*DOWNLOAD the attached file for the full version of "DENTAL PRACTICE PROFITABILITY"*
Practice profitability cannot be left to chance considering today's reduced insurance reimbursement. PPO reimbursement is averaging 37 percent of the 80th percentile of fees in your geographic area. You must be mindful of your expenses in this environment by reducing your variable costs for dental supplies and lab.
Keep dental supply costs at 5-6 percent of collections. Here are ways to keep your dental supply profitability in the benchmark range:
1. Create a Cost Containment Task Force.
Ask one assistant and one hygienist (add a dentist to this team if you are in a group practice) to volunteer to reduce your clinical supply costs to the benchmark percentage. Offer a onetime $200 bonus to each of them to review your current vendors, disposable supplies, materials and system.
2. Re-Think your system.
The supply ordering, storage and replacement system is often fractured or broken. Assign one person to order clinical supplies and one person to order hygiene supplies. Practices that allow anyone to order supplies are usually over budget. DO not store supplies in the operatory, in sterilization AND in storage. Supplies need to be centrally located and inventoried. If space confines demand more than one place for supplies, then have a system to replace supplies from the storage area before re-ordering. Once the last lot of supplies come out of storage, the re-order inventory tag goes into a supply ordering box or is immediately scanned. All stored supplies should have an inventory tag. See # 3. Once supplies are received, the person who ordered the supplies is the one who should unpack and check off the packing slip or invoice. No one should just open supplies and start putting them up. Perhaps the wrong item was sent? Or, too many or too few came in? The checked off invoice or packing slip then goes to bookkeeping.
3. Ask for help from your supply representative.
Have a meeting with your current supply representative and ask him/her to set up an inventory control system for you. Tell them your budget and that you want to order from them but you also want to keep a realistic budget. If left unchecked, sometimes salespeople can overload you with inventory.
4. Group practices should have a formulary list.
The fewer options the better. In one large group practice, this is done by committee and one option per category is chosen (crown and bridge cement or composite material, etc.) This way expensive materials do not expire.
5. Reconsider your Give-A-Ways.
Consider levels of Give-A-Ways for your patients. The complimentary amenities at different hotels are based on the "stars" that hotel has behind its name. Today you are serving people with different reimbursement levels, different stars. There are gold standard toothbrushes and there are adequate toothbrushes. Many of you are paying premium for gold standard toothbrushes out of habit from the old fee-for-service days while hygiene PPO fees are dropping.
Order samples from several toothbrush vendors. www.quantumlabs.com has a variety of options. If you want gold standard products, have an upcharge for them or reserve them for fee-for-service patients. Many practices have stopped giving away toothpaste and floss and stick with the premium tooth brush only. You pay for all the Give-A-Ways and most of you do not have your name on the toothpaste or the floss so you are spending money promoting Crest and Colgate.
Promote YOUR PRACTICE - If you choose to Give-A-Way floss, promote yourself with Floss Cards. One of the long time vendors is OraMaax - www.oramaax.com.
Sell Proprietary Products - If you want Gold standard products, add for-profit items. Consider Oxyfresh or ClinPro™ (These products are not-for-profit if you don't charge retail. Do you think your eye doctor charges you his costs for your glasses or contacts when you go to his optician? This may take some bookkeeping for the sales tax, but your accountant can help you set this up with your bookkeeper.
Look at your lab fee versus your reimbursement over the next month.
You know you can save money on lab expenses with CEREC or 4D technology. If you have the technology but have not fully implemented it, find a trainer to come in and train you and your team. Take the youngest assistant who has grown up in the tech era and train him/her with you.
No CEREC, then shop labs. Many of you have spoiled yourself with an expensive lab and have then gone on PPO's and never stopped to consider the cost of the lab bill for a reduced fee crown. If you are delivering PPO crowns, then you must look at the cost of the lab bill. SOME PPO contracts allow an upcharge for special materials or services, such as porcelain margins. You can then pass that cost to the patient. Each contract is written differently, so check before doing this.
Look at materials for the crown as well as labs. Just look at the cost and rethink your laboratory. For example, in one office at the lowest paying PPO fee, the dentist's lab cost was almost half of the reimbursed fee. The old rule of thumb was that the crown fee was five times the lab fee. It is hard today to have your lab fee at one fourth, but it is possible.
Practice profitability does not just happen. Today's reimbursements are eating at profit. You and your entire team must become profitability-minded.
Drevenstedt Consulting LLC