Here’s what I know. I know that most practices are not making as much money as they should. And here’s the good news … it doesn’t take radical changes or monumental growth, in fact it’s little hinges that will swing big doors when it comes to profitability.
Today, I want to talk about the myths that affect your practice and your profits. I’ve been to so many dental meetings, been in the hallways, heard so many dentists brag about what their practices are doing. But, they’re always talking about revenue, collections: I don’t hear many people talking about their profits.
Maybe it’s because they don’t understand what true profits are, maybe it’s because they’re embarrassed about the amount of profit they have or don’t have, or maybe it’s because they don’t know how to fix their profitability problem. So, let’s take a minute to define what profit really is….
Profits are what’s left over after all the bills are paid. All the bills… That includes paying all the doctors, including you, the owner doctor. This is where most people get it wrong.
If you are thinking about your practice like a business, you need to separate yourself, the clinician, from you the owner. The clinician should be paid as a clinician and the practice owner should receive the true profits of the practice. Lucky for you, you are both of these people. But what if you weren’t?
At the Team Training Institute, we teach a concept we call Tiger-Proofing. This was named after the longest running Las-Vegas show Siegfried and Roy, which in just one frightful moment ceased to exist. At the same time, down the road another show was starting where they painted everyone blue. If one blueman was sick or unable to perform they could easily paint another man blue and the show would go on. What happens in your practice if you are unable to perform?
Separating you, the clinician, from you the owner is a very important part of this. If when you separate this out, your practice isn’t making any profits then you know that your practice isn’t really profitable. Could you survive having to hire another clinician to replace you and still be profitable?
Practice Profits Are Not Doctors Income.
Profitability Myth #1: The secret to higher profits is more new patients.
This is like the magic pill that will solve everything. But yet, it never seems to be enough. That’s because new patients are only one piece of the puzzle – retention is the bigger piece of the puzzle. You can bring in hundreds of new patients, but if they don’t accept care and come back, then it will never matter how many new patients you bring in.
Here’s the truth about new patients… The number of new patients DOES NOT correlate with profitability. Read that once again…
The metrics to measure and watch that DO correlate with profitability are retention and case acceptance.
We work with a practice (a very large multi-doctor practice) who was bringing in an average of 400 new patients a month. They are in a highly competitive area, so their cost per acquisition is high. And their case acceptance and profitability were very low. They wanted to know what to do to increase their profitability.
After evaluating their practice, their numbers and their goals, we laid out a plan to improve their patient retention. Once they started to understand the impact of retention on their profitability, they immediately set forth to improve their patient retention by improving their team retention. You will notice that we didn’t choose to change their marketing or patient flow (because those won’t have the impact that retention will).
They started to work on maintaining their team and developing their team. Once that started to roll, their patient experience started to naturally follow. And as the patient experience started to improve they noticed that their hygiene schedule was filling up, they had less holes, less cancellations and less no shows. As their hygiene schedule filled up, so did their restorative schedule and they found that patients were accepting more care because they had built better relationships with the patients. Before it was all said and done, they had doubled – no additional doctors, no additional team, no additional locations, no additional anything. They simply focused their patient experience.
Profitability Myth #2: You need to be in an affluent area.
I always heard, you need to be in an affluent or growing area to grow profits. I like to say that the streets of rural America are paved with gold. I know incredibly successful doctors and incredibly successful practices that are in the middle of nowhere, and they’re doing very, very well.
I know one specifically in a relatively small town, 10,000 people in his county, and he has more than 9,000 active charts. And there’s 10 or 12 other dentists in that area. So you can do incredibly well in a very small community.
You don’t need to be in an affluent or a growing area; you can be in a stagnant area, or even a lower income area and you can grow profits. One of the practices that we’ve worked with is in a not very affluent part of Louisville, Kentucky. In fact, one day I went over there and there was trash in the parking lot and so I started to pick things up and make things nice for the team there. And you would not believe the stuff that was in the parking lot: syringes, liquor bottles, trash. It’s that kind of neighborhood. Yet this practice is super productive and super profitable.
So how did they do it? They learned to have systems. They had to have systems to have a consistent experience to meet people where they are at. Systems to have a great patient experience, systems to ensure great case acceptance. This particular practice even does a lot of Medicaid. They’re able to do small cases, small bits of treatment, but they keep everybody in the practice, they keep hygiene humming and it makes a tremendously profitable practice with that strategy.
