Podcast: Good Profits and True Growth

In this episode Dr. Coughlin discusses good profits and true growth, why do we do it and how should it be done.

 

Hello and welcome to Ascent Dental Radio. A program dedicated to the balance between the clinical aspect of health care and the business of health care. And now here is your host, Dr. Kevin Coughlin.

kevin-transparentWelcome. My name is Dr. Kevin Coughlin. The following podcast is brought to you by Ascent Dental Solutions. I hope you enjoy the following podcast which focuses on the ten mistakes that all dental associates make. I hope you learn how to avoid those mistakes and what to do when you can’t. Although my focus and expertise is in the dental profession, my opinion is most of this information could be applied to almost any health care profession.

Over the last 33 plus years, I have interviewed literally hundreds upon hundreds of dental associates and currently have 14 dental practices with 23 dental associates. My experience continues to grow but the following ten mistakes, in my opinion, I see over and over again and I’d like to share with you my suggestions and recommendations so as a young associate you can hopefully improve and avoid these mistakes and for those seasoned dentists interviewing and expecting to hire an associate, you can make your life much better and much less stressful.

Mistake number one is starting off at the wrong job. I strongly recommend you focus on location, location, location. As in any real estate transition, no matter how great the practice is, no matter how happy you are, if you’re unhappy with the location of the practice, it will probably be an unsuccessful venture in the long term. I suggest you decide do you want to live in the country and practice in the country, do you want to practice and live in the city or would you like to practice in the suburbs. Obviously, based on your needs, your wants and your personality you will be directed to one of those specific areas.

The next is the type of practice. Are you looking for a fee for service practice, a mostly insurance based practice, are you looking for a type of practice that is a group or solo practitioner type practice? I cannot emphasize that the type of practice as you become more seasoned and more comfortable will become very important for your long term success. There is no right or wrong, it is simply understanding the advantages and disadvantages of all these different options. And again, based on your personality and long term plans, one practice will strongly outperform the other type of practices.

I then suggest before you start this job you understand is the real estate owned or leased. What is the square footage in this real estate? In general terms, somewhere between 2,500 and 3,500 square feet are necessary for an up-to-date general dental practice.

I then suggest you review the number of dental operatories and I would recommend you focus on at least six dental operatories or at least room for six dental operatories so that you can expand your business down the road as it grows and improves. And you also have the luxury of having enough space to have one or more dental associates along with the support staff and dental hygiene program that will be necessary.

You should also evaluate the conditions of the space, the number of staff, the net profit, the net production, you should review the last three to five year tax returns and you should understand exactly what the owner really wants. Are they looking for a check and moving on and out of practice, would they like to stay on as a long term employee and you as the owner or are they interested in sharing ownership in a 50-50, 60-40 or some percentage such as just described? Keep in mind if it’s not in writing in most cases it will be BS. If it’s important enough to discuss, it should be important enough to have in writing so that both parties are clear on what is expected, what the terms are to be.

You should know something about the owner and the owner’s past, not only about their personal life but in particular their business life. In many cases, the personal life will mimic their business life.

You should then next review the number of patients and how many new patients are occurring each month. In general, I would expect between 35 and 40 new patients each month would be necessary to sustain a solo general dental practice. Less than this could put a stress on yourself and your staff.

Lastly, you should review their aged accounts receivable, 30, 60, 90 days and over 120 days. Understand the rule of 45 days which simply means that you take the average production or collection and add 15 days to it. So if the practice is collecting $100,000 a month, you would expect the accounts receivable to be 100 plus 50 or a total of $150,000. Accounts receivable in excess of that indicates weakness in collection policies and accounts receivable lower than that will emphasize the financial arrangement is maybe too strict which can have an effect on you. Following these bullet points will certainly decrease the chances of you starting in the wrong job.

The next thing I noticed, mistake number two, is the associate takes too long to leave or the senior doctor takes too long to terminate the relationship. When you’re unhappy or confused, it should be addressed immediately. You should put a time frame on the resolution. You should meet with the owner and/or management team at least one time per month with a written agenda. I suggest you provide at least a 90 day written notice if you’re intending to leave and you should fully understand the exit strategy in which you’re about to pursue and any restrictions on that exit strategy, such as restrictive covenants. You should get what’s coming to you but make sure you’re right.

