Do you remember when we had a hometown banker that we could call anytime, even at home, and discuss our financial situation? He understood that as a health care professional, it is often impossible to separate our personal banking needs from those of our practice/business. He may not have fully understood our profession, but he trusted our word and worked with us accordingly. When the Megabanks came along, they swallowed up the hometown banks and our friend disappeared. Loan applications became an impersonal issue of debt ratios, equity, and skepticism. Instead of enjoying our relationship with our bank and our bankers, and having the knowledge that our bankers were our partners in building our practices, the new banks and bankers almost seemed to become our adversaries.

That is about to change!

  A group of businessmen has chartered a new bank to address the needs of health care professionals. The first customers will be Orthodontists and Oral Surgeons and when the time is right the bank, to be named PracticeBank, will expand and serve other health care professions. PracticeBank's services will go well beyond those offered by local banks and well beyond the services offered by the patient financing firms. Services will include financing for:

• Practice expansion
• Paying off education loans
• Remodeling the office
• Purchasing/Buying into a practice
• Computer hardware and software
• X-ray/dental equipment purchase
• Personal line of credit
• Home purchase
• Personal needs
• Patient receivables
• Purchasing your building
• Purchasing real estate

  Other services are in place or in the works. For instance, there has been a major change in the banking laws

that will affect the processing of checks. PracticeBank clients (we hope that's you!) will be able to place a terminal in the office to scan checks received. Those checks do not need to be touched again! The money is electronically withdrawn from the patient account and deposited into your account, without the need for a bank deposit. The physical paper never goes to the bank!

  PracticeBank will also be offering services not normally related to those of traditional banking. For instance, they will be offering sophisticated scanning and back-up services that will help you protect your investment in your practice by making certain that your practice computer data and documents (including patient charts, clinical documents, financial arrangements, etc.) are safe and can be quickly restored should a disaster strike your office.
  PracticeBank is at the forefront of this new technology and wants to be your "Hometown Bank." They understand the health care profession and they understand the financial needs of the new graduate and the seasoned professional as well.
  The group that has formed this bank has significant banking experience and includes:
  T. Stephen Johnson, Founder of NetBank - the largest Internet Bank in the world and the first pure Internet company to pay a dividend. Steve is also a co-Founder and Vice-Chairman of Florida Banks.
  Reid Simmons, co-Founder and author of Orthotrac, the most widely-used practice management software for Orthodontists. Reid is also a co-Founder and Director of Chattahoochee National Bank.
  Ben Dyer, Founding President of Peachtree Software and former President of Enterprise National Bank, now a partner in a high-tech venture capital fund.
  Mike Fitzgerald, President of NetBank for its first five years.
  Dr. Harold O. Enoch, an Orthodontist in Marietta, Georgia.

  There are five other directors, three of whom are current Directors of other banks.
  I am privileged that this group has asked me to join them as a Director. As you know, I have spent the past 24 years consulting in the dental profession, primarily with respect to financial issues in the practice. You may not know that the first ten years of my business life were spent in finance and banking! I was a bank loan officer and financial manager of an Oregon wood product company during all of the 70's.
  My intention is to be a "working" Director! My role with PracticeBank is to ensure that the PracticeBank system and policies are consistent with the personal and the professional financial needs of the health care clientele that PracticeBank seeks.
  The slogan behind the Business Plan is: "Protecting Your Lifestyle….Your Money…Your Data…Your Documents."
  This is an entirely new concept, but one that will truly serve the profession and the professionals who will become our clients and our friends. I am thrilled to be a part of PracticeBank and I look forward to assisting in PracticeBank's growth. You will be receiving information from PracticeBank in the coming months and I encourage you to evaluate what they have to offer. They will conduct seminars throughout the country and will be exhibiting at the AAO Annual Session in Orlando in May. The marketing materials are still under development, but if you would like information immediately, please contact Reid Simmons:
      reid@PracticeBank.com or
      (850) 235-BANK (2265).
  The deposits will be insured by the FDIC, and the project is subject to regulatory approval.

Phase I Treatment

  During 2000 and 2001, we saw a number of our clients cut back on diagnosing Phase I and some other forms of early treatment. Their position was that their Phase I cases, even when combined with Phase II cases, were not getting better clinical results than if they had simply waited and started the patient into full treatment at a more advanced age.
  Not being clinically trained, I certainly could not pass judgment regarding the efficacy of this decision, but I can pass judgment on the result.
  When a mom comes into your office with her child's teeth all over his or her face, when she is afraid she has created some form of genetic defect, when the child has looked at himself in the mirror for the first time and realized his teeth do not look like most of the other kids, that is not the time to tell the mom or the child that everything is fine and to come back in a few years when more teeth have grown in. That mom is going to go elsewhere. She sees her neighbor's kids in treatment. She knows treatment is available, and she will do whatever it takes to get her kid fixed now!
  This is clearly a marketing rather than a clinical issue, but marketing is a huge part of the orthodontic equation and would you not rather treat the patient now than see him being treated by your competition?

