Lines of Credit
4. Insurance
5. Outside Services (accountant, etc.)
6. Utilities
7. Communication & Phone
8. Dues & Licensing
9. Subscriptions

Variable Expenses

These expenses can change month to month. Some like lab and supplies are tied to office productivity. Others (like CE) are tied to how much and what type you’re utilizing. Regardless, we’ve listed these expenses as “variable” which could:

a. Drastically fluctuate on a monthly basis.
b. Change (as a percentage of expense) very quickly (i.e., you could sign up for a new marketing plan and this could impact your overhead within 30 days).

1. Payroll Expense
2. Advertising
3. Continuing Education
4. Office Expense
5. Dental Supplies
6. Lab Expenses

Even though these expenses are variable, they could still fit within the percentage framework as listed above.

Working with a Basic Overhead Figure and Variable Expenses

So, how do we put all of this together to work and manage with?

Well, here’s what you could do:

1. Work out what your average collections and production have been for the past three to six months. Now, I’m assuming there are not huge swings here on a month-month basis (i.e., 25% or more).

2. Now work out your current overhead. You can use the categories above. Ensure you include the monthly amount for expenses that are paid quarterly, semi-annually and annually (insurances, etc.).

3. #2 above would be your overhead more or less when you are producing and collecting what you determined in #1.

In other words, if you work out your average monthly collections at $60,000 and your average overhead/expense is $40,000, we would say that at $60,000 your overhead is $40,000 or 67%. Now of course as explained in our last newsletter, if you were to produce/collect more, this number might go up, but the percentage would go down.

Getting back to this example, you’d be pretty set saying that your overhead was “$40,000,” as long as your collections average $60,000.

Now, let’s say you’re humming at the overhead and collections levels listed above. You haven’t added any expenses particularly; you’re staffed the same and all budgeted areas are operating at about the same level. Then, out-of-the blue, you have an incredible month and produce and collect $100,000. How would you account for the increase in variable expenses?

A simple rule of thumb would be to set-aside 30% of your increase towards variable expenses. It might be more than you need, but if you had a choice between having too much money or too little, which would you choose?

Working the numbers using our example above, it would go like this:

We’ve collected $60,000 on average (some months a little higher and some a little lower), with an overhead of $40,000. We have a big month and collect $100,000, which is $40,000 above average. We take 30% of the $40,000, or $12,000 ($40,000 x 30%) and keep that aside to cover additional expenses incurred this month (lab, supplies, etc.). So, instead of our usual $40,000 to pay bills with, we have $52,000 ($40,000 plus the $12,000 for variables).

We may use less, but again, isn’t it better to have that problem than setting aside too little?

Now, we collected an additional $40,000. We have the $12,000 for variables, leaving $28,000 left over, which is for the most part profit. What do you do with that? Well, this is where you talk to your accountant.

Now, what if this increase is not just a “flash in the pan,” but a more regular thing? Well, good news – you’re expanding. As your office expands, you’d want to review your overhead more frequently to adjust categories as more productivity will usually bring at least some additional expense.

MGE clients expand pretty fast. As such, we place our Financial Planning Seminar early on in our Executive training.

We have a basic idea now on overhead. I thank you for reading and hope I haven’t driven you into the unconsciousness of boredom with all of this numbers talk!

Trouble Spots

Let’s preview a bit of next week and look at the overhead areas that cause the most trouble – our overhead “hot spots.” From my experience, these categories (in the order of priority) tend to be most problematic:

1. Payroll
2. Advertising and PR
3. Loans/Leases
4. Credit Cards
5. Supplies (Dental and Office)
6. Lab

While other categories could cause issues in individual situations (i.e., your rent is too high), I’ve found 1-6 above to be the most common overhead trouble points.

You’ll notice payroll is #1. It’s also (if you look at percentages chart above) the expense that eats up the highest percentage. Managed well it’s still a quarter of your expense.

Next week’s issue will be completely devoted to this subject and what causes it to go higher than it should. We’ll visit the subjects of efficiency, whether you’re paying too much for certain positions and how to get this category under control.

Next Week: Managing Your Overhead and Profitability, Part III – Payroll Expense in a Dental Practice
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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 9.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Managing Your Overhead and Profitability, Part I

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

The subject of finance, or money in general, tends to create quite a reaction in people.

People “worry” about it, marriages run into trouble for lack of it and wars are started and fought over it.

You’ve probably experienced this “odd reaction” firsthand when presenting treatment to patients. “Mrs. Jones” might be the nicest person in the world during the presentation, asking all the right questions and seemingly interested in her dental health. You’re happy, she’s happy. Then financial discussion begins. At the mention of the cost, Mrs. Jones changes into someone completely different. Her face gets red. She’s belligerent. You have trouble believing that this is the same person you were having such a great conversation with thirty seconds ago. And all this at the mere mention of cost (money).

This article is the first in a five part series on the subject of how to increase profitability and manage your overhead. We’re going to talk about money. How you spend it and how to increase profitability. Being that this subject is so “charged” I wanted to lay out a few ground rules to ensure you get the most from it:

1. Due to the various “feelings” about the subject of money it tends to be one of the most volatile, misunderstood and poorly handled subjects.

2. As a result, there may be times in the process of going through these next few newsletters where you feel like increasing profitability or managing overhead is too “confusing” or too much “trouble” and avoid the subject altogether. This reaction is NOT uncommon. I assure you it’s a very simple subject. It’s a subject that, as a business owner, you MUST understand and I’ll do my best to help. So, persist. Your reward will be more control of your finances.

3. I’m not an accountant or investment professional. The purpose behind these articles is to show you how to create a SURPLUS;  in other words, more profit. What you do with this “surplus” is up to you, your accountant and/or your financial planner.

Having said that, I’ll say this: Due to the confusion on the subject, along with the onerous and confusing tax codes and the general financial psychosis (for lack of a better word) associated with investing and estate planning, people’s eyes tend to glaze over when talking to accountants and financial planners. Sure they’re the experts. But that doesn’t mean that you should shirk all of your responsibility and just let them handle it.

Guess what, if a patient has no idea what you’re talking about with regards to treatment, it’s your job to explain it to them. Well, the same thing applies to your lawyer, accountant and financial planner. If you don’t understand why they are doing what they are doing, make them explain it. And if you don’t like the explanation, you have the power to choose someone else.

Bottom line: Don’t relinquish control because the subject seems difficult or impossible to understand. Find out. You’ll be the better for it.

4. Lastly and most important, finances work best when the subject is handled in a “clean” manner. What do I mean by this? Simple: obey the law. If your accountant or other financial professional suggests that you “hide income” or offers questionable tax strategies, I have one suggestion: Get a new accountant or financial professional who doesn’t do this. If what you’re being asked to do financially seems weird or sounds too good to be true – it probably is. The amount of time, effort and potential penalty associated with trying to “skirt the system” is not worth it. It’s also to sum it up in one word – wrong, and could potentially be illegal! If you disagree with various legislation the answer isn’t to violate it. Follow the law-abiding, standard route: join organizations that are committed to changing the laws or elect a representative that will change them, etc. Handle your finances in a manner where you could care less who looked at your books – life’s great when you have nothing to hide.

So, now that we have the “ground rules,” let’s move onto the “meat.”

What is Your Overhead Percentage?

You’ve at one point in time been asked, or have asked yourself this question. Most people answer with a percentage, i.e., “60 percent.” Some people plan their future on these percentages, “Well I can cut my overhead to 55% if I pay this off or fire this person,” etc.

The subject of overhead percentage can get pretty deceptive. Without getting into all of the variables, you can see that some expenses are more or less fixed (i.e., rent) and others are variable (i.e., lab). With this in mind, let’s take it back one step further, specifically to how an “overhead percentage” is derived.

This is simple enough; you divide your total expenses by your revenues.

Example: If you spend $40,000 per month to pay bills and the like while making $55,000, your “overhead percentage” is 72.7%.

$40,000 ÷ $55,000 = .727 (72.7%)

So far so good.

When discussing overhead percentage, the focus usually goes to expenses. This is only half the equation. It ignores what is, in my mind, the more important other half of the equation – revenues.

