dental practice management Archives

Dental Management & Marketing: Fun – or No?

October 16, 2018 By Jim Du Molin Leave a Comment

Dentists are split over dental marketing and management — almost half hate those responsibilities, but just as many say they sometimes enjoy them.

“I hate the management, but like the marketing,” said one dentist.

In this survey, 43% said they sometimes enjoy dental management and dental practice marketing, 16% say it’s not the best and not the worst, and 41% absolutely hate it.

“I like patient education and motivation.” (Endodontist)
“I like the dental surveys and hearing what other dentists are thinking.” (New York dentist)
“I enjoy bringing out the best in the team and coming up with a marketing plan that works!” (California dental professional)
“I love the marketing; it is fun and profitable. Dental websites are essential, and I have many.” (Illinois sleep apnea & TMJ dentist)
“Internal dental marketing, where my patients tell their friends about the appointment they had at our office, is what I prefer most.” (Wisconsin dentist)
“I don’t like that we have to advertise, but the general public has been so brainwashed to accept marketing that we are almost forced to do some form of marketing in order to stay competitive.” (Florida dentist)
“I wish I could have someone buy my practice and do the management! I have been told often that I am an excellent manager, but it is not my favorite part of practice ownership. I never seem to get a total break.” (Alabama dentist)

Filed Under: Dental Surveys Tagged With: Dental Consultants, Dental Management, Dental Marketing, dental practice management, dental websites, dentist survey, dentists

Dentists Beware: The Government May Want To Tell You How To Manage Your Practice

October 16, 2018 By Jim Du Molin Leave a Comment

The North Carolina Senate recently upheld Senate Bill 655, which would require the North Carolina Board of Dental Examiners to examine all business contracts entered into by dental practices in their state.

No other state in the union has implemented such restrictions on dental practice management, or sought such inclusive authority over how dentists manage their business.

Talk about the far-reaching arm of the government!

As reported by Dr. Clifton Cameron in the Fay Observer –

“As a practicing dentist in Fayetteville, I know how this legislation will impact dentistry in North Carolina.

When my partner and I established our practice in 2008, we quickly realized dental school taught us much about clinical care, but little about running a business. And the dental industry, much like the rest of the health care industry, is changing and becoming more complex.

So like many small-business owners, we looked to outside companies to help finance the practice, manage billing, handle payroll, file insurance and execute other administrative tasks. The arrangement helped our dental practice operate so efficiently that we can charge lower rates and accept dental insurance from patients.

Instead of helping foster lower fees for patients and wider insurance acceptance, Senate Bill 655 would require dentists to personally handle all the administrative tasks of their practices.

The bill would forbid dentists from taking advantage of the types of business services that millions of small businesses use. Many dentists like me would be forced to spend less time on patient care and more time on managing the complexities of a modern dental practice.

Senate Bill 655 would give the Dental Board complete control of how dentists in North Carolina run their practices so they can keep fees charged to patients artificially high and insurance acceptance artificially low.”

The North Carolina State Board of Dental Examiners position on on Management Agreements with dental practices is as follows:

“The Board has become increasingly concerned about the expanding scope and nature of management company services and agreements, and their impact on the control of dental practices by the licensed dentists.

The bundled services offered by management companies typically involve some combination of (1) administrative management services; and (2) financial management services.

Based on its knowledge of the operations of dental practices, and after reviewing management arrangements with dental practices for almost ten (10) years, the Board has identified features of management arrangements which it has determined to be highly likely to create a situation where the ownership, management, supervision or control of a dental practice is impermissibly conveyed to an unlicensed person or organization because either separately or when bundled, those features interfere with the licensed dentists’ professional decision-making and their exercise of clinical skill, judgment and supervision in the dental practice.”

Have you read about this story? What are your thoughts about the government and a State Board of Dental Examiners dictating how you administrate your dental practice?

We look forward to hearing your thoughts on this subject.

For more on this story see: Op-ed: Legislation would restrict dentistry in the state and the North Carolina State Board of Dental Examiners position at www.ncdentalboard.org (opens in a pdf file).

Filed Under: Dental Editorials, The Wealthy Dentist Tagged With: Dental Editorials, dental legislation, dental practice, dental practice management, dentistry news, dentists

Dentists: Protect Your Dental Lease from Inflation

October 16, 2018 By Lewis Gelmon Leave a Comment

How an Inflation-Hedged Tenancy Agreement Can Save Your Dental Practice and Give You a Competitive Edge

Last week I started talking about what I see as the upcoming “perfect inflationary storm.”

While some indicators suggest that a slow economic recovery may be underway, there continues to be skepticism among many economists.

Some feel the current rebound is unsustainable and driven primarily by the massive – but temporary – fiscal stimulus promoted by the Federal Reserve.

In the past three years, for example, the Fed has injected more liquidity into the U.S. economy than in the previous 25 years, combined.¹ Never before in human history has so much money entered the world’s economy so quickly, and certainly never before in American history have we tripled the money supply by 300% in less than 4 years.

