By Nicholas Partridge, President; Five Lakes Dental Practice SolutionsThere is much talk about inflation and a slowing economy, interest rates are significantly higher, and Big Tech has been laying off employees en masse. Pundits agree, we’re seemingly on the precipice of another downturn in the economic cycle. Fear mongering ensues. Yet through good times and bad, humans have teeth—thus the need for dentistry endures!
Instead of worrying about things we can’t control (i.e., interest rates, Russian aggression, or where all the FTX money went), devote yourself to what you can control: your business!
I understand some of us have developed rather robust abilities to spend (i-CATs and a new website, or tuition payments and Porsches, maybe?); but managing expenses is pretty straightforward for most (save the US Congress): don’t spend more than you earn. In this article, let’s underscore the importance of earning, because earning power is a dentist’s greatest asset!
Specifically, we’ll unpack some of the many levers at your disposal to drive revenue for your practice, recession be damned.
A profit and loss (P&L) statement, simplified
To start, open the profit and loss (P&L) statement your accountant sent you. Your P&L has three sections: revenue, expenses, and what’s left over.
The top part of the report is revenue—i.e., money, which has many names like collections, production, etc. For all your toil, revenue is captured with only a few lines. The second part of the report is expenses—money out, exposing all your spending habits or obligations, summarized nicely in a long list of categories. The final section—operating income, simply reflects the math illustrating how well you did earning versus spending.
Your revenue is controlled by a series of levers.
It always seemed like an injustice to me to represent revenue in just a few simple lines, given there are so many inputs to those numbers. Revenue reflected is the result of patients entering your facility, receiving treatment, and you getting paid for the work.
Seems pretty simple, right? Except there are so many decisions that go into that equation.
- Where is your facility?
- What hours are you choosing to be available?
- How does your business communicate with the people in your community to attract patients?
- How do you differentiate yourself from the dentist across the street?
- What services are you offering?
- What are you referring out?
- How do you communicate the need for treatment? Who will perform the work?
- How are you getting paid? At what rate?
The point is, revenue is the result of hundreds of decisions you make as a business owner; levers you can adjust up or down to drive desired outcomes. Mastering control of these levers will give you the gift of predictability which will assuage concerns about the economy.
Let’s unpack the last two of these levers.
How are you getting paid?
Will you collect payment in full from a patient or accept assignment of benefits from a policy holder?
Nearly every dental practice I’ve encountered accepts assignment of benefits to ease financial considerations for a patient. When a patient has a dental benefit, accepting assignment of benefits allows the payer to pay you as a provider directly. Thus, if a patient completes treatment for $500 and the benefit will pay $400, the patient is only responsible for $100; and the provider then collects $400 from the insurance company.
If you don’t accept assignment of benefits, the patient is responsible for the $500 and bears responsibility for collecting the balance from the insurance company. If that’s the case, do you collect the patient portion at the time of service or bill later?
While some offices will file the claim for the patient, the implication is this: the more difficult you make it for the patient, the less likely new patients will choose your practice and the more likely existing patients may look elsewhere.
This leads to even more questions.
- Do you offer an in-house membership plan for uninsured patients?
- Do you offer in-house payment plans?
- Financing options like CareCredit?
- Who’s sending statements and how (via email, text, snail mail)?
- Who’s calling on open accounts receivable? How often and for how long?
- Do you use a collection agency?
- Do you keep a credit card on file for balances?
- Do you take online payments?
- If you are appealing to a younger demographic, do you take Apple Pay, Venmo or Zelle? Keep in mind most 27-year olds aren’t carrying around checkbooks.
In the last few paragraphs, there are at least 12 decisions you make as a business owner about just one aspect of revenue. There are costs to using a billing service, collection agency, online payment platforms, accepting payments via Zelle, or getting paid through CareCredit. Have the goal of understanding how the many options before you affect patient revenue—and what your return on investments are—before you make the decisions.
At What Rate Are You Getting Paid?
Pricing services in your practice should reflect your business model, community, and target market. Consider the differences between Nordstrom and Target. They have different target customers and different product offerings, but they both sell clothes and they both make money.
However, the most common method for establishing your usual, customary, and reasonable (UCR) fees is doing so based on competition in the market. Very few dental practices have performed a detailed cost accounting of each procedure and then added a mark-up accordingly.
- How will you collect and store for review competitive pricing?
- Will you buy benchmark data for your community? If so, from which source?
- How often will you review and update pricing?
- Should you participate with insurance companies? If so, what are your contract rates? How long since you last revisited them?
- What is your practice’s policy on discounting?
These are more decisions you must make that will affect patient attraction, patient retention, case acceptance, and ultimately practice revenue.
Understanding, learning, and ultimately mastering the levers of your business that lead to revenue growth and predictability are key to long-term success. So, instead of worrying or getting caught up in the latest macroeconomic distraction, go to work on your business!