Last month during the 2017 Yankee Dental Conference in Boston, I was interviewed on the topic of Minimizing Practice Overhead to Maximize Profits.? While this interview was geared specifically towards dental practice owners, much of the information discussed applies to all healthcare practice owners.? I hope you are able to use some of this information to increase the profitability of your practice.
Below are the talking points from that interview:
Question – Like any business, dental practices pay a lot of money on their overhead each year.?
Yes, overhead for most general practices ranges from a low of 45% of collections to as high as 60% or more.? Please note that is ?non-doctor? overhead, which means that the salaries and benefits paid to owners and Associates are excluded from overhead. Most dental practices, therefore, have somewhere between 40% and 55% of practice collections available to pay the salary and benefits of the owners and the other doctors, and also pay the practice debts and invest in equipment and technology.
Question – What is generally the largest expense incurred by dentists?
Staff expenses are pretty much always the largest expense grouping. Practices we work with around Boston pay on average 23%-28% or higher of their collections for salaries, payroll taxes, health insurance, retirement plan contributions, and other staff costs and benefits Remember, this is non-doctor staff costs that includes the hygienists, assistants, and front desk/admin staff.
Question ? How can practice owners minimize their staff costs?
Start by leveraging technology that is available and reasonably inexpensive to replace labor intensive activities.? All practices can improve communication with patients and save payroll costs by utilizing programs that sit on top of the popular practice management systems and interact with practice patients, including:
Lighthouse 360
Revenue Well
Solution Reach (fka Smile Reminders)
Demand Force
One of my clients insists that using Lighthouse 360 saved the practice that he had purchased a few years prior. When set up properly, these programs save staff time and cost by:
Confirming appointments via text message or email
Filling the schedule following cancellations
Sending out surveys following each visit
Promoting Yelp and Google reviews
Another way to save staff time and costs is to utilize a collections service.?Paying staff to chase after delinquent patient receivables becomes expensive.? An inexpensive service such as the one provided by Transworld Systems sends out a series of 5 letters to delinquent patients for a cost of just $15 per account.? The series of letters starts out very friendly and then proceeds to get a little more demanding with each subsequent letter sent out.
Another benefit of using a collection service is that doing so?helps front desk staff adhere to the financial policies of the practice.? All they need to do is send over a delinquent account through a web based system once the account exceeds a set number of days past due.
Question ? What about marketing costs?? It seems dentists can spend a lot on marketing that doesn?t always pay off with results.
Practices we work with seem to spend 1% to 2% of their collections on advertising and marketing each year.? According to a recent article in Dental Economics, the best way for practices to attract new patients is through:
Existing Patients
The?Practice’s Website
Social Media (Facebook and Google ads)
Yelp and Google ratings and review
To get the best results from these four methods of marketing, make sure that each patient has the best possible experience with each visit to your office so they become your best advertisement by broadcasting to their friends and family how great you are. Also make sure to track how new patients heard about your office to figure out how best to allocate your marketing dollars and efforts
I strongly recommend that you read 1 800-Dentist founder Fred Joyal?s book ??Everything is Marketing.
Question – What Are Some Other Opportunities to Cut Some Costs?
Here are some recurring costs that you might be able to save by contacting a few providers to get updated pricing:
Merchant Fees – don’t assume you have the best pricing for processing credit cards.
Utility Costs ? now that there has been deregulation.
Insurance Costs ? putting all insurance with one company can save money
Question – A lot of dentists who purchase existing practices, purchase equipment or technology, or open or expand practices have loans they are paying.? What can these dentists do to cut this overhead expense?
There are a few options available to practice owners with debt to cut the interest rate on those loans. Start by trying an?“Internal Refinancing” with your current lender. This opportunity is generally available after 1 year of paying the debt. and only in circumstances where the interest rate on the loan is higher than the rates currently being offered.? There are generally minimal loan costs and paperwork required in connection with an internal refinancing.
A second option is to refinance your practice loans with another lender. There are multiple dental specific lenders in most markets competing for good loans, and they all love refinancing opportunities, especially for great practices
Question ? Besides staff expenses, dentists seem to also spend a good amount each month on their facility expenses.? How can they cut these costs?
Most established dental? practices we work with spend between 5% and 7% of collections on Facility Expenses ? rent, repairs and maintenance, utilities, and local taxes.?? The good news is that there is a relatively new national business service available to all healthcare professionals to provide lease renewal assistance.
The name of the company is call?Carr Healthcare Realty, and unlike a Doctor that negotiates a lease once every five or ten years against property owners who negotiate leases as part of their job, Carr acts as the Doctor’s agent and use their experience and access to market data to professionally negotiate for better terms including:
Monthly Rent Cost
Free Rent for a certain period of time
Tenant Improvement Allowance
Since Carr acts as your agent, their fee is paid by the Landlord as part of the lease you sign.? We have had clients save tens of thousands of dollars over the term of their lease thanks to Carr Healthcare Realty, and paid no direct fee to Carr for that valuable service.
