Recession-Proof Your Practice

Now that the economy is officially in a recession, is your practice feeling the slowdown?

Many economists believe that the recession will be over by the middle to end of this year. Will it? Will business bounce back to the high-flying days of 1999, before the tech-bust in March 2000? With the longest boom in business now behind us, will the cooling-off period be a long, drawn out affair? Consider the following: 
  • Enron, the seventh largest company in the United States goes bankrupt.
  • AT&T is cutting 10,000 jobs—12.5% of its work force.
  • K-Mart files for Chapter 11—the largest retail bankruptcy ever.
  • Argentina is on the verge of bankruptcy that may affect South America.
  • Ford to lay off 20,000 workers.
  • Merril Lynch loses 1.7 billion in fourth quarter 2001—cuts 9,000 jobs.
  • Exxon Mobil profits dropped 49% in the fourth quarter.
  • Nokia profit drops 63% in the fourth quarter.
  • Economic Research Institute’s leading index fell to 114.9 in December ending 2 months of gains.
  • Japan continues to sink into deeper recession.
  • US industrial production fell for the 15th month in a row, the worst record since WWII.
  • JDS Uniphase’s sales dive 69% in the fourth quarter.
  • Dupont posted a huge 74% loss in profits.

With convincing signs arriving almost daily, it’s time to “prepare for the worst and hope for the best.”

Having been in dentistry for almost 30 years, I have seen three recessions come and go. In each recession my colleagues suffered along with other businesses. But dentists do not need to suffer if we take the time to adopt a recession-proof plan. In every recession since the one that occurred when I graduated from dental school in 1973—the worst recession since the Great Depression—my income has increased because I was prepared.

Contrary to how the government defines “recession”—two consecutive quarters of negative gross domestic product (read: growth)—a recession is actually the contraction of business. Most business owners don’t need two quarters (6 months) to know when business is slowing.

For dentistry, a contraction means less patient spending, holes in the schedule, and more hesitancy to do dental treatment. It means less income, fewer new patients, and longer delays until needed work is agreed to. It means fewer cosmetic procedures, more insurance dependency, and tougher times.

While practices may differ in location, insurance participation, gross income, and any variety of ways, the following tips will help most offices weather even the most difficult of times. And, it will position your practice for the coming recovery—whenever that may be. 
While no one can predict the exact effect a recession will have on a certain practice, I’ve developed a 10-step plan to be prepared in case a downturn occurs, and have tested it since the 1973-1974 recession. You might consider a similar approach. 

MINE THE DIAMONDS IN YOUR PRACTICE
There is an old adage in marketing that states, “Your current customers (patients) are your best customers.” Why? Because they will tend to spend more on your services than new patients, as a result of the trust they have built for you as their dentist. So, why not offer your current patients the benefits of the latest techniques and technologies?

By creating new profit centers that current patients may need, you can help insulate yourself from any economic slowdown. Here’s an example: Is your soft-tissue management program state-of-the-art? Do you perform the latest diagnostic techniques? How often do you probe? Do you use the latest irrigation materials? Are fluoride treatments a part of your hygiene program? What about a laser to treat nonhealed periodontal sites? How often do your patients have maintenance visits?

Enhancements to your hygiene program such as this can generate new procedures, new production, even a busier schedule. And at the same time you will have enhanced your service to your patients. In my own practice, most all periodontal patients are on a 3-month maintenance schedule, we routinely probe for periodontal disease every year, and we do not hesitate to re-treat nonhealed areas as they occur. Many times after initial nonsurgical periodontal therapy we find that the patient still has some areas that need re-treatment a year or two later.

Another example might be automated endodontics. Until we instituted this treatment in our practice, we routinely referred out $60,000 to $70,000 of endodontics each year— income we now keep in our practice.

To mine the diamonds in your practice, evaluate all your current profit centers—hygiene, restorative, maintenance, retail items, cosmetic services, etc. If they do not reflect state-of-the-art care, you can take steps to enhance your services and increase revenue at the same time. 