Preparing for Inflation

This is setting up our economy for what could be an inflationary period of time longer and more extensive than ever experienced before.

Indeed, some business owners and financial analysts with whom I have consulted have commented that many policymakers are already well aware of this. However, many of them – as well as corporate executives and Wall Street bankers – often have vested interests, thereby making implementation of these policies difficult. Further, many have been trained as expert systems managers rather than generalists, and thus only see piecemeal solutions to these very complex problems and will be unable to replace a failed system with a new one.

What does all this mean for dentists? In my view, today’s dentist must both have the foresight to read the writing on the wall and create the tools necessary to effectively manage their dental practice during rising and high inflation. This may start with an annual inflation rate of 7% within the next 1 to 3 years, rising to double-digit inflation within 4 to 5 years.

Preparing to manage a dental practice through an inflationary period can be a daunting task when you stop to think about it. Imagine your costs going up significantly and not being able to pass those costs onto your dental patients at the same rate.

However, the good news – as the saying goes – is that you don’t have to outrun the tiger; you just have to outrun the person next to you.

Being One of the Survivors

Hedging your long-term business commitments today will give you the edge needed to outlast and outperform your competition. Many of today’s dentists opt to listen to the financial cheerleaders as if they’re financial planners because it “feels” good and because it “fits in” with their view of how the world works.

Instead, take this opportunity to be a reflective strategist and critical thinker about tomorrow. One of the greatest of these was Herb Kelleher, the former CEO of Southwest Airlines. He had a reputation for thinking outside the box, and his proactive risk management style – including his fuel-hedging program implemented in the 2000s, which allowed the airline to enter into aggressive fuel futures contracts – allowed them to better manage their costs.²

As the price of jet fuel rose dramatically during that period, Southwest emerged as the most profitable airline in the industry, driving out competitors and avoiding Chapter 11 bankruptcy – the fate that ultimately awaited all major U.S. air carriers. Southwest’s fuel-price inflation-hedging strategy provides a great lesson in how to compete in difficult economic times and emerge victorious.

Hedging against Inflation

America’s tenant-based businesses like dental offices should, in my opinion, act like Herb Kelleher by identifying the major expenses in today’s dollars, in order to hedge against future inflation.

As occupancy and tenancy costs remain top priorities in long-term lease contracts for dentists, these are critical costs to contain. As your tenancy leases roll over for renewal, avoid locking into existing options to extend the terms of the previous NNN Lease Agreement protecting the landlord against inflation by passing the costs on to you.

Be willing to “step out of the box” and renegotiate hard, both the base rent provisions, and triple net components of the lease, much like the hedging strategy employed by Southwest.

In particular, ask for longer-term rents with locked-in fixed rents, which do not rise based on the Consumer Price Index (CPI), but rather, have set increases and thereby cap off the percentage increases year over year. Landlords will generally object to this, but given today’s real estate environment, they will often concede, as they are unlikely to want to lose a good, paying tenant.

An excellent window of opportunity still exists to take advantage of struggling landlords by implementing such a hedging strategy. Only agree to triple net provisions with a cap on increases of no more than 6% year-over-year. You’ll want to do this while most landlords are still operating in a non- or low-inflation mindset and remain insensitive to this request as they do not yet foresee a high-inflation period ahead.

Although putting in place an inflation-hedging strategy will take time, planning and effort, the pecuniary benefits would be a significant competitive advantage similar to the one Southwest had if you feel there is a reasonable risk that our economy will enter into an inflationary period of time.

Considering Your Risks

What do you have to lose? Ask yourself where the bigger risk lies: paying marginally more in rent on the front end, or not having the ability to stop landlords from loading you up with additional expenses, so that in the end your triple net charges begin costing you more than your base rents?

If we hit a period of 12% annual inflation – which many believe to be a real possibility – it will only take about 3 years, under most lease agreements, for your triple net charges to start costing you more than base rents.

More importantly, consider how it will affect your competition’s bottom line. Should they fail to heed the inflationary warnings allowing their landlords the unrestricted ability to pass inflationary risk on to them you’ll have the same advantage Southwest had on its competitors.

—

Bibliography
¹ St. Louis Federal Reserve
² Cobbs, Richard & Wolf, Alex (Spring 2004) “Jet Fuel Hedging Strategies”

Filed Under: Practice Management Tagged With: dental practice management, Dental Practices, dentist, dentistry, dentists, inflation, landlord, lease, lease agreement, leases, net lease, NNN, NNN lease, tenancy, triple net

Dental Practice Management: North Carolina Senate Bill Wants Dentists To Do It Themselves

October 16, 2018 By Jim Du Molin Leave a Comment

Last week in our post, ‘Dentists Beware: The Government May Want To Tell You How To Manage Your Practice‘, we reported on the story of the North Carolina Senate and Senate Bill 655, which would require the North Carolina Board of Dental Examiners to examine all business contracts entered into by dental practices in their state.

