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33 Strategies To Prosper Despite The Great Recession
As the recession deepens, doctors must avoid being paralyzed by fear. Rather, adopting a proactive approach can allow doctors to profit by taking advantage of available opportunities. Below are 33 recommended strategies to benefit doctors’ practice and personal finances during these difficult times.
The 2008 stock market crash and related credit crisis has led to a significant decline in consumer spending during the past 3 months. This slower demand has resulted in rising unemployment, and a deepening economic recession.
Virtually all doctors have been affected by The Great Recession, although to varying degrees. Without a doubt, orthodontists have been hit the hardest, followed next by periodontists, and then by general dentists performing a higher concentration of “bigger” ticket cosmetic, esthetic, and other non-insured procedures.
Geographically, doctors practicing in those areas with the highest home foreclosure rates, and which are the most competitive, have been dealt the biggest blow. Meanwhile, doctors in more stable real estate markets and those enjoying less competition have continued to increase collections despite the economic calamity.
Regardless of how significantly your practice finances have been affected, doctors must resist being paralyzed by fear, or simply becoming an idle spectator to these unprecedented economic events. Rather, doctors must seize the opportunities available to improve their practice and personal finances, despite these tough economic times. Below are 33 strategies to do just that:
1. Determine the percentile rank for your current fees in your specific zip code area. Thereafter, select the desired percentile for your fees based upon the quality of care provided in your practice and raise all fees below this up to that percentile.*
2. Orthodontists should “unbundle” their fees, by charging separately for records, basic treatment, and retention, in order to increase the perception of affordability.
3. Increase treatment acceptance rates through allowing patients to pay their portion of the fee in equal monthly payments, provided that payment is automatically charged to their general credit card each month by your office, using the VISA Easy Pay Consent Form.
4. Increase treatment acceptance rates through installing a flat screen TV in your reception area showing a customized DVD educating patients about the entire range of services and payment options that your practice offers.
5. Orthodontists should increase treatment acceptance rates by reducing the down payment required to start from 25-30% to 10-15%, and increasing the time period over which the remaining treatment fee can be paid to 24 months (regardless of the actual treatment time), as long as patient payment is made either by automatic credit card charge or automatic bank draft.
6. Orthodontists should videotape case acceptance presentations made by their treatment coordinator (with patient consent) using a webcam and hire a sales consultant to review these video tapes on a monthly basis. The sales consultant should provide monthly training to your treatment coordinators in order to boost treatment acceptance rates.
7. Orthodontists should provide a $500 coupon to the parent of each child completing treatment to be used toward the cost of Invisalign or other adult orthodontic treatment. This coupon should have an expiration date 30 days from date of debanding, in order to create a sense of urgency and boost adult orthodontic demand.
8. Boost practice volume on a cost-effective basis through purchasing a competitor’s practice and merging it into your own. Contact your state dental society and obtain the names of all dentists practicing within a 3-5 mile radius of your current practice location. Thereafter, send a letter to them indicating your interest in purchasing their practice. Finally, notify your local supply sales reps and dental society officers of your desire to expand through buying another practice.
9. Increase patient referrals by routinely asking patients for referrals (at the new patient conference, anytime they compliment you, your staff or your practice, and upon treatment completion) and write thank you notes and provide a small gift or gift certificate to patients as a token of appreciation for each referral. Create an incentive bonus program for your staff based upon reaching the desired number of patient referrals each month.
10. Develop printed business cards for each staff member including their names and business titles. Encourage them to hand these out to businesses and individuals in the community to generate more new patients. Create an incentive bonus payment monthly to staff based upon the number of business cards returned by new patients.
11. Increase practice volume by sending letters to patients who are inactive, or who have treatment that has been recommended but not accepted, informing them of your new flexible payment options, and entire range of procedures, and inviting them to contact your office to schedule an appointment.
12. Place phone calls to patients to follow up on surgery cases or where other major treatment has been performed, in order to boost perceived quality of care and increase patient referrals.
13. Launch a continuous improvement program in your practice by offering rewards for employee ideas to boost new patients, increase productivity and efficiency, reduce costs, and improve practice profitability.
14. Right-size your staff. General practices should employ one full-time equivalent (FTE) employee for each $170,000 of collections and orthodontists should employ one FTE for each $200,000 of collections. Furthermore, take advantage of rising dental staff unemployment to recruit a star performer to replace a marginally productive or poor performer.
15. Begin offering an incentive bonus plan for staff based on increased collections, in order to motivate staff to help grow the practice.
