Welcome to the continued list of warning signs, detours, and red flags (part 2) or what you should have know but were afraid to admit. If you are reading this for the first time, there are two previous articles you really need to read first. Let me know if you can’t find them and I will send them to you. We are creating a checklist that will help you explore a job for success and profitability in dentistry.
We are continuing with the things that you should understand and know before accepting a job offer. Just to be clear, you will never find a perfect office and these red flags are like warning signs on a roadway you are unfamiliar with. They tell you when to speed up or slow down. They can point out avenues of travel that are closed or too dangerous to proceed, so you make a detour and adjust your ETA and expectations, but you get where you want to get, safely. Hopefully these articles will give you pause and a genuine desire to not just accept these words as fact, but take them, make them yours, and use them to minimize the mistakes I made in my first two jobs.
- Ask not just how many new patients, but where do they come from. I’m sure you already understand this, but make sure that you are discussing or conversing with team members rather than just the owner doctor. Get the information from the team and then get clarity from the doctor. A huge red flag is when you get drastically different information from the two sources which would indicate a lack of transparency or just a doctor who has no idea what goes on in his or her office. Many owners are “exceptional” thinkers. I mean this in the worst possible sense. They remember the one time the office did something well, rather than a true picture of how these numbers or things happen day in and day out. From the perspective of where and how many new patients, we would want at least 50% coming from internal referrals from existing patients. If they have this, it indicates a healthy office that is getting most things right. Failing this benchmark might indicate systems, protocols, and a culture that do not inspire patients to refer or even come back for a return visit. Get your free copy of the Super General Dental Practice at www.supergeneralpractice.com and read the chapters on benchmarks and overhead to take a deeper dive into what you should be looking for. This red flag indicates an office with unsustainable growth. This is not the office for you.
- Look for a lack of “substantial cases” on their schedule. This is an indicator of proper case presentation, acceptance, and good financial policies. A substantial case is anything the doctor does that is about the fee of a crown. Let’s say that is $800 or so. A well-run office with adequate patients and proper diagnosis and case acceptance should have 60% of their schedule in substantial cases on the doctor’s schedule for each day. If their goal for the dentist was $5,000 a day, then 60%, or in this case, $3,000 dollars would need to come from procedures that were at or above what a crown fee would be. In this example divide the $800 into the $3,000 and you get 3.75 substantial cases needed to make that goal. NOTE: A substantial case doesn’t have to be a crown, just something that produces the dollar equivalent of what a crown would be in this office. It could be a denture, partial, root canal and build up, 6 fillings, full mouth extractions etc. You get the idea. You can look at the hygiene schedule the same way except for them, a substantial case would be things like new patients and scaling and root planning. Hygienists will not be able to produce 33% of the production for the office without about 20-30 new patients per hygienist. Recall appointments will never drive their productivity to a profitable level without these substantial cases. Those same new patients allow them to generate significantly higher per hour production rates. Offices with significant goals for production will not hit them unless 60% of the days collections is from substantial cases. A significant goal will never be obtained unless there are enough new patients and a high percentage of case acceptance. There is one more way that a red flag could pop up in this area. An unassertive dentist, who does not present comprehensive dentistry, will never have a significant daily goal. This can infect the entire office creating mediocrity and poor commitment to comprehensive dentistry. Settling for an average goal is robbing your office of the commitment for excellence in all you do. One warning when it comes to DSOs: There is a common thread from young doctors working in this type of office to do more crowns, inlays, and onlays. Some of these offices require an inlay instead of a filling or a crown rather than a two or three surface filling. This is an ethical challenge, and most doctors would do well to shy away from this type of culture. You should diagnose and offer the same treatment you would offer your mom knowing that she wasn’t going to ever pay a penny. You need to want the same treatment for your patients that you would want for yourself.
- Pay based on collections. While I always paid my associates on production in my office, we never collected below 100%. This is almost never the case in most practices. A majority of offices will want to pay you on a percentage of collections. The challenge here is that if you are paid on collections, I would want to see the quantifiable collection rate for the office over the last 12-24 months. I feel like if the associate follows the rules and does the work, it is not the associate’s fault if the office has a poor collection rate. Just keep in mind that if the collection rate is 98% or less, I would argue that you need to be paid a higher percentage to offset the 2% or greater net adjusted production they never collect. While you might not be able to see or get these numbers, if I was a young associate, I would want to see the final page of an aged accounts receivable summary. It will have the accounts receivable for current (0-30 days), 30-60 days, 90 days, and over. Most of the accounts receivable should be in “current” (1-30 days) column. Maybe 10%-15% in the 30-60, and almost nothing in the 90 days or over. Any variation on this in the 90 days or over indicates poor financial arrangements and follow through. It also indicates a poor protocol for insurance filing and follow-up as well as collections. This can be a huge income suck from your paycheck and an indicator of a poorly trained and led office.