Let’s use the example above. We’ll say expenses are still $40,000, but in this scenario revenues are $80,000. Well, now our “overhead percentage” is 50%.

In an effort to increase profitability, the doctor with the $40,000 overhead and $55,000 in revenues, will more often than not place all of his or her focus on cutting expenses. They join supply co-ops, use a cheaper lab, refinance debt (the list goes on).

I’m all for cutting wasteful expenses. Why waste money? It misses the bigger point though, which is: If you’re looking to improve profitability, the FIRST action and focus should be to increase revenues.

Now, if you have some grossly ridiculous, hugely wasteful expense, feel free to cut it. But, and I say this with almost twenty years of experience, “penny pinching” for profit isn’t going to work as fast or as well as making your office produce the revenues it’s capable of.

What’s the starting point when it comes to increasing revenues? Simple – patients accepting and paying for their full treatment plans.

I’m not talking about just fancy full mouth reconstructions either. I’m talking about basic, bread and butter dental treatment. Like the patients you saw this past week who needed, but didn’t accept or put off, the crowns, implants or bridges (or endo, etc.) that they needed.

Now, you’ll have hardship cases where a patient cannot possibly pay and you handle these accordingly, you might do some of the work as a charity case and that’s great. I personally appreciate and enjoy doing work like that.

However, you’ll find – very often – that the patient who doesn’t accept treatment could pay for it. They just don’t. They pay for their vacation or other “stuff.” Why? They don’t understand the importance of it. They’re not “sold.”

It’s not uncommon to have a client go home and collect an additional 50% (or more) after their first seminar. I see this very frequently. And, I’m not saying this to “pump MGE up,” I’m just stating fact.

How do they do it? Well, usually it starts with them actually presenting full treatments and asking the patient to pay for it. Shocker – isn’t it? Look, there’s a lot more to this, it’s about the subject of sales. Which, if you’ve read our newsletters, you know that we teach a very professional, easy and actually fun way to handle this subject. We show our clients how to really connect with and communicate with their patients. I don’t want to go too far off on this, but it starts with sales.

I’ll give you two very simple case histories. And, I want it known that I didn’t “pore” over every client’s statistics to pick the “two best,” I’m too lazy for that…. I simply grabbed two successful clients to demonstrate my point. I’m not going to use names – but the numbers are real. While all of these doctors have gone on to even greater success statistically, I wanted to demonstrate how things changed in the beginning of the MGE program with primarily marketing , and communication and sales training.

Case #1: General dentist (practicing solo) with three operatories collecting about $59,000 per month (three month average). Attends MGE sales training and starts applying it. Within six months, with little staff change, is collecting about $81,500 per month (three month average). There was no change of facility, equipment or the like. No huge additional expenses. This doctor was spending less time in the office (as they were coming to MGE to train). Yet, despite all of this, they were collecting an additional $22,500 per month, most of which was profit. Keep in mind that there is no way they would have been able to “cut” $22,500 out of their expenses to become more profitable. It would have been impossible!

Case #2: Solo practice with three ops, general dentist, averaging $78,500 per month. Does two MGE seminars on communication and sales. Next three months following first seminar average about $115,000 per month (has increased far more since). A change of over $36,000. Again, no appreciable increase in expense (other than lab and supply of course), which means this additional revenue is profit.

If you look at these examples, you can deduce a few things:

1. The primary “change” which spurred increased productivity and revenue was training the doctor, not adding a piece of equipment or burdening the overhead with heavy expense.
2. These additional moneys were primarily profit.
3. Everybody wins in this set-up, patients get the treatment they truly need, the doctor gets the satisfaction of doing the type of dentistry they enjoy and the practice is more profitable.
4. Here’s the proverbial “kicker”: If these practices grew so fast, the potential to produce or collect that much was always there. It was just unrealized. So, using this logic, you could say had these folks started six months earlier – they would have been so much the more profitable!

My point? We’re dealing with overhead, profit and expense in this series. If you want to improve your profitability, look first to increase productivity. As you do this, you can then improve on and manage expense.

Look, you don’t have to do it this way. And by all means, as I said earlier, if you have any particular expense that is out of control, don’t “wait” to handle it.

But, if you want to be successful, focus on the income – not the expense to start. If you are not an MGE client, I’d suggest the MGE New Patient Workshop or the MGE Communication and Sales Seminars. If you’re already a client and you want to improve even further, check out the MGE Graduate Sales Team Seminar.

With all of that said, next week, we’re going to dive into expenses. We’ll detail various expense categories, along with percentage guidelines by category. We’ll also start to look into some common overhead trouble spots.

I thank you for your time, apologize for any “long-windedness,” and look forward to “seeing you” (electronically at least) next week.

Next Week: Managing Your Overhead and Profitability, Part II – Overhead Guidelines
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PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.

MGE’s weekly webletter, Issue 8.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

National Health Care, Dentistry and your Future

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

“How is the new health care legislation going to affect my practice?”

I’ve heard this question (or some variation of it) “quite a bit” since the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act was signed into law in March of 2010.

And, while I’ve had an opportunity to review the literally thousands of pages of this legislation; pointing up the various sections of them is not the focus of this article.

The purpose of this article is not to share my personal feelings or viewpoints on the subject. What I have to say applies to you – regardless of where you stand on the issue – for, against, in the middle or whatever.

Here’s the reality of the situation: While this legislation is a sweeping change (as opposed to a minor one), there is nothing new about “change.” Things change all the time, whether these changes are governmental, economic or other. If you are properly equipped, you can survive (and thrive) despite just about any change in your environment.

The Basics

Let’s zero in on the basics. If you’re a dentist or dental specialist, chances are you own your own business, solely or with partners.

You have the skills necessary (clinically) to practice dentistry. You picked these skills up in dental school and honed them through continuing education and practice.

You perform the dental arts so to speak within the framework of a business – your practice.

This business must make more money than it spends (surplus) to succeed. How much surplus you create governs your profitability and, in turn, your personal financial success.

To make your business profitable you at a minimum must:

1. Perform good service.
2. Acquire a regular flow of new customers.
3. Your new and existing customers must purchase (pay for) an adequate amount of your services.
4. Control/manage expenses.

How well you do 1-4 above determines your profitability. While money is not the “end all” it is a means to an end. More income/money creates more survival potential.

The separate actions that go into 1-4 above are numerous. You have to hire good people, you need to be organized, someone has to “run” the place (management), and the practice has to present (and collect) needed treatment and market effectively.

OK, so far so good. I know I’m treating this rather simply, but most powerful things are just that – simple.

Your Success

What I say next you may have heard before. I want you to read it anyway. It’s of grave importance – especially now.

When it comes to your practice, you’re the “captain” of the ship so to speak. Using the sea as an example of an ever changing environment, let’s say that we have a captain who, being rather unknowledgeable, only knows how to sail in placid (calm) waters. As long as everything is nice and “smooth sailing,” everything’s great. But how about when the ship hits rough waters? Now, we have a problem. The crew ― panicked ― looks to their captain for guidance and he or she can’t provide any. As the water slams against the hull and the ship violently rocks back and forth, our captain either a) Issues orders blindly “hoping they’ll work” or b) Panics him/herself and hides in their cabin.

Chances for survival in this mess are slim.

Contrast this to a captain who has the necessary knowledge and skill to survive in any waters. Things get rough and he or she gets things under control fast. No one panics, and – while it might be tough for a spot – things eventually smooth out. The ship sails on.

What’s the difference? Simple – one captain knew how to handle it and one didn’t. One knew what to “do” and one didn’t (or at least was uncertain about it).

As we went over earlier, you have a good knowledge of the clinical aspect of your practice. This is something you “know.” How about the administrative aspect? By this I mean the technology and activity involved in running, managing, marketing and building your business.

It was through training that you earned your knowledge and became a clinician. Training is also required to become a good “administrator” (marketer, salesperson, executive, etc.).

Talking to the average doctor (dentist, MD, chiropractor, etc.) or small business owner over the past 18 years, I’ve found that the prevalent “idea” of how gain administrative knowledge or executive skill is through “experience.” Well, let’s see how I’d learn to perform a root canal after learning how to do so through “experience.” “That’s different!” you might say and to a degree you’re right. No one ends up in excruciating physical pain due to lack of administrative know-how. But, you can definitely “hurt” or “kill” your business with this lack of know-how.