In Conclusion:
Remember, each 1% that you can cut from your overhead puts $10k more into your pocket assuming you have a $1 million practice.
By guest writer Phil Kluge, Transaction Resources, Inc.?
Big changes are here for businesses that accept credit card payments.? Essentially, an EMV liability shift takes place October 1, 2015 that could cost your business a lot of money if you end up processing fraudulent transactions.
EMV is an acronym for Europay, MasterCard, and Visa. EMVCo?is now the organization that will manage the standards for MasterCard, Visa, Discover, American Express, JCB, and China UnionPay.
According to EMVCo’s website:
?EMVCo exists to facilitate worldwide interoperability and acceptance of secure payment transactions. It accomplishes this by managing and evolving the EMV? Specifications and related testing processes. This includes, but is not limited to, card and terminal evaluation, security evaluation, and management of interoperability issues. Today there are EMV Specifications based on contact chip, contactless chip, common payment application (CPA), card personalization, and tokenization.
This work is overseen by EMVCo?s six member organizations?American Express, Discover, JCB, MasterCard, UnionPay, and Visa?and supported by dozens of banks, merchants, processors, vendors and other industry stakeholders who participate as EMVCo Associates.?
In the U.S., EMV may be implemented as Chip and PIN, Chip and Signature, or other variations.? It is up to the issuer to choose.? As always, an effective strategy to protect against duplicate card fraud is to maintain a “card-present environment”.
EMV Liability Shift
Beginning October 1, 2015, if a business accepts a “chip card” without the use of an EMV capable terminal, the business will be liable for any fraud connected with those transactions even if the business receives an authorization for the transaction.
However, if a business has an EMV capable terminal, receives an authorization and later finds that a fraud occurred with a transaction, the issuer would be liable for that transaction instead.
What Does EMV Mean to Merchants?
If your credit card terminal is more than 12 months old, you should replace that terminal with one that is EMV-capable that supports:
Magnetic Stripe Reader
Chip Card Reader
NFC Reader (Apple Pay, Google Wallet)
What Should You Do At Your Business?
Even though there has been slow adoption of EMV in the U.S,, POS vendors and processors are now scrambling to meet EMV implementation dates.? Please make sure to talk to your Merchant Services provider or Phil Kluge at Transaction Resources to see if your business is in compliance.
Transaction Resources Inc. (TRI)?offers innovative payment processing solutions by combining the latest technologies, a passion for customer service and competitive rates.?You can contact Phil Kluge and his team at 781-496-3454.?TRI also maintains CardDog.com, which helps businesses build successful gift, loyalty, prepaid cards, and discount programs.
By Marc Slafsky, Salem Five Insurance Services;?Content provided by Travelers Insurance, ISU Network, and Philadelphia Insurance Co.
?October is Cyber Liability Awareness Month.? Did you know:
Data breaches have increased 42% in the last year.
31% of the breaches have occurred in companies with less than 100 employees.
All Industries are vulnerable.
The average cost of a breach today has risen to over $5 million dollars.
The cost associated with a breach averages $188 per compromised record.
Many doctors and dentists aren?t aware that their standard insurance coverages (Malpractice, GL, Property) typically don?t provide proper coverage for cyber and privacy liability. Most also don?t know that they (along with their practice) have an exposure to cyber and privacy risk, especially given the presence of personal health information that they and their vendors have access to and the laws that exist to protect this.
Specifically in the healthcare industry, some claim examples are:
A lost laptop that has patient records was stolen from a vehicle. This information contained patient names, social security numbers, dates of birth, address, phone number and MEDICAL CONDITIONS.? This could be considered 3-6 Records (depending on state law) that have been compromised.
A practice was ?down? for 4 days due to a hacker ?attack?; the practice was unable to see patients was they could not access records, scheduling, of critical computer equipment.? The practice lost the revenue for 4 days and had to pay the cost of the repair from the hacker damage.
Medical information that was scheduled to the shredded per HIPPA laws was accidently thrown away in an unsecured dumpster. This resulted in a class action suit against the practice
A Cyber Liability Insurance policy protects against these types of losses.? The policy pays when insured is liable for theft or loss of unauthorized access to Personal Information, Breach response and Notification and Regulatory Defense and Penalties.
The policy is based on Gross Revenue and the cost can range from $975-$1800 annually for a $1,000,000 of coverage.? This is becoming just as important as your general liability and professional liability in today?s business environment.
If you?d like more information about Cyber Liability Insurance, please contact your insurance broker or Marc Slafsky at Salem Five Insurance (978-720-5144, marc.slafsky@salemfive.com).