REVISIT OLD FRIENDS
As a result of the informal survey I did during my Beating Bad Breath seminars, I found that many dentists do not do new, complete examinations on their regular patients on a periodic basis; in fact, many rely on their hygienists to “find” the dental treatment that the patient needs. Let’s face it—by far the majority of dentistry we do today is dentistry that was done before: a filling breaks down, the tooth re-decays and it needs a crown; we find periodontal disease that is not responding to conventional treatments; or, we learn some new techniques that could benefit our current patients.

One of the ways to generate new production is to simply re-begin the entry process of patients already in your practice. In my own office, we routinely retake a full-mouth x-ray about every 4 or 5 years, sooner if the person has had a lot of restorative dentistry; but it is not a quick exam. These people are given the same diagnosis as we give a new patient—new health form, new patient interview, comprehensive examination including oral cancer screening, muscle examination, preliminary occlusal exam, periodontal probing, caries examination, and, most importantly, a brief interview. These patients pay only slightly less than a new patient would.

While this process is time consuming, it has revealed two important findings: patients who were unhappy for some reason, and old dentistry that had failed and needed replacement that wasn’t diagnosed in hygiene.

As part of this process, I can’t overemphasize the importance of the brief interview. Any caring staff member can do it, and if you only find one person a week who is still coming to you because of habit, but has some concern that is not being addressed, you have the opportunity to save 52 patients from leaving. That’s equivalent to not needing 52 new patients. In addition, this new exam will allow you to offer your existing patients, the ones who already trust you, the benefits of your continuing education since their last complete examination. When I purchased my first soft-tissue laser in 1996, I was able to start treating recurrent periodontal disease totally differently. Not only did I begin to see more healed periodontal patients as a result of the laser treatment, but my income went up and I began getting referrals, with new patients actually asking about these “new laser” procedures. 

RAISE YOUR FEES
This point will probably be the most baffling to readers. How do I know? Because I raised this issue in my seminar every time and received many strong objections. Doctors would tell me, “You can do it because you live in a high income area,” or “We can’t raise our fees, the insurance company will reject more of our cases.” After talking at length with some of these doctors, my sense is that many of us believe that our fees are too high already, or that we are dependent on insurance companies for case acceptance.

Many years ago, I heard L.D. Pankey say, “If 20% of your patients don’t complain about your fees, they are too low.” However, because we are confronted on a daily basis by patients who don’t accept our recommendations, rely on insurance to pay their bills, cancel accepted dental treatments, or just simply don’t show up, we have created a mentality of fear related to our fees.

While I can’t do much to help dentistry’s insecurity about fees, I can point out that inflation doesn’t stop during a recession. So, if you are not regularly raising your fees you’d better start now. In fact, now is the perfect time.

I still remember the first time I heard that it was OK to raise my fees. Seven years after graduating from dental school, I was sitting in the Embassy Suites Hotel in Phoenix, Arizona in 1980 (during a recession), when Omer Reed said, “…go home, raise your fees by 30%, and cut half-a-day off your schedule.” At that time I was so naive that I did just that. A few years later at another of his seminars, he repeated those exact words, and again I took notice and did the same. In 1990 (next recession), I heard it a third time, and then decided to work only 3 days per week. Not only did I stop worrying about cancellations (people were waiting to get in because I was only there part-time), my gross went up again, and I had my staff use the extra day to do recall phone calls and internal/xternal marketing that kept the remaining 3 days busy. Like most dentists, I was happiest when I was working, not sitting in the back office worrying about cancellations.

I know that a fee increase sounds strange at this time, but the return on this formula is incredible. In fact, the formula works this way: Calculate the number of half-days you are currently working and divide that number into 1. The resulting percentage will tell you how much to raise your fees when you take one half-day off, and still make the same amount of money. For example, if you are working 8 half-days, then 1 divided by 8 equals 0.125 or 12.5%. Raise your fees 12.5% and spend the other half-day with your family or doing something you ordinarily would not do. You’ll feel better, and this will flow over into your dentistry, your team relations, and your relationships with patients. The happier you are, the happier your staff and patients will be (and the more dentistry they’ll accept).

