Dropping PPO's Isn't the Only Way to Reduce Your Write-Offs

Episode #588 with Dr. Barrett Straub

Episode Resources:

• Dr. Straub’s email: barrett@actdental.com 
• Dr. Straub’s Facebook: https://www.facebook.com/barrett.d.straub
• Dr. Straub’s social media: @bstraub10
• Kirk’s email: kirk@actdental.com 
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Links Mentioned in This Episode:

https://www.dropbox.com/s/0lixufs3cobjbrm/OUTLINE_%20%20Dropping%20PPO%E2%80%99s%20isn%E2%80%99t%20the%20only%20way%20to%20reduce%20your%20write%20offs.docx?dl=0

Main Takeaways:

It’s all about achieving balance.

Increase control so you can decrease stress and burnout.

Fill your chair and maximize the efficiency of your schedule.

Know the real reason your team compensation percentage is high.

Before adding anything, understand what maximizing capacity means.

No matter your practice size or insurance participation, track your write-offs. 

Quotes:

“If you've been listening to our podcast, we've been talking about our financial gaps in those four places where money leaves your practice between your gross production and the time you get to put money in the checking account. The first gap, and the biggest one, often is what we call the effort gap. That's basically made up of your write-offs, a big part portion of that. And what we've been talking a lot about with our clients and with other dentists is that finding the participation in insurance that makes the most sense for you and reducing that and reducing your exposure to those insurances to find that write-off percentage that works the best for you. So, we've been focusing a lot on PPOs and being able to reduce that. However, we don't want the focus only to be on, ‘The only way to reduce your write-offs is to drop PPOs,’ because it's not. There are some other strategies that you can use starting tomorrow to lower your write-off.” (2:33—3:31)

“We're in an economy of inflation. We're in an economy of low dental workforce demand. And we’re in an economy of decreased reimbursement from insurance and higher costs of doing business. So, our margins are getting tighter, and that's just a reality. It doesn't mean that it can't be overcome. It just means we've got to think smarter and track the numbers and make some smart decisions.” (5:04—5:29)

“One of the quickest ways to burn-out and stress is a feeling of lack of control over your practice. We hear from dentists every day in our coaching that say, ‘I thought this would be different,’ number one. Number two, we see dentists all the time say, ‘I'm going to produce more. I need to produce more,’ only for the outcome of that added production to be the same reduced margin, and even more burnout.” (5:55—6:21)

“Many dentists out there feel loss of control because they find — and they don't know why —that more production doesn't equal more profitability in every case. And so, how could that possibly be? I just worked my tail off to produce more. I still don't have more, at the end of the day, in the bank. What is going on? That loss of control, that's a daunting topic to figure out. And we have it. Our gaps calculator is going to help with that. And the first gap is write-offs. Write-offs are such a big part of this because as we increase our top line production, many times, dentists are doing that via more insurance participation, more patients coming through the door. And unless you're tracking your write-offs per insurance, per membership plan, per even your cash patients, every segment in your patients, you don't have control over it. Once you have control and know the numbers, now you know what you can do in order to improve that profitability. And that's where stress and burnout decrease, because you can say, ‘I don't love the numbers I'm at, but I see a path. I have hope now.’ And the more hope we have, the less stress and burnout we have. And you can't have that hope as an entrepreneur unless you see the numbers and know the path forward.” (7:08—8:25)

“It's easy to say if you participate in insurances, you're going to have bigger write-offs than fee for service. That's just a fact, most of the time. And yeah, we think all dental practices, whether you're group, big group, small group, solo, high insurance, or totally fee-for-service already, you need to track your write-offs. I've been a fee-for-service dentist. My write-offs, historically, have not always been perfect because you say, ‘Well, I'm a fee-for-service dentist, so I don't need to track that.’ And then, you find out that you're giving away a lot more than you thought for free, and you're doing pro bono care, and stuff on your family during normal clinic hours — which you should do all that. Do as much pro bono as you can. But track it and know it. It's one of the gaps. So, our point is that this isn't just for high insurance participation dentists. This is for all of us.” (9:10—10:02)

“I don't have studies to prove this, but I think 6% to 12%, you're going to be in that fee-for- service. I think if you're fee-for-service, and you're watching your gaps, and watching your write-offs, and budgeting for it, and having a strategy, you should get under 10%.” (10:17—10:31)