16. Rank all managed care plans you are participating in from top (best) to bottom (worst) by total production, write-off percentage (fee write-offs divided by production), and administrative hassles, in order to develop a “drop” sequence. Evaluate managed care discounts as a “marketing fee” and drop managed care plans when you can replace the practice volume through spending a lesser amount on other marketing expenses, to improve profitability.
17. Have your retirement plan reviewed** to determine changes that can be made to optimize contributions for the doctor’s family, while maintaining staff contributions of no more than 5-6% of pay. Redirect part of the staff funding cost savings to a medical reimbursement plan to increase the staff ’s perceived value of their total compensation package.
18. Reduce yellow page ad spending and use these amounts to improve your website to boost internet referrals through adding videotaped testimonials from patients and referring doctors.
19. Take advantage of the declining commercial real estate market by renegotiating your practice lease to receive more favorable lease terms (lower rate, increased upfit allowance, right of first refusal, etc.), in exchange for a lease extension, or by negotiating a new lease.
20. Take advantage of record low interest rates (Prime interest rate is now 3.25%) to refinance existing practice loans to dramatically cut interest costs.
21. Take advantage of record low interest rates, declining construction costs, and falling real estate values to purchase or construct a new office building if you need additional space, or a new location, to improve your practice.
22. Improve practice profitability by putting one staff member in charge of ordering clinical and office supplies and give her a budget of 6% of the prior month’s gross collections for clinical supplies (7% for orthodontists) and 2% of the prior month’s collections for office supplies. Provide an incentive bonus for this staff member to maintain supplies within these industry average budget percentages.
23. Critically review all maintenance and service contracts on telephone systems, computers, and copiers. Doctors are usually better off without these costly agreements. However, don’t drop software maintenance contracts if they include upgrades.
24. Negotiate a discount with your existing lab and supply vendors by agreeing to do all of your business through them. Alternatively, negotiate a 2% discount for payment within ten (10) days. Since most doctors pay their vendor bills every thirty days, receiving a 2% discount for paying 20 days early represents a 36% guaranteed annual investment return.
25. Purchase a used sport utility vehicle (SUV) for business or personal purposes to take advantage of record low prices resulting from reduced demand during the high gas price era, low interest rate financing, and accelerated tax benefits (immediate $25,000 expensing election) for vehicles with a GVWR of 6,000 pounds or more used at least 50% of the time for business purposes.
26. Reduce accounting fees through utilizing an outside third-party payroll service for preparation of payroll checks, quarterly and annual payroll tax returns, and W-2s and W-3s. Moreover, use a third party retirement plan firm to administer retirement plans. Prepare and code practice checks monthly using Quickbooks, in order to avoid duplication of effort and unnecessary accounting fees.
27. Reduce health insurance costs by raising deductibles and/or copayments and decrease the percentage of employee costs paid by the practice to 50-75%, with the employee paying the balance through a cafeteria plan on a pre-tax basis. Consider switching to a Health Savings Account (HSA) to take advantage of the tremendous tax deductions available ($3,000 for employee-only coverage; $5,950 for family coverage).
28. Begin tracking your personal living expenses on a monthly basis beginning this month in order to determine your true personal living expenses for 2009. Thereafter, establish a personal living expense budget and compare your current monthly spending with the projected asset accumulations needed at retirement to maintain your standard of living.
29. Review your personal life insurance coverage to assure that it is adequate to maintain your family’s income in the event of your demise. Drop expensive, unneeded riders (waiver of premium, accidental death, etc.) and replace older more expensive policies with term coverage in order to reduce premium costs.
30. Cash in whole life insurance policies to eliminate expensive premium costs and gain access to the cash surrender value to meet current needs and improve investment returns.
31. Utilize existing cash in low/no yielding checking, savings, and money market accounts to pay off higher interest rate personal/practice loans, thus generating a guaranteed investment return equal to the interest rate on the debt paid off.
32. Take advantage of record low home mortgage interest rates to refinance your existing first mortgage, or consolidate a home equity line of credit into your first mortgage and then refinance, in order to reduce interest costs and make all interest paid tax deductible.
33. Reduce disability insurance costs through extending elimination periods to 180 days on disability and 30 days on business overhead coverage, if the doctor has sufficient investment assets to self-insure during the interim.
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*For more information on the Revenue Enhancement services provided as part of our Achieving Financial Independence Program, contact Janet Blair at (704) 424-9780 or at janet.blair@bmhgroup.com.
**Contact Jason Arnold of PenSys, Inc. for a complimentary retirement plan analysis at (704) 357-6400.
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