If you are already getting resistance about fees or insurance, this increase won’t bring any more resistance than you already have. Believe it or not, you won’t lose any patients either; people come to see us because they want to. And, most importantly, it will give you a cushion for those people who delay treatment and cancel appointments. 

PEOPLE WANT THE BEST AND ARE WILLING TO PAY FOR IT
This is one of the easiest concepts to understand, but for many dentists, one of the hardest to put into practice. In fact, because we already know that people will spend thousands of dollars to improve their smile, why do we believe that some won’t spend money to optimally improve their oral health?

If people didn’t truly want our services, there would be no teeth whitening, no cosmetic dentistry, no orthodontics; in fact, there would be no dentistry. People have these procedures be­cause they want them. And it is the same with any type of dentistry.

Since 1979, when I first heard L.D. Pankey, I have done class V fillings. Every restoration I do is either gold or porcelain or both; we call them permanent restorations to distinguish them from fillings. Why? Because I believe that these are the best ways to restore teeth. I have only these in my mouth. Why would I do less for a patient? Yet, even though insurance does not cover gold onlays or porcelain inlays, our acceptance rate is near 100%.

Now, before you start to say, “He must live in a rich area,” let me tell you that my practice is mostly retirees and people over the age of 60. I have only one CEO in the practice, one television “celebrity,” and all the rest are ordinary people. The difference is that when I offer them the best dentistry, they accept because they trust me and because I am willing to respect their personal situations. Now, that doesn’t mean that many times we don’t need to work out financial arrangements or even phase-in treatment. But even so, I’d rather have $200 per month coming in for 5 to 6 months for a gold restoration than get paid a one-time fee of $150 for a pin-retained filling that I know will need a crown later.

Use this recession as a wake-up call to review your procedures. Are you doing the dentistry you want to do? Are you doing what you believe to be the best dentistry all the time? 

MORE OR LESS INSURANCE?
Two of the most common situations that cause us as dentists to panic are a slowdown in the number of new patients and holes in the schedule. Our reaction at times like these is to sign up for more plans that promise to bring patients into our offices, albeit at a reduced rate. Of course, the more patients we see at reduced rates, the more regular patients we must see, or the higher our fees must be on nonplan patients to make up for the difference. In fact, it’s a pyramid scheme that is hard to get out of. It’s like the stock market: if you lose 20% on an investment (charge 20% less), you must make 50% more to make up for that 20% (work 50% harder or charge 50% more). What to do?

Perhaps the biggest paradigm shift that needs to occur in dentistry is to know that the services we provide are actually wanted by our patients, not “needed.” While this debate has raged since before I graduated from dental school, I have successfully run a non–insurance-based practice for almost 30 years. That means we do no pre-estimates, collect no insurance, and require the patient to deal with his or her insurance company directly. As Omer Reed has said, “If it’s being done, it’s possible.” And you can do it too, or some variation of it.

As I’ve already said, people are willing to pay for the services they want once trust has been established. If this were not true, no one would be having cosmetic dentistry procedures in your office. In our office, we routinely do restorative cases from $10K to $40K each month on ordinary people, not the exceptionally wealthy, and not cosmetic cases. Yes, many times we have to make financial arrangements, but with the advent of companies financing dental treatment, the pain of finances is taken out of dentistry, allowing you to concentrate on your best and finest treatment for that patient.

In my seminars and in my consulting, I have advised dentists to change their mindset about the role that insurance plays in the acceptance of dentistry. If they will place the best interests of the patient first, help the patient to accept their best dentistry, the financing becomes secondary. 

FINANCE DENTISTRY
As far as I’m concerned, this recent development is as important as the rotary drill for the advancement of our profession. Do you know why most people can afford to buy automobiles, homes, furniture, etc? It’s because of the advent of credit. Credit allows the average person who wants something to spread payments out in an affordable manner. I’m pleased to say that dentistry now has this option with dental financing companies.

