Most schools do an excellent job getting dentists
ready to graduate in regard to sharpening clinical and
patient management skills. But are you prepared to start
up or join an existing practice? When I got out of
school, I felt very unprepared.
One of the biggest complaints dental graduates have
is not getting enough information about the business
aspect of dentistry. Yes, we know how to prep and
remove teeth but what about filing dental insurance or
paying employees?
I didn't think about starting a practice from scratch
because of my lack of business knowledge. But when my
associate job fell through a month before graduation, I
had to scramble for employment. I found a dentist who allowed me to rent space and equipment all while building
my practice. Then I made it a point to learn everything
I could about how to start up a practice.
Debt
Most students have more than $100,000 in student
loans when they graduate. And it's tempting to take out
more loans to purchase a building and equipment. Dave
Ramsey, known for his financial wisdom and distaste for
debt, says to pay down debt first. Wait until you have a
good steady cash flow before making big purchases.
The advice rings true for personal purchases, too.
Ramsey calls the situation “Doc-itis” – living like you
make a doctor's salary before you really make a doctor's
salary. Doctors have expensive cars, big homes, boats and
toys to show off, so why shouldn't you since you're a doctor
now? It's the mentality of “we want it all and we want
it now.” Unfortunately, this situation happens often and
adds unnecessary stress to your already stressful life.
For this reason I highly recommend starting out as an
associate. Let your employer know up front that your longterm
plan is to start your own practice eventually. There are
multiple ways to be compensated as an associate. One of
the more popular ways is based on a percentage of your
collections per month. With this method of compensation,
you will not have to make large purchases initially
(like dental equipment, supplies, computer hardware and
practice management software). Whichever method of
compensation is decided on, make sure you obtain a written
contract stating the terms (a handshake doesn't count).
Finances
Next, ask around town and get names of Certified
Public Accountants (CPAs) who work with local dentists.
Interview them and then begin working with the one you
feel most comfortable with. It might also be beneficial to
find someone who is close to you in age. This way you
know the person will not be retiring anytime soon. Your
new accountant should be able to make recommendations
about what type of corporation you should form for
your new practice (LLC, C-corp, S-corp, etc.).
Next, your new CPA will provide you with a tax ID
number for your corporation so you can open a business
checking account. You might get better service at a local
bank than a large bank. Ask for a debit (not credit) card
to be provided with the new business account to decrease
the risk of acquiring more debt.
If you are an associate, you will likely practice, at
least initially, as an independent contractor. Take out
about one third of every check you receive and place it
in a separate money market or checking account specifically
for taxes. This is not an emergency or vacation
fund! Taxes must be paid and the IRS will come after
you if you fall behind.
A good way to keep up with your
expenses is using a three-part voucher
check. These checks are run through your
printer, which allows you to keep a record
of your purchases. For instance, when I pay
a bill with an invoice, I take the middle and
bottom section of the check and staple it to
the invoice and file it in my filing cabinet. All of the paid
invoices go in the folder in case of an audit.
Tracking and paying bills is a vital part of your successful
business. Sounds boring, but getting this system in
place can make you more money as you time your bills,
avoid late payments and even request better terms with
vendors by showing a good payment history. Having an
appropriate bill-pay software program will allow you and
your accountant to keep track of where all the money is
going for supplies, expenses, taxes, employees, etc.
I really like using Intuit's QuickBooks software for my
practice. Quickbooks organizes your financial accounts in
one place. It allows management of bank and credit card
accounts and has the ability to create charts or reports to
track money in each account. Its payroll management
option tracks payments to employees and can help with
filing taxes.
Quickbooks has a feature called the Liability Payments
Center, which you can use for doing your taxes. Your
accountant will calculate the different taxes you will have
to pay (payroll, federal, state, etc.) and then post them in
the Liability Payment Center. When you access this screen,
you will see a list of the different taxes, the due date and
the amount to pay. You can then either pay online or use
an IRS Form 941, or Employer's Quarterly Federal Tax
Form to report the different amounts to withhold.
Get in the habit of saving money from the very beginning.
Open an IRA or ask your employer if the practice
offers a retirement plan. Max out your retirement plan
each year not only to help in the long run but to reduce
your taxable income as most retirement plan contributions
are tax deductible.
Insurance
Don't forget to insure everything! The American
Dental Association (ADA) uses Great-West Insurance
Company as its insurance group to provide its members
with different types of insurance. It's also a good idea to
find a local agent in your area to insure you once you
move out on your own as you will need more coverage at
that point.
I recommend obtaining a 20-25-year level term life
insurance policy from Great-West. A good ballpark for
the amount of coverage is 10 times your annual income.
For example, if you make $100,000 per year, obtain $1
million in coverage. This can always be increased in the
future as your income and family grows.
Disability insurance is another important insurance
policy. Unfortunately, it's a policy many people assume
they don't need. We never know when something could
happen temporarily or permanently not allowing us to
practice. Make sure the plan you obtain includes a true
“own occupation” definition of disability that can pay
benefits to age 65. If you become totally disabled from
dentistry, you'll get full benefits, even if you choose to
work in another area of dentistry (such as teaching) or if
you choose to enter a new profession.
With the cost of health care skyrocketing, it's tougher
to find a reasonable health insurance policy with good
coverage. Choose a policy that offers a Health Savings
Account (HSA) option. This type of policy usually
includes a high deductible but counters with a low premium.