Real know-how comes through training. Having this know-how (and practicing it) could be the difference between struggling (or failing) and becoming a wild success.

And, regardless of what you think of this healthcare legislation, I can say with near certainty that this isn’t the last time we’ll experience some type of sweeping reform or change.

As I mentioned earlier, things change. They always have.

You have a choice:

1. Learn the technology of Administration (how to run a business) and prosper, regardless of what’s going on, or

2. Blame whatever cross-currents are rocking society at any given time for the predicament you find yourself in.

Option “1” puts you in the driver’s seat. Option “2” makes you an unhappy passenger.

Through the recent Wall Street meltdown (2008) and “economic crisis” that followed, most MGE clients reported higher revenues, more new patients and profitability. Why? They were trained.

As the captain of their ships they didn’t panic or “cower” in their cabins when the housing crisis, stock market crash and unemployment smashed against the hulls of their ships. They stood on the bridge calmly, guiding their practices on to calmer waters and success.

My advice: quit “worrying” and learn the skills you’ve been missing. Start out with the MGE New Patient Workshop. It gives you a great opportunity to learn more about us, we get to meet you and it comes with a money back guarantee. Take your first step on the road to becoming a trained executive and administrator.

Your future depends on it!

Next week: Managing Your Overhead and Profitability, Part 1.
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Jeffrey Blumberg provides this general dental practice management advice to furnish you with suggestions of actions that have been shown to have potential to help you improve your practice. Neither MGE nor Mr. Blumberg may be held liable for adverse actions resulting from your implementation of these suggestions, which are provided only as examples of topics covered by the MGE program.

MGE’s weekly webletter, Issue 7.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

Scheduling Problems?

By Sabri Blumberg
Deputy Chief Operating Officer, MGE

Consistently maintaining a productive (and efficient) schedule can be a challenge.

If you’re having problems with your schedule (i.e., not productive enough, too many cancellations and no-shows, etc.) the first place to start would be your scheduling policy.

Now, I know there are quite a few variables or “reasons” that combined contribute to a non-productive appointment book. Take an improperly scheduled morning, too little time for a few procedures and add a few cancellations and no-shows and you could have a real mess.

However, if you’re having trouble with the schedule – regardless of the “reasons,” I’d still start with a thorough review of the scheduling policy in your office. Why? Well, policy provides the “rules of the game,” so to speak. With no rules you have no game.

Having a common set of rules for everyone (your staff) to play by fosters AGREEMENT among the staff. With this agreement in place they can all move in the same direction – they are all on the same page. For that matter, lack of policy can create innumerable DISAGREEMENTS amongst your staff. How?

Well, let’s imagine for a minute that you have no financial policy in the office. There is no set way that patients are supposed to pay for their treatment plans. Now, let’s say you have two of your staff collecting money up front – “Jane” and “Bill.” In the absence of “rules” (policy) on how money is to be collected – Jane and Bill come up with some on their own. Bill allows patients to pay $50 a month on a $5,000 balance and Jane has patients pay half down.You get upset with Bill as $50 a month doesn’t cut it. You think Jane is “great” as she collects more. Jane and Bill “disagree” on how to collect money and argue about it. You end up with a mess.

Well, expect nothing less than things like this if you don’t lay out clear rules.

It’s another matter entirely if your office policy was “Half down on the start and half 30 days later.” If that was the case, then Jane is in compliance with policy and Bill is not. With NO policy – who knows what you’re going to get!

So, if your only rule for the schedule is “fill it” and you don’t have a clear cut system of policies and actions relating to it (i.e., how long to schedule for different procedures, when you see different types of procedures and when you fit new patients in), then expect varying degrees of problems or outright anarchy!

If you don’t have a scheduling system that allows you to work efficiently and productively, I’d recommend the MGE Scheduling for Production Seminar. (Click here more information).

If you do have a scheduling system you’re happy with and are still having trouble staying productive and efficient, I’ll point out three areas that may be behind your problems:

1. You are scheduling “by committee” as opposed to having one person responsible.

If you have a couple of front desk staff and “everybody” schedules, you are making a mistake. One of the basic management concepts we teach on the MGE program has to do with a clear division of duties for each position. You give someone a job, it has a specific product that you expect from it and you can assign a statistic to this job to determine if the area is expanding or contracting. Obviously, if a person is working out well and learning more as they go, they will become more efficient and statistics will improve.

Conversely, if you have a situation where “everyone” is responsible for the schedule – then in reality NO ONE IS. Have you ever had a room or closet in your home or office that didn’t belong to anyone? Since it was “no one’s responsibility,” it was most likely a mess.

Make one person responsible and accountable for running the schedule. In the event a patient needs to schedule and this person is not available, another staff member can do it, but they would turn over the information about what was done to the person responsible at their first opportunity.

2. Your staff have little to no training on how to handle people.

You are in the people business.

The person running your schedule may be very knowledgeable about dentistry and how the schedule is supposed to work, but if they have difficulty handling and directing people, you will be in trouble.

Just as there is a technology to doing anything from prepping a crown to making tasty soup, there is a technology of how to handle and communicate with people effectively. If you don’t know it, you will run into problems. And not to burst any bubbles, but this is not resolved by teaching your staff special “words” to use when scheduling or giving them a script.

Handling people effectively and cheerfully begins with understanding people and how to communicate with them. This comes from being trained. Without this information and skill, you will end up with patients controlling the schedule. Countless times I have had a client bring their scheduler to seminars here at MGE on how to communicate better and then watched as they went back and put control in on the schedule.

So the lesson here is: You are in the business of handling people. Ensure your staff are trained in this area along with the basics of doing their job in your office.

c. You have an inordinate amount of cancellations and/or no-shows.

I have heard all kinds of reasons why patients cancel or fail. Lack of confirmation, people don’t think dentistry is important, etc. Unfortunately, none of these answers lead to a solution to the problem.

So, what is the problem?

Generally speaking the reason for most cancellations or no-shows, especially for larger procedures is the patient is not “closed” on doing the treatment. They are not “sold.” They may appear to be when they leave the office and schedule.

How do you know the difference? Well, see the answer under “b” above – learn the technology of handling people. We begin teaching clients about this at the MGE New Patient Workshop (click here for more information) and really get into detail at the MGE Communication and Sales Seminars.

So, there you have it. While I could get into more detail about any of these issues (as well as a few others I didn’t mention), I hope this helps to get you going in the right direction.

If you want further information about MGE or would like to contact Ms. Blumberg, call (800) 640-1140 begin_of_the_skype_highlighting              (800) 640-1140      end_of_the_skype_highlighting or e-mail her at sabri@mgeonline.com.

Next week: National Health Care, Dentistry and your Future, by Jeffrey M. Blumberg
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Sabri Blumberg provides this general dental practice management advice to furnish you with suggestions of actions that have been shown to have potential to help you improve your practice. Neither MGE nor Ms. Blumberg may be held liable for adverse actions resulting from your implementation of these suggestions, which are provided only as examples of topics covered by the MGE program.

MGE’s weekly webletter, Issue 6.

Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

If you wish to read the first series of articles, click here.

The Real Reason Behind Collection Problems

By Gregory A. Winteregg
Vice-President, MGE

You would be hard pressed to find a dentist that would not want to increase his collections without an appreciable increase in overhead. After all, if you are paying your bills now and were to increase your collections by $10,000 to $20,000 per month ― without much of an increase in overhead – that additional money is profit. The question is: How do you go about doing this?

I. Collection Problems

Despite the placards at your front desk or financial arrangement forms patients sign, you still have patients who “forgot their checkbook” or who demand that you “bill them.” Can you imagine telling the cashier at your supermarket to “bill you” for your groceries? Or telling the gas station attendant, “Oops, sorry, forgot my wallet!” This simply does not happen. Why, then, does it happen in your office?

Failure to keep financial arrangements is obviously a contributing factor to collection issues and some offices experience this problem more than others. However, getting people to stick to a financial agreement is not what this article is about. It is also not the primary factor behind low office collections, or profitability. There is another more pressing issue that affects office collections, profitability and most importantly your patient’s health: treatment acceptance.