In most cases, the biggest point of contention is simply the fact that the associate feels that the accounts receivable are deserved for their production and collection and the owner feels that since they’re an owner, the accounts receivable should stay with them. In your written agreement or contract or employment agreement, it should spell out what the situation is for accounts receivable when the relationship is terminated. In most cases, I would suggest that the next 30 to 45 days of accounts receivable would be applied in some type of percentage, usually between 28 and 40 percent, minus laboratory fees and overhead for collection to the associate. After that, I feel all additional dollars should belong to the owner dentist.

I strongly recommend that you leave on good terms or the best terms possible. Always remember we live in a very connected and small world. Burning bridges and creating enemies usually do not help either party. If at all possible, be honest, straightforward and leave with a handshake and a smile on your face and learn from the mistakes so that you don’t repeat them again.

The third largest mistake is don’t sign a poor employment agreement. Understand your compensation clearly. Understand the number of hours you’re expected to work. Understand if there are multiple locations, which locations you will work. You should clearly understand what your perks or benefits are and they should be clear and understandable. If you have a restrictive covenant, make sure you’re comfortable with the restrictive covenant and make sure it’s fair to both parties. In general, six to twelve months is more than fair in most cases. And generally depending on the zip code, the population, anywhere from a quarter of a mile up to five miles may seem adequate and fair in many cases. I personally believe that the restriction of any worker anywhere in the United States is unfair. However, there are extenuating circumstances where this may be explored and the employer is trying to protect their vested interest.

You should then review are you on-call or not and being on call is it compensated or not compensated and will you have a support staff if you’re forced to go in on an on-call procedure.

You must fully understand what net collected money is. In many cases, the owner doctor and the associate doctor will be confused on what those terms are. In general, net collected money simply is the money after credit card fees have been subtracted, credit agencies such as CareCredit and Wells Fargo has been collected, any insurance reimbursements or write offs. So it is the net collected money that in most cases is the most important number in running your financial business and your personal finances.

You should also be fully aware of how you could be terminated, what are the terms of termination, and in most cases you will find that it will be almost like a tenancy at will. The individual owner or group practice can usually terminate on a need basis for any reason and in most cases the employee can also terminate their relationship. In fairness, in most cases unless there are extenuating circumstances, 30, 60 or 90 days is an appropriate amount of time to give your written notice.

The next mistake, number four, is what type of practice are you joining. I have heard over and over again over the last three and a half decades that all I do is hygiene appointments. I am not doing comprehensive dental care. The next complaint is all I do is dental insurance plans that don’t allow me to balance the bill. In many cases, associates are troubled by the fact that they’re doing insurance reimbursements on reduced fees because the dental plans are more like a capitation type plan and the office or owners have accepted a reduced fee in order to obtain a larger dental practice. Over and over again the major chief complaint that I see is the patients that the doctor is expected to see are not the type of patients and procedures that they are taking.

As far as review what’s expected from you and what types of treatment, it is difficult for a new associate to determine this. However, review of past billing procedures over the last year is a good indication of what you can expect. You should know the number of surgical extractions, the number of root canal procedures, orthodontic procedures, periodontal procedures, pediatric patients seen, the number of hygiene procedures that have been performed. In general, the overall review between 25 and 30 percent should be associated with dental hygiene production.

Mistake number six; do not become too friendly with patients or staff. In my experience, it almost never works out. Stay professional, stay focused. Keep it about business and treatment and care. Be nice, be polite but do not cross the line. You’ll never lose just one patient. When you lose one patient, you lose the husband, the wife, the children, the neighbors and the relatives. An angry employee can upset the entire staff. When you get too close and now you have to focus in on being a businessman or businesswoman, you will find that problems will occur. I strongly advise do not become too personal and too friendly with your employees or staff.

Mistake number seven; in most cases, the dental associates lake basic business knowledge. This is not meant as a slight to any dental associate, it’s just the nature of the profession. In most cases from the ninth grade on, the student is focused on sciences and not business, not sales and not communication. If at all possible, you should try to understand fundamental basic principles. Good service can make upfront awful a lot of terrible mistakes. Good care and treatment will always lose to poor service.