Profitability Myth #3: Hygiene is a Loss Leader
I can’t believe that I still hear this, but I just heard it a few weeks ago. A doctor who I overheard saying “I don’t care what hygiene produces. Hygiene only exists to create pink, healthy gums so I can restore all the teeth.”
I cringe when I hear this, because what I hear is someone who is not looking at their practice like a business, and frankly, who is not looking out for their patients’ interest. Hygiene services are not a loss leader if managed properly. There are two schools of thought when it comes to increasing hygiene production.
We can increase hygiene production by increasing the production per encounter or by the number of encounters. My co-founder at the Team Training Institute, Wendy Briggs, is the leading authority on this and she can spout study after study and example after example. I agree with her that the best way to increase profitability is by focusing on the production per encounter. The fastest way to burn out your hygienists and create massive turn-over is to be focused on increasing the number of encounters.
Imagine if your hygienists saw an average of 9 patients a day and their avg. production per encounter was $140 (daily production of $1,260). Now if we focus on increasing the number of encounters, and they can increase by 2/day – your daily production is now $1,540 (and they are threatening to leave because they don’t have time to get everything done with the shortened appointments). BUT, what if, instead you focused on increasing the production per encounter (where they can actually provide the patient with all the care they deserve) and they increase from $140 to $200. Well now, your average daily production is at $1,800 and your hygienists and patients are happier! And imagine if their production was $2,500-$3,000! All that extra production goes straight to the profitability of the practice.
Profitability Myth #4: The fastest way to profit is to focus on reducing costs.
While focusing on costs is not a terrible thing, and in fact is something that you should be doing, focusing on this and only this will not improve your productivity or your profitability. It’s so much easier to become more profitable by becoming more productive than it is by reducing costs.
What I would do is to work to reduce your supply costs. I have a 6-step plan that I use with all of my practices, that I don’t have space to go into here, but it starts with one counterintuitive idea:
Make the storage area where you put supplies smaller. The larger the storage space the higher the supply costs for the practice are. Most people think that by stocking up and saving in bulk they are saving overall – but the opposite is true. Maybe people have an abundance feeling when there are a lot of supplies – but there is a direct correlation between waste and amount of supplies available. A reduction in supply costs goes directly to your bottom line.
Profitability Myth #5: The most profitable practices have a team of superstars.
I often say "Your best is your worst." Sometimes having one superstar in a key position can limit the growth of the rest of your team and your practice. When we rely on one person’s talent, we make it difficult to duplicate their efforts and difficult to scale the practice.
Instead of striving to have a team of mythical superstars, I like to focus on creating a team who are super stars at implementing systems. Because having really good systems in your practice means that you have a consistent patient experience (which goes back to myth #1), and have the ability to grow and scale as you see fit.
We work with a 2-doctor practice who recently lost one of the doctors and they were panicked that this would have a big impact on the practice and their profitability. But, they have been working on creating a system-managed practice and when they plugged a new doctor in, it wasn’t long before that doctor was out producing his predecessor. They are experiencing record months with a new doctor and with the owner doctor on vacation. It’s all due to the fact that they have focused on creating systems that create their super-stars. There is a big difference and one that you should be focusing on for your practice.
To recap, there are a few keys that I always focus on to drive profitability of any practice:
1. Focus on improving case acceptance
2. Focus on improving hygiene production
3. Focus on developing a culture of systems
Where you chose to put your time, energy, and focus is what will change. Make sure you are focused on the activities that will drive profit for your practice.
The focus on building a profitable practice, and the 5-step process I use to do this, is spelled out in greater detail in my book The Ultimate Guide to Doubling and Tripling Your Dental Practice Production… How to Build an Unstoppable Dental Practice WITH The Freedom to Enjoy it. You can grab a free copy of the book at www.UltimateGuideFreeBook. com; all I ask is that you cover the shipping.
Dr. John Meis is the founder of The Team Training Institute. An innovator in practice management, marketing, leadership, and team development who at his peak was producing in the top 1% of dentists in the United States. He multiplied his one practice into 12, and has been a partner in more than 180 dental practices, playing a key role, visiting, coaching and innovating on the ground in these practices. After extensively studying the most successful dentists, dental practices, and business owners, he developed the “Productive Practice Mindset” from which the core principles of the Team Training Institute were created. The Productive Practice Mindset consists of 11 key habits and attitudes which differentiate them from less successful practices.