Let’s take this a step further. Let’s say comprehensive treatment plan acceptance, including actually getting paid for the treatment. This is, in truth, your biggest source of lost practice income. For example:

Dr. Smith presents a case to Mr. Jones. Mr. Jones needs two root canals, two build-ups and crowns and two three-unit bridges. Let’s say Dr. Smith charges $700 for each unit of endo and an average of $800 for a unit of crown and bridge. The treatment plan would look like this:

Service	Quantity	Unit Price	Total
Root canals	2	$700.00	$1,400.00
Build ups	2	$160.00	$   320.00
Crowns	2	$800.00	$1,600.00
Bridges	6	$800.00	$4,800.00
Treatment plan total:			$8,120.00

Dr. Smith presents his estimate, but Mr. Jones only wants to do the root canals now (after all, insurance pays 80%). After Dr. Smith shows him that doing the root canals without the crowns would not be a viable option, Mr. Jones begrudgingly agrees to do the crowns and build-ups as well. He weakly “agrees” to do the remainder of the treatment (bridges) in the next year, or the year after – he’ll talk about it “some other time.” Dr. Smith, not wanting to bother Mr. Jones too much and thinking that “the customer is always right,” agrees with his patient.

Most dentists would consider that Mr. Jones accepted the full treatment plan in the scenario above. In truth, he has not. What he has agreed to is to do a portion of it. Whether he will do the rest remains to be seen. Dr. Smith presented the entire treatment plan to Mr. Jones and suggested that he get it done now. He reasons that if this was his own mouth, he would do it all right now. He explains that opposing teeth will super-erupt, etc. Then after all of this, he agrees with Mr. Jones about putting the additional treatment on “hold.”

Take a closer look: You are talking to a patient about a treatment plan and telling them that it is important to do it all now. And, truthfully it is. The patient balks and “only wants to do what insurance pays” or says “it costs a lot of money” or something of the sort. You don’t know how to “handle” this objection. So (usually against better judgment), you reverse your position about doing it all now and agree to put a portion of the treatment plan on “hold”. What are you in effect saying to the patient about that portion of the treatment plan that is now on “hold”? That it’s not that important. Don’t be surprised if the patient begins to wonder, “How important is the treatment that I did agree to do now?”

Back to our treatment plan above, Mr. Jones has agreed to do the root canals, build-ups and crowns. He has about $1,500 in insurance coverage and a $50 deductible. This would look like this:

Service	Quantity	Unit Price	Total
Root canals	2	$700.00	$1,400.00
Build ups	2	$160.00	$   320.00
Crowns	2	$800.00	$1,600.00
Total:			$3,320.00

Insurance covers 80% on the root canals and 50% on the build-ups and crowns. If you do the math, this would max out Mr. Jones’s yearly benefit ($1,500) and leave him with a balance of $1,820 as his co-payment.

Depending on how Dr. Smith does financial arrangements, Mr. Jones might pay nothing down, 50% down, finance his balance or whatever. Or he may come in, get his work done and give you those famous four words, “I forgot my checkbook.”

The difference in price for the treatment Mr. Jones accepted versus his full treatment plan is $4,800. Had Mr. Jones accepted this it would have been $4,800 added to monthly collections and a more dentally sound patient. In truth, that is $4,800 in lost income for Dr. Smith’s practice, and Mr. Jones did not receive the needed care.

II. Eye-Opener

It is not a bad exercise to sit down and add up how much in treatment was not accepted in a given week or month in your practice. Simply take all of the needed treatment you diagnosed in the last month and add it up. Now, subtract the amount of treatment that was actually accepted and done during that same period. The difference is what could have been produced/collected (without working much harder or longer for that matter) that was not. There’s your profit!

To take the focus off of the money for a minute, as that is not the most important issue, think of this: Would Mr. Jones have been healthier if he had done the full plan? Yes. And what patients are your best referral sources? Usually the ones that did a full treatment plan. Why? They go to work and show their friends, and they are happy that all of the work is done. Lastly, what do you enjoy more – patching a patient up or doing all of the work that is needed so only checkup appointments are required? The net result of Mr. Jones’ failure to do the treatment plan is a less healthy mouth for him and, for Dr. Smith, less profit, fewer referrals, a less healthy patient and little fulfillment.

So what was the problem here? Is Mr. Jones’ “dental IQ” low? Does Mr. Jones not care about himself as much as Dr. Smith does? Can Mr. Jones really not afford it? Maybe. But the problem also is that Mr. Jones is not sold on the necessity of the treatment.

III. Changing Attitudes

Perhaps reading that last four-letter word, “sold,” turned you off. After all, you don’t sell anything. You’re a doctor, right? Well, I hate to break this to you, but you are also a sales person. Selling is simply effectively communicating with a person in such a way as to get them to agree to a service or item that is going to help him or her. Selling is about helping people. There is nothing wrong with that.

So, why is the issue of selling a problem in dentistry? First, because many sales techniques taught in this country are unworkable, or cause you to stray so far from being yourself that you are uncomfortable using them. Second, most dentists never learned the technology of how to sell or communicate effectively.
I did pretty well my first 10 years in practice (1981-1991). I was collecting about $40,000 a month in a small rural community. To give you an idea of the cost of living, my crown fee, which was average for the community was in the $400 range, and the largest house in the county sold for $150,000. My practice was located in a strip mall next to a supermarket. I was getting about 25 to 30 new patients a month. Like many of my colleagues, I spent tens of thousands of dollars on consultants to teach me how to have a great staff meeting, fix my appointment book and get a better collection percentage.

Then, at the end of 1991, the supermarket moved out of the strip mall. My new patients crashed to fewer than 10, and my collections hit about $30,000 a month – my collections were barely covering my overhead. Up to that point I had used six different management companies in 11 years, and each of them agreed that the staff should handle the “financial discussion.” So that’s how we did it in my office. I did not want to do it anyway; it made me uncomfortable.

Then in 1992 I became a client with MGE: Management Experts, Inc. (in 1994 I became a partner). I started with the MGE New Patient Workshop, which taught me the technology of how to develop an effective marketing strategy. From there I did the MGE Sales and Communication Seminars from which I learned a technology of communication and sales that was natural, easy, truthful and actually worked!

I went home and starting presenting treatment plans effectively. In short order, two things happened that simply blew me away: 1. Production and collections shortly hit $54,000 a month and were soon over $65,000, and 2. New patients jumped to over 30, before my marketing even went out! It was all referral. My increased selling had brought my new patients back up. Once the marketing kicked in that I learned from the MGE New Patient Workshop the new patients jumped to about 70 a month. And this was with no managed care (PPOs, HMOs) of any kind.

My patients were getting the optimum care they needed, and I felt that I was in control of my practice, destiny and financial future again. From this I learned that the only safe and secure conclusion to make is that if you aren’t doing the selling, then start! And if you can’t do it, then learn how. It’s easier than learning how to cut a crown prep!

IV. Getting Down to Basics

It’s time for us as a profession to address this issue head on. This is a business basic: You can’t deliver more goods or services than you can sell. Marketing and promotion give you people to sell to. One could then conclude that the amount of services you deliver will be determined by how much you sell, which, in turn, determines your income.

Take any business as an example, whether it is a furniture store, large corporation or health club. If that business cannot sell its goods or services, it will not survive, or will have financial trouble to say the least.

I’ve met so many dentists with incredible clinical skills. They have trained with the best and can really deliver high-quality dentistry. The problem is that the ability to sell dentistry is what will determine the volume and quality of delivery of dentistry. If you can’t sell it, you won’t deliver it. End of story.

Next Week: Scheduling Problems? by Sabri Blumberg
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Dr. Greg Winteregg provides this general dental practice management advice to furnish you with suggestions of actions that have been shown to have potential to help you improve your practice. Neither MGE nor Dr. Winteregg may be held liable for adverse actions resulting from your implementation of these suggestions, which are provided only as examples of topics covered by the MGE program.

MGE’s weekly webletter, Issue 5.

Here is the next edition of MGE’s new weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

This is Part II of a two part article on the subject of associates. For Part I, click here. If you wish to read the first series of articles, click here.