The premise behind the account is to take the
monthly savings (due to low premiums) and fund the
HSA. The amount saved in the account rolls over from
year to year if left untouched. The money in this account
grows tax-free, contributions are tax deductible and money
withdrawn is not taxed if used for medical purposes.
Malpractice insurance is a must-have but can be a bit
confusing due to the different types of policies that are
available. The two main types of policies are Occurrence
and Claims-Made.
When you purchase an Occurrence Policy, the premium
you paid upfront will cover all claims for malpractice
during that policy year. No additional premium is
required if you cancel your policy. For example: A medical
practitioner purchases an Occurrence Policy from a carrier
for 2005. The insured decides not to renew for 2006. The
carrier is presented with a claim in 2007 for a surgery the
practitioner performed in 2005. The company will defend
the practitioner because the incident occurred during the
policy period of 2005, during which the practitioner was
insured. However, if the same medical practitioner had
performed the surgery in 2006, the carrier would not
provide coverage for the practitioner, because the incident
occurred after the policy period ended.
The main difference between Occurrence coverage
and Claims-Made coverage is that the event insured
under a Occurrence Policy is covered regardless of when
the occurrence took place. When Claims-Made coverage
is initially purchased, the premium charged will be lower
than premiums collected for comparable Occurrence
Policies. The premium charged for the Claims-Made coverage
is made based upon the possibility that a claim will
be made during the year of the premium charge. Claims
resulting from professional services are not usually
reported during the first year; therefore, the first year's
Claims-Made premium is significantly lower than the following
years' premiums.
This stair stepping of premium continues for five
years until you reach a mature premium. At that point,
assuming there are no rate increases, your premium
remains stable and you pay the same premium every year
thereafter, with one significant exception. That exception
occurs when you cancel your policy. It is the Reporting
Endorsement.
Claims-Made Policies, unlike the Occurrence, require
the purchase of a tail (extension of coverage) if it's discontinued.
This is due to the fact that the policy only covers
claims that are made during the policy's period. Future
claims may arise and be first reported after the termination
date of your Claims-Made Policy. A tail provides
insurance for covered losses arising after your retroactive
date, and reported after your policy's termination date.
Computers and Practice
Management System
The brain of your practice will be your computer
system and practice management software. It is strongly
recommended that you begin practicing chartless. If you
begin working with someone who has paper charts, just
remember that all of those notes and documents of
patients that you treat will one day have to be scanned
into your computer system. Most software companies
and equipment vendors will provide a new dentist discount
so make sure you ask.
Dentrix is a very popular practice management system
used by general dentists. There are several different
companies so it would behoove you to try several out
and ask around first before making this purchase as it
will be one of the largest practice investments you will
make. Whatever system you decide on will include onsite
training for you and your staff. The trainer will give instructions on everything from scanning documents,
progress notes to electronically filing insurance. Make
sure the software trainer shows you how to set the security
levels for each employee and sets up the system in
which they must log on/off each time they use a computer.
This is important to allow you to run reports and
visualize what staff member is doing things such as
printing prescriptions, attempting to delete transactions
or any other thing you may want to keep an eye on.
This is an issue that you and your staff will need to
keep top-of-mind. Your software trainer will show you and
your staff how to electronically file insurance claims daily.
A nice inexpensive add-on to your practice management
software is NEA FastAttach (www.nea-fast.com). This is a
downloadable program, which allows dental providers to
transmit supporting documentation for electronically filed
claims. Documentation like periodontal charting, patient
notes, digital X-rays, letters to insurance companies on why
treatment is needed can be sent electronically.
Most software is Microsoft Word-based for clinical
progress notes, letters, etc. Initially, templates and
forms will have to be set up and then placed in the
system. This is very time consuming initially, and is a
continuous work in progress, but it is easiest to do it
up front when you have fewer patients. Examples of
forms include consent forms, HIPAA forms and financial
forms, which can all be viewed on our website,
(www.anzaloneperiodontics.com).
Staff
Staff is a big deal in a practice. Hiring and firing
dental staff can be very stressful and unfortunately most
of us will make errors hiring folks that we think are a
good fit but turn out not to be. One thing that you
must perform on all potential employees is running a
background check. Companies like AccuScreen
Systems can provide these types of services. Not only
will it perform a background check, it also offers drug
and alcohol testing too. Dental office embezzlement is
a big problem affecting more than 35 percent of all
offices in the U.S. These screenings can help to potentially
weed out the field before the possibility of you
hiring them. These companies check criminal records,
driving records, employment and education credentials,
and identity and credit background checks as well.
Who is the type of person that is going to potentially
steal from you? Background checks help you to identify
the person with a history of drug or alcohol abuse or
someone who has horrible credit and owes everybody
money. We now routinely screen every potential
employee and these services are very reasonably priced
considering what they can do for you and your office.
All employees must read and sign an Employee
Policy Manual once hired. Most companies offer generic
manuals that can be modified to your liking. Policies
such as cell phone usage, Internet usage, office attire,
vacation, sick leave, etc. are all spelled out for each
employee. Job descriptions and your office systems can
also be added to help with the training process. For the
first employees you hire, have them write down everything
they perform, step by step, in a notebook (which
you can have typed in a Word document). After this is
completed, future employees will be able to come in and
perform all required tasks by following the documented
procedures. The more detail, the better the list. The list
should span from turning off the alarm in the morning
to the time the door is locked at the end of the day. Once
the system is created, try handing it over to another
staff member to test. Keep adding more details until you
are satisfied that the task is being performed correctly
with few outstanding questions. Then you will know
your system is ready.
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