PPO/Delta

  We discourage participation with any closed panel/PPO plan. Many doctors believe that Delta plans should be viewed differently. We do not agree. Our research shows that a practice dropping Delta loses less than 25% of Delta patients and the increased fee structure resulting from dropping the plan results in gross income greater than that lost by the lost Delta patients. Make your own choice but we have rarely seen a doctor who dropped Delta (or any other managed care plan) and ever chose to go back on the plan.

Treatment Options

  In the past I have written and lectured, many times, on the tremendous damage done to case acceptance by a policy of offering financial "options" to your patients, especially when the actual goal of the presentation is to get huge down payments or to encourage patients to choose outside financing. Cash flow as a percentage of production is always good in such offices but productivity per hour worked and the rate of case acceptance (the percentage of new patient exams that end up in some form of active treatment) is always weak and practices presenting finances in this manner are among those that suffered the most during this most recent recession.
  There is another issue regarding options that is just as damaging. What I am describing is presenting your patients with treatment options. I see dozens of doctors each year who believe that patients need to be told all of the clinical options available to them.
  Most doctors believe, as do I, that your obligation as a health care provider is to use your training and present to the patient the best possible way to treat the patient's clinical problem. Further, these doctors believe that presenting a secondary or alternative course of treatment is only appropriate once your primary course of treatment has been presented to and rejected by the patient.
  As a credit management consultant it is not my place to pass judgment on which method of treatment presentation is clinically, ethically, morally correct. To me that is entirely a personal choice issue. However, I can quote statistics! There is overwhelming evidence to show that doctors quoting a single course of treatment have far greater case acceptance rates than do doctors who give their patients clinical choices.
  If I go to a doctor, I trust his judgment. He is, supposedly, trained to be able to identify what is best for me or for my child and I only want to hear about what is best. I am not the least bit interested in knowing (or being confused by) what the second or the third best treatment options are. Most of your patients feel the same way.
  Clearly, some patients feel differently and for those patients the Treatment Coordinator or Financial Coordinator will present secondary or tertiary treatment options, but only when it is determined that the patient has rejected your first choice.
  If you want the very best rate of case acceptance, and the very best patient satisfaction, present to your patients only what you believe is the best possible treatment choice - how you would treat your own child, for instance. Let your staff, with your guidance, handle the presentation of alternative forms of treatment.

"Success is the feeling that we can succeed." Nelson Boswell

Where Does "Net Profit" Come From?

  I have noticed for some years that the average overhead percentage of our orthodontic clients outside the USA is significantly less than the average of our USA clients. Overhead outside the USA typically averages 40% or less. Inside the USA, overhead typically averages greater than 50%. Initially, I thought that was strange considering that staffing costs tend to be high outside the USA and that most "foreign" practices buy almost all their equipment, orthodontic supplies, and even their computer systems, from the USA.
  I have done a bit of research and guess what? The ability of non-USA doctors to have a great net income and very low overhead has nothing whatever to do with their ability to control overhead! As a rule, non-USA clients have a much higher average case fee (they are not afraid to charge what they are worth), they have better case acceptance rates, by far, and they tend to have better penetration (case acceptance) of Limited and Phase I cases. In other words, a higher percentage of these cases go on and enter into regular braces.
  Noticing this, I took a look at a select group of my USA clients who I happened to know had a low overhead percentage. I was a bit surprised (although I suppose I should not have been) to discover they also have a high average case fee and very strong case acceptance.
  I wonder how many doctors understand that these factors (strong case acceptance and a solid average case fee) are, in fact, the key to having a strong net income.
  Our average single doctor practice starts 27.5 new cases each month. They also start other cases, typically identified as Phase II starts, which, because they are not new patient starts (they have started once before) are not counted as "new" starts. Gross production in these offices averages $129,000 a month so the average case fee charged ($129,000 divided by 27.5) is $4,691.
  A $100 increase in the average case fee charged, increases net income in these practices by $33,000 a year ($100 X 330 cases)! These practices average 39 new patient exams a month (468 a year) so a 1% change in the rate of case acceptance increases annual production and gross income by $22,000 a year (4.6 cases X $4,691). Almost all of that $22,000 becomes net income. Together, a $100 increase in average fee plus a 1% improvement in the rate of case acceptance totals $55,000 a year in additional income! I ask doctors often, "What could you possibly do, with respect to expense control, that would reduce your overhead (and increase your net) by $55,000 a year?" The answer, of course, is "Nothing!"
  My point is simple. While it is appropriate and prudent to be expense conscious, true overhead control is generated not by reducing expenses but rather by changing performance in practice statistics that increase income without increasing overhead. The average case fee charged (gross production divided by the number of new [first time] case starts) and the average rate of case acceptance (total new case starts [not counting Phase II and other secondary starts] divided by total new patient exams) are the two statistics that will, once improved, create the best net income for your practice.

