Dental Financial Wellbeing

Are you a dentist just out of dental school with a practice to run and you’re not prepared for the business aspects? You might be making financial mistakes every day and not even know it. You could have major financial problems coming your way and won’t know it until it’s too late.

Across the country dentists are struggling. The percentage of dentists who describe themselves as “not busy enough” is increasing all because of a growing supply of working dentists and shrinking demand. If you find yourself with more time than patients, you could be in trouble. With dental care among adults decreasing and the continuing changes in dental insurance, it’s harder and more important than ever to get control of your finances.

Financial decisions – For some dentists, every financial decision causes panic, even the routine ones. If you don’t have sufficient cash flow, you won’t have the money to confidently spend on the things you need to grow your practice. Some of this can come from poor management of overhead. As a percentage of your revenue, you should be running your practice at about 55% to 60% overhead. Anything higher than 60% can mean you are heading for disaster.

Debt – If you’re afraid of debt, this can only make the problem worse. When you try to pay cash for everything, it means you don’t have cash things that come up, and this puts you in a position where your problems feed one another and send your finances into oblivion.

Retirement – Poor cash flow also leads to poor long-term savings, which can delay and dramatically reduce the quality of your retirement. If your money is sunk into overhead costs and tax bills, you won’t be able to adequately save for retirement. To maintain your current lifestyle after retirement, you need to manage your money intelligently today.

Are you spending more time managing your practice than seeing patients? If so, you need help, before it’s too late. Seek financial guidance now, and get your practice back on track.

Dental Practice Spring Checkup

In addition to providing for you and your family, your dental practice is a part of this country’s small business job creation engine. Small businesses make up 99.7% of U.S. employer firms and account for 64% of net new private sector jobs.* Conducting an annual review of your practice finances can help keep your business healthy and growing.

 

Management

No doubt you are pivotal to the success of your practice, however, at some point it’s important to focus on bringing up the next level of management, especially if you would like to sell your practice or pass it on in the future. While mentoring the key individuals who can effectively run the business, don’t forget about key person insurance for them. It’s designed to protect your business if you, a partner or another key employee were to die prematurely.

Plan ahead

What would happen to your practice if you or one of your key employees could no longer work? Unless you’ve planned ahead, the practices’s continued success, continuity of management and the future of all the families your practice supports could be jeopardized. Would the absent employee’ family — which could be yours — be fairly compensated for their interest in the practice if that interest needed to be sold?

A buy-sell agreement combined with key person insurance can help relieve concerns you may have. Work with your financial professional and attorney to make sure the agreement is drafted properly to address your and your practice needs.

Risks

Do you have appropriate processes and procedures in place to handle human resources and compliance issues, such as the new health care coverage rules under the federal health reform law? When was the last time you reviewed your practice’s insurance coverage with your financial professional? You may discover that your practice does not have all the coverage it needs in this litigious climate. Ask about umbrella and general liability insurance.

* Frequently Asked Questions about Small Businesses, SBA Office of Advocacy, September 2012

In Or Out Of Network?, That Is The Question

When it comes to insurance, oftentimes you will hear the terms “in-network” or “out-of-network.” Dentists who are “in-network” have agreed to a contract with a benefit plan. These contracts have restrictions and requirements and usually agree to a reduced fee schedule. Therefore, patients who chose an “in-network” dentist typically will pay less of their own money toward treatment than those who choose an “out-of-network” dentist.   Also, an “in-network” dentist usually is paid directly from the insurer and payment is sent to the dental practice.

An “out-of-network” dentist has not signed a contract with the insurer of a particular plan. However, patients may still choose that dentist and have some of their fees covered, but they may pay more out of pocket. Also, plan payment checks are usually sent to the patient, not the dentist. The plan pays the patient, and then the patient pays the dentist. Or in a lot of cases the patient pays the dentist and is later reimbursed by the plan.  Most dentist offices will prepare and submit the paperwork on behalf of the patient requesting the reimbursement go directly to the patient.

A dentist who decides to become “in-network” may choose to do so because a large population of patients are on the plan, because he/she likes the security of receiving payment checks directly, or because the fee schedule seems fair.  Others remain “in-network” for fear of the number of patients they will lose as a result of not contracting with major providers.

A dentist may decide to stay “out-of-network” because a smaller population of patients uses a particular plan. The dentists may be content with patients receiving payment checks. Or he/she may not be comfortable with the fee schedule. Be sure you have a very clear understanding of what specifically is dictated in the contract before becoming an “in-network” dentist.

The choice to be “In” or “Out” of network is a tough decision and one that should not be taken lightly.  There are several things you should ask yourself if you are considering dropping a PPO (in-network status):

• Approximately what percentage of my production and collections come from the patients in this particular PPO?
• How much am I writing off per month with this PPO?
• How many of my new patients come to me because I’m on the PPO’s list? How many new patients will I get if I’m not on the list?
• How much do I have to discount my normal fees for this PPO? If you have a 40 percent net on production and the discounts on the PPO are about 20 percent, then you could lose up to half the PPO patients and not lose any profits. If you lost less than half, you would be ahead. So, the break-even point is: Loss % = Discount %/Net %
• If I lost half of the PPO patients, would I still have a very good chance of being busy? If I lost all of them, would I still be OK? Do I have concrete plans to build up the nonPPO part of the practice?
• Does this PPO have decent out-of-network benefits?
• Are my patients on this PPO young and cash-strapped or older and more affluent? Long-standing patients of record with good incomes will be more likely to stay.
• Have I tried talking to the PPO to see if they will consider increasing their reimbursement to me?

By: Jenny Furey, CPA