All About Associates, Part II

By Gregory A. Winteregg
Vice-President, MGE

Perhaps now or some time in the future you’ll think about adding an associate. Whether that time is today or ten years from now, it is best to be informed on the subject.

Part one of this article (which appeared in our last webletter) offered guidelines to help determine the need for an associate in your practice.

In this issue, we’ll pick up with questions you might have once the decision is made to hire an associate. Specifically:

1. Do you want an associate or a partner?
2. What type of work do you expect the associate to do – i.e., what would be his or her job description?
3. How should you pay them?
4. Where can you find associate prospects?
5. How does the associate’s treatment philosophy match up with yours?
6. Are there ideas on how to determine if the associate is a “good fit” with your office and the staff?

1. Do you want an associate or a partner?

You should never enter a relationship saying “Well, come on board and we’ll see how it goes and work out the details later.” If agreements are not clearly delineated, each party has their own idea of what the agreement is and they seldom match! The associate starts with the idea he or she will be offered a partnership and eventually buy the owner/doctor out. The owner/doctor is entertaining the thought but is ambivalent.

The associate makes the schedule easier so the owner/doctor, who originally planned on retiring in three to five years, now has more time off, feels better, and decides to work another fifteen years.  The associate feels abused and taken advantage of and decides to leave.  The owner/doctor finds himself back at square one. What happened? In this case, a severe communication failure! Ultimately, the owner/doctor displayed poor leadership/executive skill.

Had good communication existed from the get go, with a clearly delineated idea between both parties as to where the relationship was headed, things might have turned out differently.  You don’t have to offer a partnership right up front.

If partnership is a possibility though, at least have some benchmarks in place and get these agreed upon by both parties beforehand – and stick to the agreement.

For example, you both agree that you will work together for a set evaluation period before talking partnership, etc. One excellent example I saw was a doctor who had his new associate (potential partner) sign three agreements: a) associate, b) buy-in and c) buy-out.

If the associate met certain guidelines and the relationship was good, he could buy in.  If the owner then wanted to sell the remainder, the associate could buy him out, etc.  Either way, you might not want a partner – ever. This should also be made clear. Talk it over with your accountant or other advisors and decide what you are shopping for before you start on this journey.

2. What type of work do you expect the associate to do – i.e. what would be his or her job description?

Do you expect them to: take all operative and root canals off your schedule and see all the children that come in? Will they treatment plan and present their own cases?

Determine issues like this prior to interviewing, much less hiring. Keep in mind that the associate is there for you and your office. They either fit or they don’t.

Imagine you were selling your house. If the realtor brought in a potential buyer that asked you to add a pool and two more bedrooms, you wouldn’t do that to make it work.  The realtor would find another buyer. Same concept with an associate.

For example:  You want an associate to free up your schedule by taking all of the fillings, kids and root canals. The prospect you are interviewing refuses to do root canals and doesn’t really like kids. Next…You get the idea.

While of course some things are open to negotiation, don’t go crazy attempting to accommodate. If you needed a full time receptionist and you interviewed someone who couldn’t work Mondays and Wednesdays– why hire them?  You would eventually find someone who can.

3. How should you pay them?

This depends on what you expect the associate to do.  If they are to find their own new patients, present their own cases, etc. the percentage would be higher. Conversely, if you handle all of the treatment planning and fill their schedule for them, the percentage would be lower.

Sit down and do the math. If you had an associate producing X amount, at Y percentage – what would that equate to and how would that impact your bottom line. Also consider how this would impact your schedule. If you are booked out for several weeks and you give an associate all operative, root canals and single unit crowns, etc., you would be able move all of the major work on your schedule forward making you more productive.

For a GP associate, anything over 35% of collections in compensation is too high in my opinion (specialists are an exception).  I’ve seen some doctors who pay their associates 20-25% if all they do is work on patients with no treatment planning responsibilities. You can also mix a per diem and percentage. If you are going to do this, you have to ensure it is viable for the office. For example:

You guarantee a doctor $450 per day.  He works 16 days per month, making the guaranteed salary $7,200 per month. You decide you don’t want to exceed 30% in compensation for the associate, so we take that $7,200 and divide it by 30 and multiply by 100.  This is the old fashioned way to determine what $7,200 is 30% of.

Example:

1. Associate Monthly Base $7,200
2. $7,200 Divided by 30 equals 240.
3. 240 multiplied by 100 equals $24,000.
4. $7,200 is 30% of $24,000.

So, if we are going to give a percentage on top of the base, we tell the associate that they get 30% of anything they collect over $24,000 in a given month and we distribute this amount at the end of the month.

On the other side of this, what happens if a year into the relationship you have an associate who’s only collecting $15,000 per month and you are paying him/her $7,200 a month in salary? Well, you had better do something as they are costing you more than they are worth – in this case 48%!

In my experience, if an associate can’t do $40,000 per month, no one is going to be happy.  They won’t be making enough money and below that level of production you aren’t making enough of a profit to keep them around.  You must have enough business to make it worth everyone’s while and they must be confident enough clinically to produce it.

4. Locating associate prospects.

You’ve filled in the blanks and decided what you want and what you have to offer.  If no prospects are immediately to hand, you need to go out and find someone. The question is: where to look?  The answer: everywhere! Here are some ideas:

1. Advertise in the paper.
2. Ask various sales reps (i.e., your supplier, etc.)
3. Call your friends and colleagues.
4. Advertise in local and state dental journals and newsletters.
5. Advertise online.
6. Have your office manager help you contact doctors in your immediate area to see if they know anyone.
7. Sign up for an associate “headhunting” service (can be pricey).
8. Contact residency programs in your state.  Dental schools are also an option, but if you need someone who can hit the ground running from a production standpoint, you may have to deal with a learning curve.

If you outflow enough, you’ll eventually find someone who would be a good fit.

5. Interviewing your associate: How does the associate’s treatment philosophy match up with yours?

You are interviewing an associate prospect. The level of compensation, job description and hours will work for him or her.  He or she seems like a nice person that would fit into the office. Now there are two things to look into: treatment philosophy and most important, clinical competency.

Divergent treatment philosophies between a senior doctor and his or her associate are the cause of more turmoil than you’d suspect.

How can you prevent this in lieu of having to work together for six or more months?  Try this approach: During the interview with your prospective associate, take ten charts, along with accompanying x-rays and models (if there are any) and temporarily remove the treatment plans.

Now, ask the associate to draw up a treatment plan based on the information to hand. Match up the associate’s treatment plan with the treatment plan you made for the case. If they are relatively similar, you may have a good match. You could also describe a number of clinical scenarios and see what course of action he or she would take and see how that agrees with what you might do.

6. Are there ideas on how to determine if the associate is a “good fit” with your office and the staff?

Ultimately, the MOST important thing to consider with an associate is their level of clinical competence. To get an idea of where they are clinically you might:

1. Have them treat you (even if it is a prophy, you’ll see their chairside manner and the like).
2. Ask them to bring in models and pictures of cases they have completed.

If you feel you have found the right candidate, you could possibly have them treat you and some of your staff.  If the team isn’t sold on them as a clinician they’ll be reluctant to have patients see the ‘new guy/girl’.  You’ll end up just as busy as you are now while paying the associate to sit around because “none of the patients want to see the associate.”  It’s a great ego trip but doesn’t move you in the direction of lightening your load or expanding the practice.

If you’re satisfied with their clinical criteria and go ahead with the hire, you should still check up on their work with your patients. Personally, I’d recommend that you watch things like a hawk until you are completely confident in their ability – and this confidence should be based on what you actually SEE.

I once had a doctor tell me that there was no way he would let his associate work on him.  Excuse me?! They represent your office. Their treatment is your treatment! You are responsible for their work.  And no one wants to be re-doing dentistry for free after a sub par clinician leaves the practice, not to mention the effect this has on your patients and practice.

These are a few of my thoughts on a subject that could easily fill a book.  You might try these simple guidelines and get good advice from your advisors.  Don’t forget though…in the end, the decision is ultimately YOURS. Choose wisely.

Click here for next article: The Real Reason Behind Collection Problems
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Dr. Greg Winteregg provides this general dental practice management advice to furnish you with suggestions of actions that have been shown to have potential to help you improve your practice. Neither MGE nor Dr. Winteregg may be held liable for adverse actions resulting from your implementation of these suggestions, which are provided only as examples of topics covered by the MGE program.