Auto-Draft

  A recent advertisement for a dental financing company had a quote from a doctor saying, "More than 98% of our patients use auto drafting." You were, of course, supposed to believe that the doctor being quoted was thrilled with this fact and that 98% of his patients were choosing autodrafting after being given full choice in the matter.
  In fact, when given the choice of how they choose to make their payments, far fewer than half of patients will choose to have their payments automatically taken from their accounts. The quote went on to say that the practice had "not seen a decrease in case acceptance." Remember that by the time you are advising your patients regarding their lack of choice in this matter, they have already made the decision to start treatment in your office and there is only a small chance of lost case acceptance. My concern is lost patient referrals.
  In order to receive referrals from patients, it is not enough to do good clinical work. Every aspect of your relationship with your patients must be positive, including how you handle money. Your patients do not like being told they have no choice in how their payments are to be made to your office!
  We are a strong proponent of auto-drafting. It saves your patients time and it saves you time. It even helps, a little bit, with delinquency control. However, auto-drafting must be presented to your patients as a matter of choice - as an extra service you offer them if they should choose to use it. Telling your patients they have no choice in the matter is not the way to build strong patient relationships!

Case Acceptance & Patient Flow in General Dentistry

Your rate of case acceptance as well as your productivity per hour worked often depends on your patient flow procedures and your verbal and case presentation skills. If you know you can use some fine-tuning in this area of practice performance, consider calling Mitzi Aaron. She is a high energy, well skilled, consultant who specializes in marketing, (attracting more new patients), verbal skills, and case acceptance issues. She can be reached at (281) 839-1245.

How Do You Count Orthodontic Delinquency?

  Since we starting consulting in February of 1980, we have taught that the primary reason for keeping delinquency under control was not to have better cash flow but rather to have better relationships with patients. We know that delinquent patients do not refer friends/relatives to your practice. They tend to fail appointments more often, they have more emergencies, they are less clinically cooperative, they go over treatment time more often (ortho), etc. Basically, delinquent patients are a pain in the rear (sorry about the vernacular!) and they do nothing to enhance the quality of life in the practice.
  I was pheasant hunting in South Dakota a few weeks ago with a group of orthodontists and one doctor said to me, "I have no delinquency problem. My total delinquency is only 3.2%." Most of my clients would have an infarction if their delinquency were anything approaching that! I have lost count of the number of orthodontists who, over the past 24 years, have told me that they "had no delinquency problem" when 20%, 30%, or even more of their patients were past due. The problem is in how many doctors count their delinquency.
  My pheasant hunting friend was telling me that 3.2% of his accounts receivable were past due. Three percent delinquency, measured in dollars, could easily be ten times the delinquency of 3% delinquency measured in the number of past due patients/accounts. The goal for delinquency is 3%, but that 3% refers to the number of patients/accounts past due, not the number or amount of dollars past due. Dollars delinquent don't damage the practice much at all. Patients delinquent do all the damage!
  Our average client has 18 patients delinquent an average of $200 each. That's $3,600 of delinquency. Our average client has 600 open accounts with an accounts receivable of roughly $700,000. Therefore, 3% of his accounts (patients) are past due and less than ½ of 1% of dollars are past due. That is how to count delinquency! Start counting the number of accounts/patients that are past due. You can also look at the dollars delinquent if you must but it is the number of patients delinquent that tell you what you need to know about that part of your practice.

"Whether you think you can or think you can't - you are right" Henry Ford

Hidden Delinquency

  I recently had a client who was upset because even though his delinquent accounts were reported to be 3% of total accounts (just what we wanted), his failed appointments, emergencies, etc. had not improved at all and, in fact, had slightly increased. A two minute check of his practice numbers showed me that in fact his true delinquency had not improved at all. He had substantial "hidden" delinquency!
  My client's Financial Coordinator was making new financial arrangements with his delinquent accounts, over and over again, and every time she did so, she was "adjusting" the financial arrangement within the computer, making the delinquent patient appear to be current. This is sort of like tracking the rate of case acceptance. Anyone can look good if you want to manipulate how you count or track the statistic. When we say that our average client's delinquency is 3%, that is 3% of total accounts/patients that are 30 days or more past due, and not one account has ever been "adjusted" to make a delinquent account appear to be current. Negotiating a new agreement with a delinquent patient is acceptable and appropriate but it is never appropriate to change the contract and therefore hide the fact that the account is still delinquent!