Let?s start by discussing some of the benefits of setting up and maintaining a Retirement Plan for your practice.? The first benefit is that contributions you make into the retirement plan are generally tax deductible, and then those contributions grow tax deferred.? Remember, contributing to a retirement plan is one of the best tax shelters available to people during their working years.
Here are a few questions I get all the time:
Why bother contributing to a retirement plan at all?
And why contribute now, especially since the stock?market, until recently, hasn?t performed all that well during the past decade or so?
When you contribute to a retirement plan, the taxes you save provide you with an Immediate Return on your Investment.? Let?s assume you?re in the 28% federal tax rate, and you live in a state with a 5% rate.? So each additional dollar of income you earn is taxed at 33%.
In this scenario, you would earn an instant 49.25% return on your investment by contributing to a retirement plan. That?s because it only costs you $670 in after-tax dollars for every $1,000 that is now invested. You?ve already earned a whopping $330 on the $670 you invested.
Yes, you will owe income taxes on the money withdrawn from these accounts down the road, but you get to invest the government?s money over all those years that the money remains within your retirement accounts. And, you get to keep the investment earnings on the government?s money.? Trust me, investing the tax savings over time really adds up.? The compounded growth on the tax savings can easily add up to tens of thousands of dollars or more.
For example, $100k invested and earning an average of ?8% per year over 25 years will grow to be worth $685k within a tax-deferred account.? What happens if you pay taxes each year at a 33% rate?? Since your compounded return falls from 8% to 5.35%, this $100k investment will grow to just $370k over 25 years, assuming all the income and growth within the account is fully taxed each year. That?s how powerful tax-deferred compounding can be.
There are additional benefits of a retirement plan.? For starters, money in most retirement plans is protected from your creditors. That?s great news for anyone in a profession like healthcare where getting sued is not completely out of the question. Please check with a lawyer to find out which types of retirement accounts are protected based on the rules for your state.
Plus, contributing to a retirement plan is one of the best ways to build a nest-egg to fund your post-working years.? Unless you work for a government employer or some other business that provides a lucrative pension, it?s up to you to make sure you have enough money set aside to fully fund a comfortable retirement.? And the earlier you start building our nest egg, the better chance you give yourself to reach your retirement savings goals.
Looking for additional benefits of maintaining a retirement plan for your practice?? Offering a retirement plan might be a way to help you attract and retain staff, and is also a great way to reward staff for loyalty and longevity at your practice.? Most practice owners would agree that having an engaged staff is a key ingredient to having a successful practice.
Managing a practice requires that you look at “the numbers” on a regular basis. If you’re like most practicing Doctors, you probably try to glance at the production and collections figures at least monthly. Did you know that there are a lot of other performance metrics that can help you gauge how your practice is performing?
Figuring out which metrics are meaningful is one challenge. The problem is that calculating those metrics and then looking at those performance indicators in a vacuum doesn’t provide you with much insight at all. For that reason, calculating various performance metrics will be much more valuable to you if you can compare your practice’s metrics to your peer group.
My CPA firm currently provides tax, accounting, payroll, and basic practice management services to more than 130 dental practices. This past winter, we collected practice management data from many of our practice clients and used that data to calculate the following ten meaningful performance metrics for general dentists for 2012:
Number of Active Patients (Defined as an individuals?treated at least once during the prior twelve months)
Collections per Active Patient
Collections per Doctor Hour
Collections per Procedure
Number of Procedures per Active Patient
Number of Non-Diagnostic and Non-Preventive Procedures per Active Patient
Re-Care Efficiency (Defined as the percentage of Active?Patients who came in for two exams during the year)
Number of New Patients brought in during the last year
Percent of New Patients to Active Patients
Percent of Adjustments and Write-Offs to Gross Production
Please note that even though the data was collected mostly from practices in the Greater Boston area, I feel that most of these metrics are relevant to practices located within all 50 states.
To make these metrics even more meaningful, we calculated each performance metric based on the data collected from all the participating practices, and then re-calculated them based on the practices that collected $1 million dollars or more during 2012. It’s very interesting to see how the performance metrics for the total sample compare with the same metrics calculated from just the million dollar practices.
An part of our analysis, we also created a graph that we call our “Internal Marketing Matrix”. This graph plots Re-Care Efficiency on the x-axis versus New Patient Percentage on the y-axis for each of the participating practices. Depending on your practice metrics and where you fall on this graph, you’ll either be apolitician, engineer, neophyte, or “dentist-preneur”.
If you’re practicing in the Greater Boston area and would?like to set up a time for my firm to help you figure out these metrics for your practice, please do not hesitate to e-mail me that request.? We’d really appreciate the opportunity to help you gain some insight on the performance metrics for your practice.
If you plan to start a new business, or you?ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the IRS that can help you get started:
1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form.
2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
4. Recordkeeping. Keeping good records will help you when it?s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business? progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is true even if you receive the income or pay the expenses in a future year.