MGE’s weekly webletter, Issue 4.

Here is the next edition of MGE’s new weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

This is Part I of a two part article on the subject of associates. Part II will be featured in our next edition of Weekly Practice Ideas. If you wish to read the first series of articles, click here.

All About Associates, Part I

By Gregory A. Winteregg
Vice-President, MGE

Several times a week I field associate related questions. These come from dentists who need one right away, as well as doctors just entertaining the idea as a future goal. The pros to adding an associate are obvious: more service for your patients, potentially more time off, someone to cover emergencies, etc.

There are also plenty of cons: your patients may not like the new doctor, and you might worry about them making off with your patient base, etc. When discussing associates, close to thirty years in the dental industry (thirteen years in private practice and sixteen as a trainer/consultant), have taught me one hardbound rule: There is definitely a right and wrong way to go about this associate business.

If one or more associates are in your future plans (whether this is now or ten years from now), there are several things to consider:

1. When should you get an associate?
2. How would you structure compensation?
3. What’s the best way to find one?
4. What are the important points to cover when interviewing?
5. How will you integrate them into your practice?

I’ll start with number one: When should you get an associate?

Arguably, this is the most important question. This is also where I see the most errors made. Let’s say you are doing moderately well, still have some openings in the schedule, and are getting about 10 new patients per month. You decide to expand your hours and bring in an associate to become more productive. The reasoning seems sound – you are adding more hours and providing more treatment opportunities for your patients – but this rarely works. New patients don’t magically show up, the associate is unproductive and unhappy. You either a) let him or her move on or b) start moving work from your schedule to make the associate busier/happier. The net result is less profit and a problem – “how do I keep my associate busy?”

In this scenario the office was in no position to justify adding an associate. How would you know as a doctor, when the “right time” was? The answer has to do with you.

I’ll give you another scenario: Your practice has expanded to where you’re very profitable. You’ve organized your schedule so as to maximize efficiency. You have an adequate number of trained assistants. You’re satisfied with your balance of speed and clinical skill – meaning you’re happy with how long it takes you to complete procedures while still maintaining a high level of quality. Despite all of this, you are physically incapable of adding more to your schedule. It’s packed and things start to book out. You just cannot do anymore without drastically expanding your hours, working weekends, etc.

Now, it is time to add that associate to serve three purposes:

a) To provide faster and more efficient service to your patients
b) To lighten your schedule so you can focus on the type of work you want to do and
c) to increase practice productivity.

I would not add an associate to a declining practice unless you were replacing one that left. I would instead get the practice reverted to the point where it was at least mildly expanding, or I had maxed out as a practitioner. If I started booking out a couple of weeks in advance, I would look at adding an associate – perhaps one to two days a week to start and roll from there.

From a practical standpoint, I would also look at how many charts I had. In my experience, 1000 charts, if handled efficiently can potentially keep a doctor and hygienist productive. Also, maintaining a 1:1 ratio of doctor to hygienist seems to work best. If you are already have two full time hygienists (who are booked), chances are you need an associate now.

Business survival is inexorably connected to expansion. If the office is well-run (which would manifest with at least mild expansion), there would come a time when you couldn’t produce any more yourself and would need an associate. The level of production that will require an associate will be based on your style of practice, fees, type of dentistry you do, etc. It may be at $60,000 per month or it may be at $160,000. It’s a personal thing.

At MGE we suggest you get an associate when there is more work than you personally can handle and patients are now waiting to receive their treatment. How long is too long for them to wait? You decide, but it shouldn’t be more than a couple of weeks. Too long of a wait is just not good service!

The other aspect of this associate question is new patient flow.

To start, are you even getting enough new patients to support yourself? How many should you be getting?  This depends in a large part on how you practice, but I’ll give you a basic formula to use:

1. Take your total number of active charts
2. Multiply this by 20%.
3. Divide “b” by 12 (months in a year).
4. The figure from “c” above gives you the minimum number of new patients you should be getting on a monthly basis to maintain your practice’s health.  Note that this is just to keep you going.  You would definitely need to exceed this number to add an associate.

Example: Dr. Smith has 1200 active charts. 20% of this is 240. 240 divided by 12 is 20. To maintain a health practice, Dr. Smith should be getting at least 20 new patients each month.

Keep in mind this formula assumes a couple of conditions exist:

1. The new patients are fee-for-service.
2. The doctor has an acceptable skill level when it comes to treatment presentation and acceptance (which is reflected in production and collections).

Again, if you want an associate, I would recommend that you far exceed this 20% factor. This is where the MGE New Patient Workshop comes in handy – whether you want an associate or not. If you need to learn how to get more fee-for-service new patients to keep your practice healthy, to expand or to make it possible to add an associate, the New Patient Workshop is the solution. Click here for more information.

Click here for next article: All About Associates, Part II.  Subjects covered will include: Determining how to properly utilize an associate, how to find a good one, associate pay plans, what to look for during the interview and how to make sure you and your associate prospect are a good “fit”…and more!
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Dr. Greg Winteregg provides this general dental practice management advice to furnish you with suggestions of actions that have been shown to have potential to help you improve your practice. Neither MGE nor Dr. Winteregg may be held liable for adverse actions resulting from your implementation of these suggestions, which are provided only as examples of topics covered by the MGE program.

MGE’s weekly webletter, Issue 3.

Here is the third edition of MGE’s new weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

This is the final installment of a three-part article on New Patient Acquisition. If you would like to review Part I of this article, click here. For Part II, click here.

New Patient Acquisition, Part III

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

Two weeks ago, I began my first article by defining the three components of New Patient Acquisition (Marketing, New Patient Management and Service) and discussed the first component: Marketing. In last week’s article, we focused on New Patient Management. I’ll wrap up this week with a look at “Service.”

Everything we’ve covered to date concerns getting new patients arrived at your office. Now, we’ll take a look at what happens after they get there – i.e., “Service” and its impact on new patient acquisition (and your practice in general).

Among other things, the level service in your practice is going to determine:

1. Your “conversion rate.” By this I mean if the person actually stays on as a patient in your office for the long-haul or not.
2. Whether this patient refers other patients (leading to more new patients).
3. Whether this patient accepts comprehensive treatment plans that may be proposed (which in turn will impact collections).

Looking at 1-3 above, you can see that this “service” point is of paramount importance and immediately impacts collections, new patients (by way of referrals and goodwill) as well as your number of active charts.

As a health care practitioner, you’re in the “service” business. You sell and deliver “services” as opposed to “things” or products (cars, jewelry, boats, etc.). For the purposes of this article, we’re going to touch on the non-clinical (administrative) aspects of service in the office with a focus on how it relates to new patients.

Bad Service

Much has been written about the dangers of “bad service.” Why? I’ll give you an example you can relate to:

Let’s say you see 20 patients per day (between hygiene and your schedule). Nineteen are happy with their visit. Several are extremely happy with what you’ve done for them. One patient however is problematic: rude to the staff, difficult in the chair and all in all, not the type of person you’d like to see in your office. Out of these 20 people, who is it that your staff talk about at the end of the day? For that matter, when your spouse asks about your day at work, what’s the first thing you talk about? Chances are, it’s that one patient who you had problems with. No one’s talking about the 19 (95% of your day) patients who were happy. Instead you talk about the one (5%) that went wrong. Why is this you might ask? The specifics behind this phenomenon are not the subject of this article. However, I believe you can see that this phenomenon is real to some degree.

Now, let’s take this phenomenon (focusing on the negative experience) and extrapolate it to a business. It explains a few things. It explains the theory of people who are unhappy with your service talking about it to more people than those who are happy with your service.

As far as how many people a dissatisfied customer talks to, I’ve seen this number vary from 3 to 10. Run the math and you can see that enough dissatisfied customers will destroy your goodwill and tank your business.

So, with that said, creating a positive service experience for your patients becomes all the more vital. A word of caution though – don’t get all caught up worrying whether people “like you” or too “careful” about offending anyone. Provide good service and you’re in good shape.

