Can You Recognize the Hidden Signals of Practice Instability? By: Sally McKenzie, CMC

Think about the activity level right now in your practice. From all outward appearances, it may seem to be doing okay. The office may be swarming with activity, money regularly coming in and you and your staff may even be getting along without conflict. Unfortunately, such a cursory review of your practice vitality often leads to serious risk and errors in judgement.

Having consulted in literally thousands of practices across the country over the last 20 years, I know and have witnessed first-hand that practice erosion is as silent as cancer. Consistently, when my team of consultants and I are called to assist a practice in deep trouble, we find that many problems could have been recognized and solved long before the total breakdown occurred.

Just as in a dental or medical exam, it’s important to document findings, assess them with reference to normal versus abnormal, and determine how well the practice is functioning. The top five management systems most likely to breakdown are: Collections, Scheduling, Hygiene, Production, and Personnel.

Collections
The vital sign of a breakdown in collections is the daunting disease we refer to as NSF, never sufficient funds. Unless there’s been a parallel decrease in production, the most common reason for not having enough money to handle overhead is that accounts receivable exceeds 1x monthly production. Additional warning signs include: a collection ratio of less than 98%; over 90 ARs being greater than 12% and less than 30% of monies collected daily being paid at time of patient dismissal.

These problems typically can occur due to a variety of reasons. Most often the practice has not set expectations for collection or provided training to enable employees to be more effective in collections. Many times, adequate measurements to evaluate these crucial areas are not in place. There are easy steps you can take to ensure your collections are in line with your goals.

You must begin by developing a sound financial policy. The policy includes guidelines on how patients will pay for treatment. This step is an integral part of setting procedures for collection. It also outlines procedural guidelines for both your patients and staff. Questions such as should a crown or bridge be paid for in full up-front, or can the patient pay 50% at the start and 50% at completion should be thoroughly explained. Whatever decisions you make on your personal financial policy, be sure to be consistent.

In addition to explaining collections by procedure, you also need to develop sound internal policies that detail over-the-counter collections. Issues such as billing, insurance, and handling delinquent accounts should be discussed and explained in depth. Following is a sample internal policy formula that has helped many practices dramatically change their collection ratios.

Billing: Statements should be sent daily or weekly rather than monthly to every patient who owes money and should always include a due date as well as a delinquent message for any overdue balance. Spreading out the billing reduces workload and increases cashflow.

Insurance: All claims should be sent electronically on the day of service. Calculate the amount of insurance payment expected, and collect the patient’s portion at time of dismissal. Generate a delinquent insurance claim report each week, grouped by carrier. It will be much more efficient to make one call per carrier to check the status of claims currently 30-days delinquent.

Delinquent Account Calls: These calls should begin one day past the due date on the first statement. The key question is, “When can we expect payment?” After coming to an agreement, restate the terms–the date and amount the patient has agreed to pay so there is no confusion. Follow it up with written confirmation of the conversation the same day.

Performance Measurements: Total accounts should not be any more than 1x monthly production. Accounts receivable over 90 days should not exceed 12% of total accounts receivable. A 98% collection rate should be maintained for current treatments. Over-the-counter collections should range between 40-45% of total production. Staff should be monitored routinely with performance measurements to make sure vitals are at appropriate levels.

Although outlining the specifics of your collections is important, the key to total effectiveness will be deciding what members of your staff will be responsible. The manner and tone used by staff for collections will greatly influence the effectiveness of their efforts. It’s essential to use personality-appropriate staff who are well-trained for this task and accountable for achieving expected goals. Ideally this is a two-person job: the first, should be responsible for collecting monies from patients as they are dismissed; and the second, should have enough uninterrupted time to do insurance filing, billing, and delinquent account calls.

Scheduling
Do patients have to wait four or more weeks to obtain an appointment in your practice? Don’t confuse this condition with being popular. This not only causes stress for you, your staff and patients, it is very detrimental to the health of your practice. Some typical causes for this type of frenzy include: prescheduling entire treatment plans (scheduling two or more appointments at once), booking appointments far into the future with patients who may not keep them; ineffective or inefficient utilization of clinical assistant(s); inefficiencies in time/motion of delivery of dentistry; a sudden increase in new patients and overblocking the schedule.

Signs of strain become quite apparent as dentists try to correct a too-busy schedule by limping along working into or through their lunch hour, coming in earlier, leaving later or hiring an additional clinical assistant or associate. Unfortunately, this work pattern results in stress to the max, and additional staff increases payroll.

A practice that is not very busy has a different but equally destructive problem. Because production never seems to match the anticipated levels, gaping holes occur in the schedule. This gives doctors and staff alike too much extra time to just sit around. This inactivity often signals a dwindling patient base. One reason for this problem may be that patients are tired of waiting weeks for an appointment or waiting for hours in the reception area. Another reason may be the practice is suffering from a lack of patient retention. Perhaps there isn’t a marketing plan in place to attract new patients. Another reason for a dwindling patient base may be that treatment planning is not being effectively presented. In addition, staff may not be reminding patients of treatment they’ve agreed to but have yet to schedule.

Here are some solutions for an inactive practice:

Schedule to a production goal: Let’s say your production goal this year is $666,666 (this is a million dollars in practice production, before hygiene is added. This annual figure equates to $13,889 per week (taking four weeks out for vacation). Based on a 40-hr work week, your practice will need to produce approximately $347/hr to meet your goal. A crown procedure, charged out at $750 which takes two appointments for a total of two hours, exceeds the per hour production goal by $28. This excess can be applied to any shortfall caused by smaller ticket procedures such as Class II fillings performed on #12 and #13, which take 50 minutes and charged out at $267 (about $27 below your per hour production goal). More than likely, you’re going to need to make some other changes in production to reach your goal, like correcting inefficiencies in the delivery of dentistry or decreasing the amount of time to perform procedures.

