Practice Values Continue To Be Strong in a Weak Economy

Shea Practice Transitions reports that practice values continue to stay steady if not increased slightly from 2010 through 2011. Shea Practice Transitions reports over 50 practice sales during that period of time, with some interesting statistics. Of these, the average practice collections were over $775,000. The average patients per practice equaled 2,005. Over 95% of the practice sales were sold in cash transactions. The average price per patient record was over $180. The practices sold from a range of 31% of annual gross collections to 78% of annual gross collections. Over half of these practices sold for over 60% of their gross, and over 10% of the practices sold for over 70% of gross. The average practice took approximately 8 months to sell.

The above are simply averages; however, somewhat enlightening. Naturally all of these practices are in different geographic locations, facilities, patient compositions, overhead structure, as well as many other fluctuating variables. Nevertheless, what these statistics do point out is that there is still an excellent market for practice sales (including practice buy-ins). So, don’t sell yourself short. Make sure you get proper value for your practice. Contact Kevin Shea at: www.sheatransitions.com or sheainfo@sheatransitions.com

The Mystery Shopper

Has a mystery shopper called you yet?
We’re getting reports from many clients that they’ve been called by the “Scheduling Institute,” Jay Geier’s group. Mystery Shoppers will call posing as a patient. The patient is usually asking for a fee on a crown, or saying they just moved to town looking for a Doctor, or want to know if the practice takes kids, etc.

This is the Scheduling Institute’s way of finding prospects. The Scheduling Institute has a detailed and extensive program focused on the initial patient phone contact with the office.

Surprise! Almost every office they call earns a 0 on a scale of 0 to 5 for handling calls effectively. Therefore, Dentists are told that they stand much to gain by subscribing to their program… that new patients can go up by 30% or more with thorough staff training.

There is much that the Scheduling Institute recommends that we agree with, but not all. We’ve been doing “Mystery Shoppers” ourselves for over 25 years. We agree with Jay Geier on this…doing things right can add to your new patient flow. Like the Scheduling Institute, we find that most often the initial phone contact with patients is a matter of screening, warning and indoctrination.

For example, there is often way too much focus on insurance and x-rays. Even very competent, well-meaning front desk people can present a bureaucratic and cold presence.

However, before you sign up for a $5,000 program, let me assure you that we can help you and your staff with this. In some cases, we feel that the Scheduling Institute is too aggressive, maybe not “Midwesternly” enough. So, if you got “0 stars” call us and we’ll help. If you don’t know what your rating is and want a “Mystery Shopper,” we’re happy to do it for you. Just call and we’ll make arrangements to ensure patients’ and shoppers’ first contact with your office is first class.

We want the “Mystery Shopper” not to be the Secret Police though. We want to work with your staff… not to catch them doing it wrong but to catch them doing it right!

Trends to watch

Trends: Matt, Shelly, Robyn and myself make over 600 onsite visits per year. Here is an informal list of trends that we are observing:

1) Multiple location group practices (e.g., Midwest,Heartland). See our previous newsletters on this. (They are online at www.AdvancedPracticeManagement.com under “Dental News.”)

2) More GP’s doing ortho. For example, about 22% of offices now offer Invisalign.

I remember my travels to Outstate MN over 20 years ago when lots of GPs did ortho but that faded. It’s coming back now with the new technology and approaches.

3) Technology in the Operatories: Over 60% of Dentists have digital x-rays and in-operatory computer monitors. Add to that Laser Caries Detection (45%), Intra-Oral Cameras (65%), Patient Education Technology and Lasers.

This technology can easily run $14,000+ per operatory and that’s in addition to your clinical delivery equipment (chairs, dental units, etc.). So, you have to get “Result Control.” See the article on this at www.AdvancedPracticeManagement.com.

4) More Delta Participation: In 2004, provider Delta Premier participation was down to about 81%. Nowadays, 87% of area practices are with Delta Premier. With Delta continuing it’s domination of the dental market, it can be quite challenging for Doctors to be outside the network.

Another 31% of Dentists are with a “Delta within a Delta” (Delta PPO). In our opinion, many practices with Delta PPO do not need to be with Delta PPO… and it costs them thousands. Essentially, their Delta write-offs are almost doubled and there isn’t enough gain (in our opinion) to make up for the write-offs. Likewise for Met Life.