Service from the Patient’s Point of View

Take a few minutes and imagine that you are a new patient entering your office for the first time. How would you like to be handled? What would you expect to see? Obviously, you’d expect to handle your chief complaint clinically, but what would “sell” you on becoming a “permanent” patient in your office?

There are the basic points: Is the office clean and well kept? Does your staff dress professionally or in such a way you’d expect in a dental office? Is the office actually open during posted business hours?

Assuming this all checks out, we move on to the rest of the experience.

General Service Attitude

From the moment they walk in to the moment they leave, would a new patient consider that a) they are receiving adequate attention b) that you and your staff display a genuine care/concern for them c) that both you and your staff communicated and related well with them and c) that their experience in the office was well controlled?

These are some of the “little things” that add up.  Were they greeted promptly and taken care of (given forms to fill out, get their questions answered, etc.)? Did your staff relate to them well or did the patient feel like a “number”? Were they made to wait excessively – either in reception or in the dental chair? Were they politely directed as to where to go, sit, what to pay, etc.?

Thirty or more years ago, most service stations were “full-serve” (of course…I’m too young to remember this…I read about it in a book). You drove your car in, they checked the oil, tire pressure, cleaned the windshield and filled the tank.  Gee, that would be nice wouldn’t it? Gradually we’ve moved over to “self-serve.” Don’t be an inattentive “self-serve” office. Make the patient important.

This has much to do with staff attitude. During business hours, patients are the only “important” people in the office. I use the word “important” loosely and this is not to say that you or you staff are not “important,” but it does mean that when the office is operating – the attention is 100% on patients. When hiring a staff member, I look to see if they are inclined or willing to provide unselfish service to the public.  Someone who feels that getting a patient a cup of coffee, or taking out the trash is “beneath them” can create serious problems for a business. My viewpoint: At work I’m not very “important;” our clients are. Someone who gets so caught up in how “important “ they are immediately places attention on themselves and NOT the public and will find certain parts of a service job to be a problem. I’m not so important that if I see something that needs to be cleaned up or handled I can’t fix it. I’m here to provide service to the public.

Promptness

How fast you handle patients, their requests and concerns is another factor. With relation to the schedule, this is obvious; they shouldn’t be made to wait.  NEVER, EVER, EVER.

If patients are “waiting,” there are usually three reasons:

1. You had a clinical problem with the patient or two prior which threw you behind, or
2. Someone’s goofing off (talking to other employees, etc.) and not doing what they’re supposed to or
3. Your schedule is unrealistic.

#1 above will happen from time to time and there’s nothing you can do about it. If it does happen, it should be handled as EARLY as possible; don’t have the patient find out you’re an hour behind (when you knew this two hours ago) right when arriving at your office. They should be notified FAST and directed as to what their options are.  This would not be: “Doctor’s running behind, what do you want to do?” Instead, you should direct them as to what options they have: reschedule, come later, see the associate, etc., etc. Meanwhile, the front and back offices should work together to get the schedule back on track.

#2 is just plain bad service and NOT OK. If you see these kinds of things, handle them – they’ll only get worse. #3 is on the doctor. If a procedure really, actually takes you two hours, you are better off scheduling more time than was needed than scheduling only 1 ½ hours. Build a little bit of EXTRA time into your scheduling policy on how long certain procedures take.  It allows you to make up the time if you run behind on a procedure and also finds you time to start additional work if you’d like.  The point – be real, make sure your scheduling policy at least reflects how long things actually take.

When it comes to handling patient communication, correcting billing errors and the like – apply the same concept – HANDLE IT FAST. It tells the patient, by your actions, that you truly care about them and their needs.

Relating to the Doctor

When you meet a patient for the first time, they know very little about how great you are clinically. Their first impression of both you and your office began with your staff and now is monitored by how well you communicate and relate to them.

Here’s where we enter the realm of “sales.”  I know most doctors hate that word, but in fact that is what you are doing. You’re selling the patient on your office and when it comes to recommending treatment, you’ll have to sell them on your treatment plan. Now, by sales I don’t mean lying to them, holding their arm behind their back, etc. I mean communicating to them in such a way that they understand their treatment plan and thereby become willing to pursue it.

Poor sales will kill both your collections and referrals. You may also lose patients. If you were to do a multi-pin amalgam on a patient that really needed (and should have had) a crown and this restoration breaks a few months later (while they’re on vacation), how happy do you think that patient would be about coming back? How many patients do you think they’d refer?

“Patch-up” work done as the result of inability to sell costs both you and the patient. You lose the fee you would have made by doing the kind of work you felt was needed clinically.  The patient loses as they didn’t get what was best for them.

My recommendation here would be to really learn how to communicate and sell.

We at MGE do quite a bit of training on this subject.  For more information on our Communication and Sales Seminars, click here.

Final thoughts

There is so much to this subject, it could fill a book (and some will accuse me of trying to write one with how long this article is…).

You could survey your new patients on what they liked most and least about their experience and work on improving things from there.

I try at least weekly to walk around our business and look at it from the viewpoint of a client or new client and correct things I see need fixed. There are a million variations on this and I’m sure you could come up with a number of ideas.  If anything, you can’t go wrong by placing a strong focus on providing the best service possible to patients.

Click here for next article: All About Associates Part I, by Greg Winteregg, DDS
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If you haven’t done the New Patient Workshop, we strongly recommend you do so. This two-day workshop will give you immediate tools to fill up your practice with new patients. Click here to register!

MGE’s weekly webletter, Issue 2.

Here is the second edition of  MGE’s new weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

This article is part two in a series of three articles covering New Patient Acquisition.

New Patient Acquisition, Part II

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

In last week’s article, we covered the three components of New Patient Acquisition (Marketing, New Patient Management and Service) with a focus on Marketing. In this week’s article, we’ll dive into the second component – New Patient Management.

The term “New Patient Management” can mean any number of things. For our purposes in this article, the term “New Patient Management” will cover:

1. How prospective new patients are handled when they call in.
2. The scheduling procedure used.
3. How the office ensures the new patient actually arrives.

What happens when a patient shows up to the office will fall under the heading of “Service,” which we’ll cover next week.

As we covered last week – marketing’s job is to create a phone call or other form of contact to your office. Your marketing’s effectiveness could be measured by tracking the number of “responses” meaning phone calls or contacts generated by a particular marketing effort.

This brings us to a hardbound rule: ALL new patient inquiries of ANY kind MUST be kept track of and broken down by source (i.e. Radio Ad, Yellow Pages, referral, etc).

I mention this now, as most offices don’t track the number of new patient inquiries; they only track number of new patients.

Failing to track your new patient inquiries puts you at a loss when attempting to determine:

a)      Whether any type of a marketing effort is actually working and

b)     Whether your front desk person is handling new patient call-ins properly.

c)      If your office has a procedural problem (i.e. the procedure followed to schedule new patient appointments).

I can’t stress how important this is. While most yellow page ads track the number of calls by using a different phone number, your best bet is to have a mechanism that does this with ALL new patient inquiries.

I could spend hours telling you stories of offices that had 50 new patient call-ins to schedule 3 people. Front desk contact, while not the only problem with new patient acquisition, accounts for much more of the problem than you might imagine.

It has nothing to do with whether your receptionist is a nice person. Chances are your receptionist is great. The problem most often lies in how they handle the new patient call-in.

Assuming you’re tracking inquiries, you can compare the number of calls and contacts to the number of people who actually scheduled.  From this you can work out:

1. If your front desk is doing a good job handling these calls and
2. What marketing is working and what isn’t.

First contact – the right attitude

The biggest mistake I’ve seen with new patient inquires has to do with the attitude of the person answering the phone. Again, this is not to say that your receptionist is mean or rude. The problem in attitude is that they need a clear cut idea of the end result they are going for. Too many receptionists think their job is to “answer the phone” or “answer questions.” With the amount of money you might be spending to get the phone ringing – this becomes very important.

When it comes to new patients, their job is very simple – get the new patient in and in the chair!

Having said that, you’d be surprised how many front desk staff interrogate a new patient inquiry for ten minutes to determine if this is a “quality” patient, or some such thing. I’ve even seen cases where the new patient inquiry isn’t even asked to set an appointment – but told to call back when they “can get their full mouth x-ray from their last dentist.”