Being a dentist is a difficult task, and it is made no easier by the feelings we have for the economics of our patients. However, these feelings, or actually pre-suppositions, are a hindrance to the way we treat our patients. Why? Because many times our profession makes diagnoses according to our interpretation, or actually our “guess” of what the patient can afford or what insurance will pay. Many times we diagnose down instead of up—the least-expensive treatment instead of the best treatment.

But we need do this no more. Dental finance companies can help your patients pay off their bills with you; you get immediate payment and they get monthly payments that will fit their budget. Sometimes companies such as this will finance $1,000 to $2,500 at no interest for 1 year; other times, we have had treatment plans financed for over $20,000 at rates lower than credit cards that would fit into a patient’s budget. While this is not an endorsement for any specific company, it is a rousing endorsement for this way of helping people afford your best dentistry. 

FIRE YOUR STAFF. . .UP!
One of the biggest mistakes that all businesses make at the onset of a slowdown is to see their employees as liabilities instead of assets. Of course, as an employer, this is easy to do because salaries are the single largest overhead cost in any business. But I’m going to suggest another approach based on my experience in management and consulting.

Dental offices are not one person, they are a team of people. This means that no matter how well your team gets along, what happens to one affects all. The worst message to send is letting a team member go because of slow times. While it may be possible for the remaining team to make up for the lost person’s effort, the damage to morale created by sending that message is destructive. Now, instead of pride in what they have done before, pride in being a member of a “team,” people begin to fear for their jobs. This fear can be “smelled” a mile away by other staff and by your patients. Your hygienist will stop recommending treatment, your receptionist will be a little more abrupt on the telephone, and your assistant will forget the personal approach that is paramount in a recession.

Here’s a better approach: Sit down with your team and tell them, “We are entering a period of economic uncertainty. However, with all our skills put together, we will be able to weather the storm.” Then, talk with them about the profitability of the practice, how their combined salary expense means that you must do a certain amount of production, and that you may be asking them to do other work or change their job description for the success of the business.

What’s amazing is that if you will be honest and open about this (of course, you must first have a plan), your staff will rally behind you. They will know that you want to keep them, which is of utmost importance because the number one fear in a recession is job security. Once you have them on your side, I would then alter job descriptions depending on what your overall plan entails. Here are some ideas.

If you will be doing external or internal marketing, your receptionist may spend part of her time doing that; if you want to add a personal touch to your practice, your receptionist can go out into the waiting room to greet people and talk with them (great to create more trust); if your hygienist’s schedule is less than full, she may be the best one to activate old patients from your call list. And, if you eliminated a half-day from your schedule, don’t cut back on team hours or salaries, but assign them specific goals or tasks to do while you are now enjoying a bit more freedom.

The important thing here is to keep your employees working—happily. This will only happen once they know the facts and know that you want them to help you remain productive. 

AFFINITY MARKETING
Without a doubt, this is the most important avenue of bringing in new patients in a recession. The concept works like this: Find complementary but different businesses than yours and enlist them in a win-win situation for increasing new clients for both businesses. Why is this important? Because instead of the usual ways of external marketing, where someone may see your direct mail piece or advertisement or newsletter, affinity marketing relies on “the transference of trust” between two businesses. If you, as a professional or business owner, recommend another business in your area to your patients, then those patients will become customers of the other business. It’s simply a different approach that you already take when someone asks for a referral to a physician.

Let’s take a practical example, one that I have personally used. Right before the beginning of the 1990 recession, I had just purchased a new home, and my mortgage payments, along with college obligations and other living expenses were stretching my income (it really was an incredible house). At the same time, I began to understand that we were falling into a recession, so I got out my trusty old Recession Plan, and this concept of affinity marketing hit me as the best way to attract new patients.

My first chore was to make a list of the types of businesses that would complement my dental practice. Because in my practice people were used to having the best service as well as treatment, my list contained such businesses as jewelry stores, hair salons, real estate offices, etc. The next step was to determine the best of these type businesses and craft a letter to the owner. It was important that the list was prioritized based on how complementary it might be to my type of dental practice. For example, I did not want the local branch of a jewelry store chain to partner with, but a single-owner store who had been in the area at least 10 years and had built up a moderate, but complementary list of customers.