Other PPOs such as the Premier Group, Health Partners, etc., pay fees more akin to regular Delta Premier and, if an office is running efficiently, the bottom line can be fine.

5) The Internet as a Source of New Patients: I’ve seen several instances this year where the Internet had overtaken the Yellow Pages and other sources (e.g., Direct Mail) in the number of new patients brought into offices. This is not universal. In some places Yellow Pages are still pulling. Visibility (signage) remains a very major factor. Of course, so are patient referrals which still account for 50+% of most office’s new patients.

6) Treatment Coordinators: A treatment coordinator is usually a hygienist or an assistant who presents treatment all the way from the x-rays through to the financial arrangements. The most ready model for this is orthodontic offices who have had treatment coordinators for years. The Doctor looks at the treatment plan, the treatment coordinator goes through it with the patients, holds their hands and works out the financial arrangements.

It’s easy to hire a hygienist and plug them into your operations. Developing a treatment coordinator is a little more tricky. It is a less defined job description. It takes a unique set of skills (a good dental background with good communication skills) and can be hard to work into your routine if you are not used to it. However, when we see offices with treatment coordinators, they do well.

This is by no means a comprehensive list but the trends mentioned are worth your attention.

The truth about getting new patients on the internet:

We have a unique advantage because through our work in the field visiting well over 200 dental offices we can really see what’s going on out there. What’s working and what isn’t. We know that getting more new patients is of great interest to most of our clients. So you can bet we keep our eyes and ears open about the sources of new patients.

Over the past two years the Internet has really come on and in many areas is superceding other sources of new patients such as Yellow Pages and direct mail. Clearly this is where the marketplace is going but there is also a lot of hype. Every week we hear of a new scheme involving special promotions*, social media, etc. Usually the bigger the promise, the more the bull. There is no such thing as a sure thing when it comes to increasing new patients. Believe me, if there were, we would know about it. However, it is a sure thing that if you don’t do anything, you won’t see more new patients.

Over 60% of area dentists now have websites. Most dentists go with the major outfits such as Officite, Prosites, PBHS, IDA, Sesame and The Online Practice. All of these companies have their strengths and weaknesses. Many dentists also hire an acquaintance, patient or relative that “knows websites.”

The common denominator is this. When most dentists get their website up, they more or less ignore it. It just sits there. Getting more new patients from the Internet isn’t just about your website. And no, it isn’t all about Facebook either. It’s a combination of factors of which, leading the pack are your presence on the major search engines like Google, Yahoo and Bing. Most importantly, the Google “Place Page.” There are many other directories (such as Yelp & Insider Pages) that attention needs to be paid to also.

Since 70% of all web searches take place through Google, the Google Place Page is the “front porch” of your website. You have to have the lights on and make sure that there are positive reviews to entice people to proceed on to visiting and scheduling on your website. Once they get into your website, they shouldn’t have to wait a while for flash or fancy graphics though. Web searches today want quick access to pertinent information. There should be very concrete information about your practice and appropriate copy and design to lead people to act...that is, make an appointment!

Website enhancements can include a “video brochure”, video testimonials, offers, photos and biographies. If you were looking for a healthcare professional, what would you want to see on a website? You wouldn’t want a lot of filler or platitudes, “Fine quality care, comfortable surroundings, blah, blah, blah.” You want to know about that Doctor, the staff, the hours, the services and what to expect. You want to see that they are a nice looking, clean cut group of people in an atmosphere where you will feel safe.

Further enhancements can include Twitter, Facebook and blogs but most of you can get well ahead of the competition by paying attention to your Google Place Page and having a website that truly reflects you...and that can be done even with one of the generic companies such as Officite or Prosites if you work at it.

How many positive reviews do you have up on Google? Do you know? If you don’t, you probably don’t have as many as you should! Yes, you can use “Demand Force” and other companies to help you in gathering reviews and testimonials (reviews are on the website and testimonials are within your website). However, don’t just rely on those.

We’re all very busy and it’s hard to have a lot of time to putter around with your website. There is also a lot of jive out there. We all probably get just as confused by the web peoples’ jargon as patients get confused by dental jargon. So, on the requests of many of my clients, I have lined up top rate Internet marketing help. We can help you tune up your Web Presence all the way through; Whatever website company you are with, wherever you practice. You see, if you are paying attention to and tune up your website, your presence in the directories, etc., you’ll be ahead of the competition in your area. You’ll have a stronger presence on the Internet and you will get more new patients.

