DENTAL PARALYSIS BY ANALYSIS
Response time is calculated by reaction time plus movement time. In other words, your response time is determined by the time it takes you to notice an “alarm” going off (problem, decision you need to make, or strategy you need to incorporate), to the time that you are able to take action to address whatever triggered the alarm. In general, you want to heighten your awareness of threats, blockages, and needed change, and be ready to act quickly.
Some dentists operate on a ready, aim, fire cycle. A smaller number operate with a ready, fire, aim strategy, but the group I want to address today is the ready, aim, aim, aim, aim, aim, aim, do nothing, never fire because I am paralyzed by analyzing the situation and every possible scenario prior to doing something while life passes me by doctors.
Reactionary gap refers to the time or distance separating you from the action you need to take and the threat that has a potential to harm your practice or you personally. A simple illustration might be you out jogging and just as you begin to cross the street you notice a car 100 feet out moving slowly that will eventually cross your path. In this scenario, you can easily keep jogging and your brain tells you to keep going at the same pace and just cross the road because there is no danger at all. Let’s take the same problem of crossing the road and noticing a car, but in this case the car is moving quickly, is just 50 feet away, and the distracted driver is texting and paying little attention. You would then have to consider a make or break, do or die, on the spot decision to move on or stop. What is your reactionary gap? For many of us, we postpone important decisions because we are afraid of making a mistake. The fear of the unknown is more terrifying and has more control over us than the potential upside of following through with a strategy.
I want to give you an example of an actual situation with a doctor that is desirous of cutting back in dentistry to take on an ever-increasing role in another business. Good practice, but to trigger this event the doctor would need to quadruple the number of new patients being seen each month. This will be challenging at best due to poor demographics, lots of competition, and a limiting location due to traffic patterns. So the doctor is trying to decide whether to increase PPO participation in order to attract a larger and wider segment of the population to facilitate bringing in an associate/potential partner or buyer. His self-imposed time line is soon. He has researched the problem and has posed some practical questions:
1. It seems that I will have to work significantly harder to make up the reductions from going in-network. Yes or no? Answer: To win at managed care, you must either work about 25% faster or sell products and services that the insurance company does not cover. You decide if that is harder. The practices that do this correctly still have a 55-60% overhead and don’t consider it overly difficult.
2. Won’t I look just like every other practice around me rather than standing out now because I have remained out-of-network? Answer: You may look like other practices because you would then be more convenient, more in line with what the patients are looking for, and more likely to become good patients and refer to you. Because of the limited number of new patients in your practice, I would assume that the public had already voted and gone somewhere else.
As you can see, most of his concern is centered on profit and the stress that this might cause compared to the upside of having more patients. At this time he is worried that if he takes the plunge and becomes an in-network provider, he will lose some income because he has patients that still come to him even though he is currently out-of-network.
Max was thinking about this and formulated this simplistic mathematical scenario.
In 2013 the practice produced $355,258 from patients (1159) with the six plans that were evaluated. It isn’t clear if those 1159 patients were “active” (seen in the practice in 2013) or simply patients of record with one of the six plans. Let’s assume they were active. That’s an average of $306 per patient.
Now let’s assume he goes in-network and “loses” 15% of the income. That would be write-offs totaling $53,288.
The key question should be: How many additional patients would the practice have to see from these six plans after going in-network to get back to break even?
They need to make up $53,288 after the 15% write-off from additional patients. The number is $62,700.
That’s an additional $62,700 gross production over the course of a year to break even. At the 2013 average of $306 per patient, the practice would need to see an additional 205 patients who are on one of the six plans.
The $62,700 would be approximately:
$5225 per month (12 months)
$1254 per week (50 weeks)
$327 per day (192 days or an average of 16 days per month)
$41 per hour (8 hour days)
Does an additional $327 per day seem like an unbearable, punishing amount of extra work?
And every additional patient they attract over the 205 number above would result in ADDITIONAL income to the practice.
Sounded good to me. I would add the value of:
1. More new patients
2. No increase in marketing dollars for those patients.
3. The potential referrals coming from an inspired patient that might be fee for service.
4. Potential for moving on to an associate/partner with increased new patients.
5. Fewer holes in the schedule so a probable increase in production per hour per provider.
6. Increase in productivity should come without an increase in staff which holds the overhead down while increasing the production per employee and per operatory.
Each of these create “choices” in being to take more time for real estate once an associate comes in and becomes busy. This in turn, gives you a built in buyer for your exit strategy, or in the event of your disability or death.
What would you do? This is Summiting.
Michael Abernathy, DDS