Schedule on a computer: Electronic scheduling can add many benefits. Benefits include an instant daily schedule for each treatment room, as well as a printout of information on each patient. Computerized scheduling also creates records of every failed/cancelled appointment as well as unscheduled treatment.

Track, call, and schedule patients who have cancelled but not rescheduled.

Use the computer to fill holes in the schedule. If your staff sees a two-hour opening in the schedule, teach them to recognize it is a perfect amount of time to perform a 4-unit bridge. A couple of keystrokes by your scheduling coordinator and the computer will scan its data to see what patients you might contact to fill that spot.

Limit scheduling to only one to two appointments at a time for any patient.

Use expanded-function scheduling whenever appropriate.

Schedule in 10-minute increments.

Set up all treatment rooms the same to improve efficiency.

If you are going to block the schedule, do so only on historical data. Don’t be tempted to work on ‘guesstimates’ use actual figures from past production.

Your Hygiene Department
If your hygiene department has suffered a drop in profitability and the number of hygiene production days has not increased over the last two years, it’s a very good bet your patient base is declining. Another problem could be that patients due this month can’t be appointed until next month or later, thanks to preappointing, and then, invariably, time slots will fall open due to cancellations or failed appointments. Here’s my Rx for a profitable and productive hygiene department:

Get a well-trained patient retention coordinator to be accountable for recall systems. This is often one of the most neglected areas in the a management system but extremely vital. Immediately, purge all thoughts of trying to have your patient retention coordinator assist the hygienist in addition to dialing for dollars.

Measure patient retention by dividing number of patients due to be recalled for prophys that month into the number of recall prophys performed.

Calculate the number of cancellations and failed appointments due to the prescheduling of recall patients. Send a serious note–as opposed to a cutesy reminder card–which will reinforce why the patient needs to call and set up a hygiene appointment

Determine the appropriate number of hygiene days to accommodate appointment potential of recall system.

Implement time and motion improvements for doctor(s) and staff.

Evaluate fees and hygiene hours regularly and increase when appropriate.

The economic health of your hygiene department is also dependent on other critical factors–revolving around the number 33. Hygiene services should account for 33% of your total practice production (which will bring the $666,666 of doctor production up to the million dollar mark for total practice production). Next, 33% of your hygiene production should be derived from periodontal therapy (namely the 4000 insurance codes such as #4910). Finally, your hygienist should not be earning more than 33% of hygiene production. You can now apply my formula–if your total practice production goal is $1,000,000, then $333,333 of it will be coming from hygiene services. But if you want to achieve industry-standard profitability, not a dime more than $110,000 should be paid to your hygiene department.

Production
One of the major contributing factors to production problems is poor presentation and acceptance of treatment plans. Before development of the treatment plan, the diagnosis should be given adequate, deliberate time and thought. Too often, there’s such a flurry of activity and lack of time dentists end up shortchanging the diagnosis process.

The treatment plan should identify how many appointments are required to complete treatment; what procedures will be performed at each appointment; chair time and doctor time needed for these procedures in addition to including fees as well as how those fees may be broken down and paid out. The terrific thing about doing this now rather than a decade ago is when entered into the computer, the treatment plan feature of your software can measure the percentage of treatment accepted by the patient (which also indicates effectiveness of presentation); and puts more production on the schedule by tracking every bit of dentistry that still needs to be scheduled.

Personnel
This is one of the hardest areas to measure by observing physical signs because they can be very confusing. Perhaps what you’re seeing is a lack of motivation; or interpersonal conflicts between employees and/or doctors; maybe it’s poor job performance; or just a shortfall in team effort. Although these vital signs indicate a problem exists, many times no change is made because it’s very hard to staff the office. Rather than becoming paralyzed at the thought of being understaffed, be determined to have the right staff doing the right thing. Following are a few suggestions for putting together a great team.

Hire an adequate number of employees with personalities well-suited for their assigned tasks.

Develop detailed results-oriented job descriptions for every employee. Once employees know exactly what is expected of them, provide them with the absolute best training you can afford so that each employee can, in fact, be made accountable for specific practice goals then monitor and measure their performance regularly.

Reward staff (verbally or otherwise) to reinforce positive performance and give constructive feedback for performance that is lackluster. Make sure your staff understands their effort will be matched by job security and personal satisfaction. Empower your staff to take ‘ownership’ in the business. Learn to delegate responsibilities. The more you delegate, the better your team will function. Here are my recommendations:

Ask and you shall receive. Request assistance nicely and remember to use the words “please” and “thank you.”

Clearly explain the project and your expectations.

Provide the necessary resources. If you expect a full report on accounts receivables make sure the employee knows where they can get all of the information needed.

Establish reasonable deadlines. Yes, we all want it yesterday but yesterday has come and gone. Give the employee time to do the job right.

Monitor Progress. Ask the employee to provide progress reports on a regular basis, such as at the weekly staff meeting.

Encourage growth. Tell your employees there are no dumb questions. Encourage them to ask many questions and answer them completely and respectfully.

Redirect tasks respectfully. If you don’t like the direction the project is heading, further educate the person on your expectations and show them what you want.

Praise them–publically and privately. Congratulate your employee on a job well done and make sure they know how much you appreciate their efforts.

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Sally McKenzie is a Certified Management Consultant, nationally-known lecturer and author. She is President of McKenzie Management, which can provide in-office analysis of your business, clinical, and hygiene department. McKenzie Management also conducts on-site staff training and offers a full-line of educational management books, audio tapes and videos. For more information call Sally toll-free at 877-777-6151. Don’t miss Sally’s new website: http://www.mckenziemgmt.com