The bottom line is this; getting your website to the top of page one on Google and optimizing it to attract potential patients is like aiming at a moving target. Be leery of anyone who tells you otherwise. What you can count on from my team is that we have our ears to the ground and are staying on top of the ever-changing Internet landscape to keep you on the path and a step ahead. The Internet is increasingly where people go to select a Dentist and we’ll help you make sure they select you.

 

*For example, we have seen some spectacular numbers with Groupon and Groupon Clones but patient retention has been a challenge. We are learning how to improve this.

The Growth of Multi-Location Group Practices

Like Arby’s?

Years ago we thought the trend would be franchise practices in retail settings. It hasn’t exactly happened that way but there has certainly been a growth of multi-location group practices.

In most cases, the model is less formalized than say an “Arby’s.”

Of course, there are the more “corporate” type of large clinics in multiple locations, such as Metro (37) and Park (23).

But, if you look at the recent activity in the Midwest, what you see are groups such as Midwest Dental and Heartland (word is Heartland is coming to our area). Midwest Dental owns more than 77 upper Midwest practices. Heartland (centered in Illinois) has about 300.

Then there are smaller multiple location groups such as Main Street Dental (5 locations in southern Minnesota) and Family and Cosmetic Gentle Dentistry (12 locations) in the Metro area.

There are other niche-type practices such as The Smile Center (7) and Emergency Dental Care U.S.A. (7 Nationally).

Midwest Dental and others are eager to buy and they’re growing. Heck, Heartland Dental even owns a corporate jet! You have to be making some serious moola to have one of those. Let’s take a look at how some of these groups do it.

Your Practice Area Demographics

Are Demographics Destiny?

If you listen to anyone on the lecture circuit and most consultants, they’ll tell you that it doesn’t matter where you practice…it matters how you practice.

True, mostly.

I have certainly seen the substantial difference good management can make wherever you’re practicing,

However, after 30 years of doing this I have come to think that even the most virtuous, capable dentist with a well-managed office can be hurt by crummy demographics.

The toughest demographic—a low population to dentist ratio.

Many dentists locate with the income of the population in mind and little attention to much else. That’s why there’s very high dentist to population ratios in affluent areas such as Wayzata, Edina and North Oaks.

It’s been my experience that these are some of the toughest, most competitive places in the state to practice. The high per capita income does not overcome the high dentist population ratio.

Dentists have an easier time of it if they’re located in a place with a lower dentist population ratio even if the population’s income is not in the top tiers.

On the other hand, there’s a point where the population’s income can be so low that no matter if you have a low dentist to population ratio (e.g. lots of patients) it isn’t worth it because you find yourself doing less and less on more and more people—a version of dental hell.

You can see more info, stats, even charts in our May news letter on the Advanced Practice Management web site.

Beyond the DOW: Recent Economic Survey of Dentists
I recently completed my fee, wage and economic surveys for the Upper Midwest. Over 300 practices responded.

33% of the Metro practices surveyed said they were up this year, 46% were down and 21% even. For Outstate offices (including the edges of North and South Dakota, Iowa and Wisconsin) the outlook was a little better. 41% of the practices said they were up, 28% down and 31% even.

17% of Metro Area practices felt the economy is not a factor at all but 73% felt the economy had a “moderately negative” effect. 27% of Outstate offices said the economy hasn’t affected them at all and 70% said “moderately negative”.

29% of Metro Area offices have given or plan to give raises this year and 41% said they won’t. In Outstate offices 54% have given or plan to give raises this year with 24% saying that they do not plan to give raises (the rest variable or not sure).

There is no question that the current economy is having an impact on practices. Just three years ago “5% growth” was more or less the rule.

I believe in management. Whenever we see Doctors take actual steps to improve, they do improve! Things just don’t come as easily as they might have in previous years.

Feel like talking about your situation? Got some ideas? I have a standing offer of a free 20 minute consultation that allows you and I to get to know each other and share information that will be beneficial to both of us. Call me at 952 921 3360.

’til next time...