In essence the letter I sent to the business owners said that I had a group of patients who would probably appreciate their service and if they would be interested in a business relationship, please call me. Keep in mind that all small businesses are in the same boat during a recession, and the chances of them being receptive to an ongoing relationship that would increase their business is very high.

After they called, or I followed up with a phone call, I proposed the following: I would send a letter to my practice telling them of our special relationship, and that the merchant would be giving our patients an exclusive offer (if he would do the same to his clients). You can craft the details of your own offer yourself, but I requested he give my patients a 25% discount on any purchase between then and Christmas (this was October). It worked famously. He received over 150 new customers from my practice because of his discount. When he reciprocated for me, after the New Year I received over 60 new patients in one of the slowest times for us—January and February.

If you can see the possibilities in this approach, it is possible to affiliate with a large number of businesses over time to keep your new patient flow higher than it normally would be in difficult times. 

NEW PATIENTS: INTERNAL MARKETING
The truth is that in periods when jobs are being lost, income is falling, and discretionary spending is declining, many people hesitate to do anything that changes their expenses—like see a new dentist. That is why up until now, I have emphasized ways to keep production up without increasing marketing expenses. But I have found a number of ways to entice patients to our office in all types of economic times. Affinity marketing, as I’ve already mentioned, is one of the best.

Another good technique that I have personally used is “Thank You” marketing. It works this way: For any reason(s) you choose, such as the referral of new patients, the completion of a crown, or even toughing out a mandibular block injection, a gift with your name on it might be appropriate. In our office, we have small teddy bears ($4) for the person who sheds a tear in our office, calculators ($10) for the men who have dentistry done, and vases ($35) for women who complete quadrant dentistry or more. When giving any of these gifts, I always ask for a referral and put two business cards in with the gift. Marketing experts will tell you that this type of approach will generate somewhat of a feeling of “obligation” to return the favor—in other words, refer you a new patient. All I can say is it works!

However, in our practice, marketing begins the moment a new person calls the office. Whether or not they make an appointment, we capture their name and address so we can send them a folder of information describing our practice. This folder contains our practice brochure, a personalized letter, copies of articles I have written, and a self-made CD that contains photos of cases I have done in a digital “album.” What this does is get them involved with our office even before they come in, and because this approach is so unique, they often show the CD to friends or family members. 

MONITOR EXPENSES
This particular topic is last because I believe it is the one over which we have the least amount of control. Yes, if you open the newspaper every day you can find one company or another that is laying off employees, or closing a new plant, or not going ahead with expansion plans. But, if you decide to keep your team intact and weather this storm with them, all the other expenses—laboratory, supplies, utilities, etc—have a very small impact on your bottom line.

The one exception to this is the purchase of new equipment, and here’s the dictum: Only purchase new equipment to replace that which has broken down or new equipment that will become an immediate profit center. Why? Because if your profits or production will not go up because of it, it will place a drag on your financial reserves. And as dentists, the one thing we dislike almost as much as cancellations is more money going out than coming in.

So, before you decide to purchase any new equipment for your office, do a careful cost analysis and income projection analysis to determine if it will increase or decrease your bottom line. Determine in advance how and when it will be used, and how you can charge for it. 

CONCLUSION
If you draw up a plan and then follow some of the guidelines laid out here for slow economic times, you will see that the answer to your busy-ness problem lies in better service and more complete dentistry to those you currently count as patients and those new patients you will receive from affinity marketing or internal marketing techniques. While none of us can predict how long the current recession will last, simply being prepared will help you do better dentistry, with less worry and more financial security. And, best of all, by utilizing this approach, when the country emerges from this recession, you will have established the basis for a greater expansion of your practice in the next economic upswing.


Dr. Miller maintains a practice in Alexandria, Va. He is the author of the book Beating Bad Breath, an international lecturer on marketing and profit centers in the dental office, a consultant, and a pioneer in the use of direct marketing for dental practices. He can be reached at www.recession-proof.com, his website devoted to helping dentists thrive in tough economic times.

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