Dr. Clifton Cameron, a dentist in North Carolina reported to the Fay Observer that, “Senate Bill 655 would give the Dental Board complete control of how dentists in North Carolina run their practices so they can keep fees charged to patients artificially high and insurance acceptance artificially low.”

We wrote that we couldn’t find the reasoning behind such a move by the NC Senate and Board of Dental Examiners, but the Board did post the following to their website:

“The Board has become increasingly concerned about the expanding scope and nature of management company services and agreements, and their impact on the control of dental practices by the licensed dentists.

The bundled services offered by management companies typically involve some combination of (1) administrative management services; and (2) financial management services.

Based on its knowledge of the operations of dental practices, and after reviewing management arrangements with dental practices for almost ten (10) years, the Board has identified features of management arrangements which it has determined to be highly likely to create a situation where the ownership, management, supervision or control of a dental practice is impermissibly conveyed to an unlicensed person or organization because either separately or when bundled, those features interfere with the licensed dentists’ professional decision-making and their exercise of clinical skill, judgment and supervision in the dental practice.”

After we ran our original story, several doctors commented. A New Jersey dentist wrote:

“In New Jersey, the state board already forbids outside management. My partner and I spend about 20-30 per week running my business instead of on continuing education or, patient care.

The real argument isn’t whether or not I could be one of the practices recruited by management companies, but the unfair advantage it would bring to my practice over anothers’. Lower overhead, decreased fees, increased insurance acceptance, large marketing budgets would destroy competition and lower practice values and access to care.

Management companies specify laboratory selection, supply selection, employee selection, and continuing education budgets. While they bring lower overhead, they take money from the practice as well. If you fail to be attractive, your practice cannot contract with them.

Giving this advantage to a small percentage of dentists is unfair to the majority of dentists that do not wish to join or would not be accepted. I have 10 dentists within a 0.5 mile radius. We can’t all be Aspen Dental Centers. The other 9 practices would suffer, and that wouldn’t be fair.

This is about the only aspect of dental life in New Jersey that makes practicing here worthwhile. Defeat it. Resist, North Carolina!”

Another dentist responded with:

“Have they gone mad over there? Sounds like there’s something they are not telling us about…It sounds like the insurance companies are in bed with the politicians again….”

Indeed, it could be a game changer that would impact North Carolina dentists and how they manage their dental practices. The North Carolina Office of Research, Demonstrations and Rural Health Development reports that there is already a severe shortage of primary health care providers in North Carolina, particularly in the State’s rural areas.

But perhaps this isn’t about patient care at all — or making dental practices transparent. Perhaps this is about lawmakers just playing politics.

Filed Under: Dental Editorials, Practice Management Tagged With: Dental Blogs, Dental Editorials, dental legislation, Dental Marketing, dental practice management, dental practice marketing, dentistry

The Economics of Dental Hygienists

October 16, 2018 By Jim Du Molin Leave a Comment

Analyzing Your Hygiene Profit Potential
Editorial by Jim Du Molin

Last week I started talking about dentists and dental hygienists, and how you, the dentist, need to think like a capitalist. The first step in this capitalistic venture is preparing the operatory space for the hygienist – as I mentioned last week, it’s both an investment and a risk, and it’s one you need to consider fully.

Next you need to actually hire a hygienist. Let us assume that the dentist is working four days per week and that 25% of his or her time is spent performing treatments that a hygienist could perform. This means that there is at least one day of potential hygiene production per week.

Let us further assume that based on the dentist’s fee schedule, a hygienist would average $700 per day in production. Collections at 96% would reduce this to $672, from which we have to deduct variable costs (disposable supplies and materials used in treatment), salary, and employer taxes. Our estimated profit before indirect overhead costs is $292 per day.

Daily Gross Profit on Hygiene Production

Production	$700
Collections (96%)	$672
Minus variable costs (9%)	– $63
Minus salary	– $288
Minus employer taxes	– $29
Profit before indirect costs	$292

This is the first level of profit to be realized from hiring the hygienist – direct profit on the hygienist’s production. Adding just one day of hygiene per week provides $1,168 of passive income per month and $14,000 per year.

More importantly, the dentist is now free to use his or her time more productively. Previously, 25% of the dentist’s time (two hours per day) was used to perform hygiene treatments. Let’s say that he or she could bill $88 an hour for those treatments. Now, the dentist can use these two hours to perform more complex and more costly treatments – at, say, $313 per hour. That’s an increase of $225 per hour, or $450 per day.

Assuming that collections are 96%, and variable costs including lab and supplies are 24%, the marginal net profit on the additional production is 72%. Therefore, if daily production increases by $450, the extra net profit will be $324. Remember, that’s $324 everyday. In an average 16-day month, that comes to an additional $5,184 in profit per month.

Adding the dentist’s additional production to the hygienist’s production, the total additional profit is $6,352 ($1,168 + $5,184) per month.
However, there’s more to the story: capitalists have to take risks, and smart capitalists can make lots of money… but I’ll get to that next week!