Overhead and Inflation by Sandy Pardue

 

When money’s tight, your whole team needs to be on board to maximize productivity and efficiency

Earlier this year, the Consumer Price Index had its highest increase since 1981. Surging food, gas and energy prices contributed to the gain, with fuel oil up 106.7% over the past 12 months. The rise in inflation means your employees and your patients are losing ground and getting less from their paychecks. High inflation leads to lower levels of consumer spending and lower treatment acceptance, which could have huge implications for dental practices.

A viable dental practice doesn’t happen by accident. During uncertain times, practice owners need a strategy to thrive—or even flourish—despite the economy and other issues they’re facing. The time to work on your practice is before, not after, inflation gets out of control. Infrastructure and organizational systems have never been more important.

The first step to hedge against inflation is to talk about urgency with your team. Look it up in the dictionary together and discuss what it means to the practice: urgency to fill the schedule, urgency to get patients back for needed treatment, urgency to get new patients in, urgency to retain patients and urgency to collect outstanding money. You need everyone on the same page, and things can’t be put off for the future because you get one opportunity to make today the best it can be. Tomorrow is too late.


Pay attention to productivity

Time is your most valuable asset. You can’t make or buy any additional time. Every day, every hour and every unit of time has a dollar value. Learn what that is in your practice and share with your team.

• Set goals for each provider and start scheduling with that goal in mind. Know you can be a great clinician and take care of business at the same time. Remove the blindfold and start watching the numbers—and be sure to share them with your team.
• Appoint a scheduling coordinator to create productive days and hold them accountable to fill each day. They should know the production goals and work to achieve them. Focus on filling today, tomorrow and the day after tomorrow first. The scheduler must know they’re responsible for practice productivity. Others in the practice may schedule patients, but the scheduler is the manager of the schedule and verifies all appointments, identifies any barriers and makes sure the patients arrive. It’s a big job but it needs to be done. Most practices have too many people involved, which leads to inconsistent production, lack of predictability, overworked providers and added stress.
• All patients must be confirmed. Use a third-party company and call the patients who can’t be trusted to keep appointments.
• Increase the variety of services being offered.
• Evaluate your fees, because it may be time for an increase.
• Create an effective internal and external marketing plan.
• Implement a periodontal therapy program in hygiene.
• Evaluate clinical efficiency.
• Consider hiring a treatment coordinator who will present treatment and follow up on unscheduled treatment.

Increase collections

Money is getting tight, and the practice needs to collect outstanding balances and pay close attention to patient accounts and financial arrangements. Just like all systems in the practice, you need someone overseeing accounts who is held accountable for results. The quickest way to reduce overhead is to collect more money without adding expenses.

• Set a monthly collection goal of 98% of adjusted production.
• Appoint a financial coordinator who will manage this department.
• Generate an account aging report in your software.
• Work to collect on unpaid accounts by making phone calls and sending statements and letters.
• Verify statements are being sent.
• Make sure every patient has a financial arrangement before scheduling.
• Generate an insurance aging report and follow up on unpaid claims.
• Verify insurance is being filed daily.
• Collect down payments for services that will cost more than $250.
• Arrange for alternative financing with a third-party company.
• Collect 30%–40% of monthly production at time of checkout.
• Send statements throughout the month for a steady flow of income.

Know your numbers

Knowing where you are in your business is a main function of ownership. This information allows you to make needed adjustments before it’s too late.

• Receive your profit and loss statement (P&L) for the previous month in a timely manner.
• Categorize expenses so the P&L is easy to read.
• Know your overhead percentage.
• Know what it takes to achieve a 55% overhead.
• Payroll: Aim for 20%.
• Payroll taxes and benefits: 3%.
• Dental supplies: 5%.
• Office supplies: 2%.
• Rent: 5%.
• Lab fees: 10%.
• Miscellaneous: 10%.
• Know how much you’re writing off because of insurance participation.
• Assign statistics to team members that align with what they can control for added accountability. Have them report the results at the monthly team meeting.

Lower your overhead

Optimize dental supplies: Improve your ordering system by taking inventory and putting all of the supplies in one place. Create a checklist. Put one person in charge and implement a purchase order system so you know and approve what’s being ordered. Shop for the best prices and consider joining a dental buying group. Consider ordering generic brands. Prepare a list of suppliers, stock up on core supplies and look for backup suppliers.

Examine subscriptions and service contracts: This includes telephone lines (consider VOIP), internet, waste management, cleaning service, lawn service, etc. You may be able to downgrade the service or find things you no longer need.

Utilize credit cards: Take advantage of introductory offers and merchant-specific discounts. Pay all office expenses with one credit card and earn rewards on purchases.

Compare insurance rates: Shopping around for insurance is one of the best ways to ensure you’re paying the best rate based on your circumstances.

Outsource tasks: Evaluate the administrative area and consider outsourcing some tasks instead of hiring another team member. Outsourcing insurance verification and follow-up will free up time to focus on keeping the schedule full and productive.

Create an in-house membership plan: You may need options for patients who are feeling the effects of inflation, losing their jobs, etc. An in-house membership plan helps retain patients and helps them afford the treatment they need.

Take team inventory: Employees are feeling the effects of the economy and may want an increase in pay. You can’t afford raises if the practice is losing money. The actions of team members have a lot to do with the viability of the practice. Take inventory of your team using their individual job descriptions as a guide.

• Position.
• Rate of pay.
• Benefits.
• Performance.
• Attitude.
• Contributions to the practice.

There are many possible outcomes to this activity. You may discover you need to hire, give raises if you can afford it, outsource or make internal adjustments. Focus on retaining productive and loyal team members. Work on team dynamics, designate time for team training and focus on improving office culture.

Close the back door: Look for blind spots that cause patients to fall in the cracks.

• Revisit your recall and reactivation processes.
• Verify that calls are going out regularly to schedule past-due patients and patients with unscheduled treatment.

Conclusion

Inflation takes our attention away from fundamental business practices and taking care of our patients and employees. Now more than ever, effective internal systems are needed for consistent income and predictability in your practice. If you collect $900,000 in the next 12 months and you reduce overhead by 5%, that adds $45,000 to your bottom line.

In addition to your current owner responsibilities, you will need to add managing inflation effects to your job description. It’s unlikely that this will be the last time you will be faced with this challenge. Drive profitability, increase productivity and boost accountability. Focus on the actions that matter.