- Pay is too little or too much. I know what you are thinking. How could the pay be too much? Like it or not, your pay must fit into the overhead structure of the practice you are considering working for. With that said, if you are going to work for someone, their (the owner’s) expectations should be to make at least 5% to 10% off of your labor. If they couldn’t make a profit or lost money every time they paid you, that would not last very long. So, the numbers have to work. Here’s an example: Don’t obsess about the number I am using in this example. They will pay you 30% of your collections. If this practice had a 72% overhead and hired you, they would lose money. Most offices would also need to hire an additional team member or two in addition to your employment and fix up the op that no one wants to work in. This is not a solid ground to stand on in any employer/employee relationship. So, some offices will have overheads (you will probably not know this number, sorry) that would not allow them to pay a competitive salary or, might cost the employer an amount where they could not make any profit by bringing in an additional dentist. “Some” offices (really most offices) will fall into this category. If they do and they hire you, it will end badly. In this case they could be paying you too much.
What if they paid you too little. Red Flag because the owner, in order to make this work, should know that associate pay is not some superfluous percentage that is an industry standard. There really is no “industry standard”, rather, it is an algorithm. There has to be a low enough overhead, and enough capacity, that employing you would generate not just income, but profit. Most offices don’t understand that associate pay, and profitability never works unless the office has a 63% or lower overhead. So, if the pay is too little, you walk away, because this practice is not ready for an associate. Their systems, historical overhead, and profit level dictate that what they need is not another doctor, but a new game plan for consistent growth, increased profitability, and production from their current number of team members and new patients before they consider hiring you.
- Too few new patients. Even a one doctor office demonstrating a history of being unable to generate growth by attracting and keeping at least 20-30 new patients a month per hygienist is a no-go office for your successful employment. Face it, this is a numbers game. These new patient numbers are average and even at average, there is no room for bringing in an associate doctor. We need to verify the condition of the office we are investigating as a new job. The circumstances and warning signs are there, or they are not.
- Super Red Flag!!! A practice that is considering bringing in an associate with the idea that they will hire you and you can use the office to build your own following. Let me translate that into what they are really saying: “We really don’t know what we are doing. We have too much debt, are overwhelmed with problems, and can’t seem to find or get very many new patients. We are not sure we could even find an additional staff member and our facility and location have always been pretty poor. We are desperately hoping you can come in and help pay down my debts and lower my overhead and bail us out.” This breaks the number one cardinal rule of hiring employee doctors: You, the owner, must be able to deliver 30 or more new patients to the associate month-in and month-out to fulfil a huge part of your responsibility for making this transition a success. This office is clueless. Look at this office as a “dead-man-walking” type of situation. They are done, they just don’t know it yet.
- In addition to a fair pay, there are no benefits. Once again, the practice is not competitive enough to offer the going rate of benefits, pay, and a successful practice to ensure the success of this transition. This is a tell-tale sign of poor overhead, growth, and profit. Walk away.
- Location. Never, ever, take a job where you have to commute more than a 20-minute drive each way. There is a point where distance and time can erode a good opportunity. Don’t start by jinxing the job by not living near the office. The halo effect of the job might have you justifying the drive, but that will not last. Commit to the move if the practice is what you want.
- Taking a job with a strict over-reaching non-compete when it comes to distance and length of time. Don’t take a job where the location might adversely impact your ability to start your own practice in the same city due to an overly aggressive non-compete (and yes, they can and are enforced). Stop getting legal advice from the Internet.
- Poor demographics. Don’t take a job in an area with a dentist to population ration of less than 1:1,500 (1:2,000 plus is ideal). Same thing goes for extremely low-income areas (lower than $39,000 medium income) where frequency or even going to the dentist is a financial impossibility except for extractions. Even at slightly higher income levels, keep in mind that anything at or slightly above average can indicate that without their dental insurance they would not be able to afford more than basic maintenance at the dentist. An important aspect of demographics will be the rate of growth over the last 5 years within a 5-mile radius of the office. There needs to be growth. A plateau will signal difficulties in finding additional patients for your new employee dentist. Last thing to consider would be the percentage of the population unemployed and at poverty level. They are not coming to the dentist.
Hopefully you are creating your checklist and educating yourself about the area and the office you are considering. Next, I want to finish this by discussing the “rubber meets the road” reality of dental practices and the difficultly of finding the perfect practice.
Michael Abernathy DDS
[email protected]
972.523.4660 cell