Keep it simple – make the person feel happy to have called. Have a caring attitude and listen to what the person wants. Your front desk person is not a “gate keeper” who scrutinizes people to determine who they’ll let in the door. A person calling your office for the first time has no idea who you are. Establish good communication, get any needed information and get them scheduled and in for the appropriate type of appointment. Don’t get into a long philosophical discussion about your office, dentistry, the insurance industry, etc. You’re not going to find out everything there is to know about a patient or clue them into everything about your office over the phone. You’re better off sorting out who’s who when a patient is in your office, face-to-face, not over the telephone.

Now, I know you might have questions about what to do with people who are out-of-network or “shoppers.” I have an excellent four-page write-up titled: “Getting New Patients in the Door” from an MGE client who has a very high new patient conversion rate. This write-up deals with specifics as to how to handle new patient inquiries. If you’d like a copy,  click here and fill out the form and we’ll email it to you.

Scheduling Errors

OK, so your marketing is working, and your receptionist does a good job with new patient inquiries. Everything should be great – right?  It should be – unless you make an error in scheduling.

To determine this, ask your Office Manager or receptionist to come and see you for a minute and ask them:

If a new patient were to call in right now for a “cleaning” (not an emergency), when is our first available appointment for:

1. After 4 PM
2. First thing
3. Between 10 AM and 12 PM.

If any of those come up as more than a couple of days – you could be blowing new patients off.

Making a prospective new patient wait weeks (or even one week) will cost you.  Sure some people will show up, but who likes to wait?

The lesson here is: make sure your schedule is arranged (somehow) to accommodate new patients preferably within 24-48 hours.

Parting Shots

We just had our first MGE Owner’s Conference of the year this past weekend (the next one is in November). For those of you who don’t know, the Owner’s Conference is a seminar where MGE graduates meet to update their skills and share successful actions.

During the Round Table section of the Owner’s Conference (an open forum where ideas are shared) a number of very useful ideas came up with relation to new patient acquisition. I’d like to share one idea in particular that a client shared (which another MGE client had suggested) and I found very intriguing: Have the doctor him or herself confirm new patients the night before. The client who discussed this said his new patient no-shows have more or less disappeared since instituting this. You wouldn’t call just to “confirm” – you could call and say you wanted to call ahead and see if they had any questions before you meet the next day, etc.  Whatever, you feel like here is OK. Patients are pretty impressed with a doctor phone call.  And, if you have five or six new patients on the books for the next day, this wouldn’t take very long.

Summary

Improve your new patient numbers by:

1. Tracking your incoming new patient inquiries (regardless of where they come from).
2. When it comes to new patients, make sure your front desk person is focused on “getting them IN THE CHAIR,” instead of something else.
3. Make sure you can accommodate new patients FAST – don’t make them wait.

Click here for next article: New Patient Acquisition, Part III – Service
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If you haven’t done the New Patient Workshop, we strongly recommend you do so. This two-day workshop will give you immediate tools to fill up your practice with new patients. Click here to register!

MGE’s weekly webletter, Issue 1.

Welcome to the first edition of MGE’s new weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.

Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.

This week’s article:

New Patient Acquisition, Part I

By Jeffrey M. Blumberg
Chief Operating Officer, MGE

When the average dentist wants more new patients, he or she normally thinks the solution lies in some form of marketing – internal, external or both.

It is merely a component part. You could say that marketing or promotion is the spark that lights the fire. Or, the fuel in the fuel tank – it is not however what makes sure the fire actually stays lit or what drives the car!

You could say that the component parts of new patient acquisition would be:

Marketing or promotion of some kind: Whether this is mailers, internet, TV, radio, internal marketing or just word of mouth.

New Patient Management: This would include how new patients are handled when they call in as well as scheduling and finally making sure new patients actually show up.

Service: On top of any clinical considerations (i.e. quality of care) this would include how your patients are handled when they come into the office by both the staff and the doctor and the level of satisfaction the patient has with your service.

Each of these three are component parts of the new patient “machine” so to speak (important parts of the whole – yet still just parts).None of them work particularly well without the others.

Beginning with this post, we’ll take a closer look at each one of these so you can compare it to what’s going on in your office. We’ll start with point #1 – Marketing:

Marketing

Without getting into a bunch of marketing ideas, I’ll say this: Marketing should be:

1. Targeted
2. Consistent
3. Of adequate volume to produce the result you are looking for.

Let’s break these down a little further.

1. Target Marketing

This may sound stupid, but I’ve seen it violated too many times – Marketing should be done to the demographic that you are actually trying to attract. I say this because I’ve seen dentists who want to do a lot of crowns, bridges and implants blow thousands marketing to college students. Now, you may have several different demographics you’re interested in (i.e. families, potential restorative patients, etc.) and each of these would be marketed to differently. Ultimately though, when spending your marketing dollar, you should have some idea as to whom you are marketing.

Another aspect of targeting is surveys. For someone to receive your message, it has to be delivered in a manner in which they would be willing to listen. For example, let’s say you were selling tires and your target public was families with large vehicles (minivans and SUVs). You survey these public and find that their biggest concerns with regards to tires are safety and reliability. Well, you would theme your marketing campaign that way as this is what this target public wants and needs. You would not do some type of ad with a shiny Ferrari sitting on a showroom floor as this is not what that public is looking for. Dad might think its cool, but he’s looking for safe, durable tires for the vehicles which will transport his children. You could imagine that the “Ferrari” campaign for your tires targeting families with minivans and SUVs probably wouldn’t sell a lot of tires – and selling a lot of tires is why you’re marketing in the first place!

So, you would need to survey your demographic to find out what is wanted and needed to ensure that your marketing actually works. We teach you how to do this on the MGE New Patient Workshop.

2. Consistency

OK, so you have a great marketing idea, you sent it out via the internet, mail, TV, etc., etc….once.

Take a look at any product you’ve purchased (as the result of advertising) in the last 12 months. Some you may have purchased the first time you heard about it. If you are like the majority of Americans – you heard about it multiple times before you bought it.

So, this tells us that repetition is an important component of your marketing.

Then there is the simple fact that if you have a promotional campaign that brings in 30 new patients, you could in theory promote again in a similar manner to bring in 30 more. This is not to say – even if you promoted once – that you shouldn’t expect a good response. What I am saying however is that for consistent results, you need to market consistently.

3. Adequate volume/amount

A couple of years back, I was speaking with a prospective client with regards to his marketing efforts. He was upset and went on and on about how the marketing he was doing just wasn’t working. I asked a few simple questions and found that he was getting about 10 new patients per month and wanted over 30. Probing further, I found that his marketing efforts consisted of 200 postcards being mailed out from his office every month. 200 postcards to get 20 new patients would be a 10% response – which would be phenomenal – and definitely not something you could count on. Worse than this, even if 20 people responded to this doctor’s postcards, there is no guarantee that they would all shop up!

The moral of the story – ensure that your marketing effort matches the result you are looking to achieve.

Before wrapping up for this week, I’ll leave you with this:

The ultimate purpose of marketing is to create a demand and to sell something. Whether you are selling your office or a specific service or product – you are attempting to induce someone to purchase or do something. Having said that, keep in mind that the direct result of a promotional campaign will be a response or interest – not necessarily the sale itself.

About ten years ago I was speaking with a client who claimed that his new patient promotion was “not working” because he was getting “more new patients” (only 5 had come directly from his advertising the prior month). I asked him to tally the number of responses (calls) he had the prior month off of his new patient marketing. He called me later that day and was very quiet at first. Then he dropped the number of responses on me – 55. Yes, 55 people had called and only 5 scheduled. His problem was not marketing – the marketing was doing what it was supposed to do. The real problem had to do with the staff member answering his phone. New patient marketing isn’t going to put people in your dental chair. It will however get prospective patients interested in and contacting your office. Whether this person actually becomes a new patient has everything to do with your staff and their skill at new patient management, which we’ll cover in next week’s post.

Click here for next article: New Patient Acquisition, Part II – New Patient Management
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If you haven’t done the New Patient Workshop, we strongly recommend you do so. This two-day workshop will give you immediate tools to fill up your practice with new patients. Click here to register!