"Kind words can be short and easy to speak, but their echoes are truly endless." Mother Teresa

Talented Artist

I spend one third of each month at our home in the mountains of Montana, not too far from Yellowstone Park. Betty has become enamored of the bears we see from time to time on the property and, since our anniversary was coming up, I wanted to get her a carving of a bear. I found, in the small town of Three Forks, Montana one of the most talented artists I have ever known. His name is J.D. Spiritwalker Huot. If you want a beautiful piece of 100% custom artwork for your home or office, or a stunning gift for a great referral source, check out his website at www.lifestouchcreations.com or give him a call at (406) 285-0551. You can see the moose antler carving he made for Betty in the "Gallery" section of his website.

Weak Cases Being Approved

  OFP, Unicorn, and sometimes even CareCredit, continue to buy a number of weak "B" and "C" contracts. They are not consistent and certainly cannot be depended on to approve these poor quality contracts but it seems like they get hungry from time to time, or perhaps they are trying to buy the business, or perhaps the loan officer on duty is temporarily insane, but who cares! We see numerous examples every month of "C" and "B-" patients getting their accounts financed through third party financing companies.
  Let's not look too closely at this gift horse and remember the Zuelke & Associates "rule." Every single time you have a "B" or "C" patient who is unable or unwilling to pay you appropriately, lobby them to let you send their application to OFP, Unicorn, CareCredit, etc. Most will still be turned down but enough will get through to make it well worth the time and effort.

Regarding Credit Reports

  Although obtaining and using credit reports is an extremely small part of the credit management system, it is an important part of that system. Our clients continue to hear misleading and entirely inaccurate information regarding credit reports.
  No laws have changed! It is now, and has always been, legal and appropriate to obtain credit reports on your prospective patients.
  If you use Equifax, as we recommend, your credit report inquiry does not show up as an inquiry on the patient's credit report and your inquiry does not impact the patient's/parent's credit score. Those individuals or companies who tell you otherwise have an agenda that does not include the growth and well being of your practice but only considers the growth and well-being of their particular business!

Bad Ideas

These are activities, policies, procedures we see every day in doctors' offices that are damaging their well-being, their performance, and/or their quality of life.

Quoting treatment options
    Give your patients the single clinical recommendation that you believe is best. Refer to the article on this subject in this newsletter.

Quoting financial options
    Negotiate your financial arrangements one step at a time. Ex. - Get an agreement on a down payment before you start to discuss monthly payments. Giving your patients financial options just makes them want to go home and talk to their spouse. Many of those patients/parents you will never see again.

Waiving or adjusting off late charges/interest
    None of your own creditors would adjust off a validly charged late fee or interest charge and it is unlikely you would even have the guts to ask for such a thing! Adjusting off or forgiving these charges only teaches your patients that delinquency is acceptable to you.

Links on your website to OFP/DFP and other outside finance companies
    The goal is to tie your patient to your practice. The more you separate yourself from your patients the fewer your referrals from those patients and the worse your case acceptance. Implying that you would rather have your potential patients pay a finance company instead of paying you will do nothing to tie your patients to you. Keep links away from your site off your site!

Direct Mail and Yellow Page advertising
    Yellow Pages and Direct Mail are great, as long as you enjoy horrible patient quality and worse case acceptance. Market for quality, not for volume!

"Requiring" auto-draft for patient payments
    I am amazed by the doctors I speak to who really believe that "forcing" patients to have their payments auto-drafted/auto-debited is somehow a good thing. See the article on this subject in this newsletter.

Spending more on external rather than internal marketing
    Your marketing budget to get existing patients to send relatives and friends to your practice should be 75% of total budget. The budget for all other marketing together should be 25%.

Believing that a satellite office will help to build your practice
    Our average client with a satellite produces $114,000 a month. Our average client without a satellite produces $149,000 a month. Enough said!

Believing that your orthodontic competition could possibly hurt you
    There are more patients, children and adults, needing and wanting orthodontic treatment than ever before. The very best thing that can happen to an orthodontist today is to have some "competition" move in next door! The extra marketing increases the awareness of the value and availability of orthodontics in the community and, in areas of the highest "competition" (doctors per 100,000 population) there are far more patients in treatment, and patients per doctor, than in areas of low competition.

Believing that consultants are expensive
    A bit self-serving perhaps, but the truth is that our average client recovers 100% of our fee within 45 days of our consultation. The 17% (average) increase in cash flow from then on is "gravy!" Most of the recognizable consultants in the industry have similar results with their clients.