A business philosophy for a successful dental practice: Going lean
As competition rises in dentistry, it’s more important than ever before for practices to develop a business philosophy that allows them to become and remain successful. To that end, I firmly believe in a concept that I refer to as “Lean Dentistry.” It’s an excellent business approach for dental practices looking to improve their performance.
What is Lean Dentistry?
Lean Dentistry is based on a concept originally created by Toyota that revolutionized how large, multi-national manufacturers approached business in the late 1980s — increasing production while controlling overhead and eliminating waste of money, movement and time.
Too many practices today are struggling to maintain production and profitability. This is due to increased competition from other dentists and dental support organizations, reduced insurance reimbursements moving to a preferred provider organization level and a growing number of dentists putting off retirement and remaining in the workforce longer. These and other factors are putting downward pressure on dental practice production and profitability.
The Mighty Few
In applying the Lean Dentistry approach to production, there are certain key actions that any practice can take to improve performance. I like to think of these as the “Mighty Few.” While they may be small in number, they make a powerful impact. The Mighty Few should include concepts such as:
- Scheduling 98% of all active patients at all times. The key is to get the patient’s cell phone number and have a follow-up process where you continue to contact the patient using positive language and compassionate messaging that encourages them to call and schedule an appointment.
- Reactivating 35% of inactive patients from the last three years. Reactivating patients is more difficult than many would lead you to believe. However, what seems to work well is reaching out to them by cell phone rather than simply sending a text, email, or letter. You must try to reach the patient at least six times over six months.
- Decreasing no-shows and last-minute cancellations to under 1%. In eliminating no-shows, it’s important for patients to know that it’s not OK to miss appointments. The next time you have a no-show, push out their rescheduled appointment for a reasonable period of time to create a sense of demand and let them know that there is a fee for missed appointments. However, do not charge it to them the first time letting them know the doctor has decided to waive the fee. This will send a powerful message.
- Increasing case acceptance by 15% to 25%. Case acceptance is a complex process needing a sophisticated methodology. Perhaps the most important factor is to be very comfortable in presenting the case and fees. A relaxed, confident dentist is perceived much better than one who isn’t as comfortable talking about cases and associated fees.
For maximum success, the Mighty Few must be identified, implemented and carefully measured.
The other major factor in Lean Dentistry is an intentional focus on overhead. In fact, controlling and reducing overhead is just as critical as increasing production. Practices should analyze every key overhead category — and possibly every expenditure — monthly. Areas such as staff labor, rent, lab costs, supplies, investment capital, equipment, technology, marketing and accounting all need to be evaluated, benchmarked against key standards and reduced.
Why is this so important? Because for every 1% practice overhead is higher than it should be, the practice loses $1,000 of income for every $100,000 of production. This means that an $800,000 practice with 4% overage in overhead will lose $32,000 of income per year.
If this doesn’t sway you, then consider this: for every bit of overhead that’s too high, the dentist must work longer in order to reach financial independence. And these days
“longer” doesn’t mean days or months, it means years. If you choose not to analyze, measure and reduce overhead on a regular basis, how many extra years are you willing to work?
The challenges of increasing competition in dentistry can be daunting. Using the business approach of Lean Dentistry — increasing production and controlling overhead — will ensure that your practice generates long-term success.
This article, originally published in the ADA Dental Practice Success, was written by Dr. Roger P. Levin, a third-generation general dentist and the founder and CEO of Levin Group, Inc., a dental management consulting firm, and has written 65 books and more than 4,300 articles. He is also the executive founder of Dental Business Study Clubs — Dentistry’s only All-Business Study Clubs, the next generation of dental business education. Learn more at levingroup.com.