You have to take in much more money than you take out. In many cases the young associate assumes that whatever they collect they’re entitled to. I believe most dental practices in the United States today currently have an overhead of between 70 and 75 percent and unfortunately many even have higher overheads than that. That means out of every $100 collected between 75 and 80 dollars are going to expenses. The best financial arrangements I could teach or recommend for you is collect 100 percent of your finances before you start care. Although this may seem unrealistic, that’s a goal that you should lean towards.

Keep in the back of your mind that the owner is never doing as well as you would think. And I would strongly recommend that your treatment plans be written out for a patient or lay people to understand the options, the costs and the amount of treatment that you’re recommending and why. In the end, if your patients cannot find value in the recommended care and treatment, they will not accept your treatment.

Remember the acronym BLT. In order for your treatment to be successful long and short term, for your practice to be built larger and more successfully, the patients have to believe, like and trust in you, and this is equally important for the support staff that will keep you in business and keep you successful.

Mistake number eight is many times you do not understand how to refer patients, who to refer them to and when to refer these patients. It would be good during your review of the practice before you join to see how they refer and if they refer and who they refer to. It is important that when you refer the patient you should understand that you’re the quarterback for the team and their care and treatment is your responsibility.

Over and over again, I see the young associates that many times would refer a patient and lose contact with that patient and ultimately that patient leaves the office and their family and friends follow them. Make it clear to the referring doctor that his is a two way street. You expect to perform the care and treatment that you’re comfortable with and that the patient should remain in your practice for the long term and referred back to you for the routine general dental care that the patient's need and expect.

With periodontal treatment and periodontal care over and over again I am confused why the periodontist needs to do the hygiene appointments, which in most cases are done by the hygiene staff and they certainly could be done by you the general dentist. If the periodontist elects to provide a three month hygiene re-call or re-care program, there’s no reason in the world that the patient could not be seen in your general dental practice and once a year follow up with the periodontist. Keep in mind with oral surgery and periodontics if you’re not doing implant surgery you should be clear that the abutments and the prosthetics would be referred back to you. Keep in mind at the end you are the quarterback and if you’re not referring properly and you don’t know how to refer, you are losing patients and business.

Mistake number nine is you do not know how to market yourself. It should start with an announcement in the local newspapers, on radio and TV. It should be part of the office website giving a C.V of your background, your training and education. I strongly recommend that this be started after the signed agreement at least three months in advance so that the practice and the patients get used to your name and know something about you.

Lastly and one of the most significant mistakes that I’ve seen is communicating poorly, not just with your patients, but with your staff. I strongly recommend that you minimize your communication as much as possible to the following; Mr. or Mrs. Smith, your tooth is broken. Mr. or Mrs. Smith, your gums have an infection. Mr. or Mrs. Smith, you have a combination of an infection in your gums and a broken tooth. Additional information and conversations beyond that will normally cause confusion to the patient and problems for your practice.

Keep in mind that you will be most cases joining a seasoned dental office. It is extremely embarrassing and difficult to explain to your patient why they have subgingival plaque and calculus after they’ve been coming to the hygiene office for every three months for the last ten years. It’s extremely difficult to explain to the patient that the filling you just put in is cracked or broken. Since no one can tell what happened in the past or what’s going to happen in the future, keep your treatments to your tooth is broken, your gums have an infection or you have a combination of both problems and I can guarantee you your life will be much easier.

Other areas of problems are the associate will say that there is an overhang on the filling, there’s an open contact, the color of the crown is off, the dental laboratory did a bad job. Remember the acronym KISS, keep it simple stupid.

Lastly, do not leave on bad terms. Be civil, only speak when both you and the owner have time. Write out what you like and what you didn’t. Make sure you have an interview that is an exit interview so that both parties know why you’re leaving so that it doesn’t occur for either party in the future. Make sure you leave a forwarding email or address in case you need to be contacted. It can be a great ride but you can make it even better.

 I hope you learn how to avoid those mistakes and what to do when you can’t. Although my focus and expertise is in the dental profession, my opinion is most of this information could be applied to almost any health care profession.

I hope you enjoyed the podcast and thanks so much for listening. For additional podcasts, I can be reached at drkevin@ascent-dental-solutions.com. My website again is www.ascent-dental-solutions.com. The focus is on knowledge, development, training and consultation.