“If you look at your overhead and your team compensation percentage is north of 30%, or even higher, I want you to look at your write-offs. And if you think about it this way, we as dentists have to staff our businesses based on our gross production. So, let's back up. Gross production minus write-offs, net production. We have to staff our practices based on our gross production. So, let's say we do $2 million of dentistry. Due to our master fear of gross production, we need to have the people to produce them. But what if we're writing off 40% of that? So, now, our net production is north of $1 million. And let's say we're collecting not 100%. So, we see practices all the time producing to collecting $1.1. So, now, our team compensation percentage is going to be too high because we're paying on $1.1, but we're producing two. So, we have a $900,000 effort gap. So, it's logistically going to be more difficult to get that team compensation into the ballpark of 25%, 26%, 27% because we have to have enough people to produce that $2 million. (11:19—12:38)

“Our motto is better practice, better life. That's about balance, right? So, same with PPOs and fee-for-service. Find that balance that works for you, works for you in that your workday looks the way you want it. You go home feeling energized instead of exhausted. And, at the end of the day, you have the profitability that you thought you were going to have.” (14:04—14:24)

“If you're a dentist sitting at home listening and this is a little confusing, I want you to remember this. Instead of saying, ‘I produce X,’ production is only a third of that first KPI that we all like to know. We all like to go to study clubs and say, ‘I produce this. I produce that.’ Really, we should say, ‘I produce this, I write off this, and my net production is this.’ Unless we have those three numbers, production tells me nothing about your practice. It tells me nothing. You could say, ‘I produce $2 million.’ And unless I know your write-offs and your net production, I have no idea how healthy, profitability wise, your practice is. So, if nothing else, know your production, your write-offs and your net production, because your net production is what you can actually collect.” (16:22—17:06)

“Think of output. Think of a widget manufacturer. They're open X amount of days, X amount of hours, and they have X amount of people, and they have X amount of widget manufacturing machines. If all of those things were performing at maximum capacity, their output would be Y. We can produce X amount. We can produce Y widgets with this many hours, this many people. We have output too. We have five chairs, and we're open four days a week, for instance, and we have 31 hours of available chair time, and we have this many, this many, this many. There's an output there. And most dentists are not maximizing their output. It's hard to maximize. You're probably never going to be 100% of your output. You want to get closer. But because we don't know our write-offs and our production, because we just focus on production, the assumption is, ‘Well, let's do more. Let's add a chair. Let's add a Friday. Let's add a hygienist. Let's add, add, add, add, add.’ And we're going to say, before you do any of them, before you add to your operational capacity, first, let's maximize your already offered capacity.” (17:24—18:32)

“If we just pause and we think logically — so, I need more money, or I need to have more profitability, or I feel like I need more production, well, first, let's look and see if our current chair is filled. So, let's track our hygiene chair. If that hygienist sees patients for 8 hours on a Tuesday, let's look back and say, of that 8 hours, how many hours was a butt in the chair? That's a percentage. It's retroactive. You have to go back and research that, and it doesn't take long. It takes a few seconds. So, we want hygiene chairs to be 90, 95; doctor's chairs, 95-plus. So, let's make sure our chairs are filled. Why would we invest in building a new operatory if the five we have aren't maximized? If we're only at 80, 85, we don't even need to build another operatory. Let's fill the ones we have. That's a lot cheaper and more profitable.” (20:19—21:15)

“You can fill your chair, and then we're going to look at, ‘Well, what's your production per hour, production per day, production per visit?’ the three key metrics of production. And you could say, ‘Well, even though we're at 95%, our production per, our production per visit, isn't as high as it should be. Let's schedule more efficiently. Let's do a schedule analysis to see how long it actually takes to do two fillings, a crown so that we're not scheduling extra time. Let's maximize the efficiency of that schedule.’ So, let's fill the chair, number one. Two, once it's filled, let's maximize the output from the same 8 hours.” (21:55—22:37)

“Doing for resins in one visit takes a lot less time, energy, costs, manpower, than it does in two visits. So, that's a simple example, but let's maximize our time. Let's do quadrant dentistry. Let's build enough value so the patient is like, ‘Yeah, I'm in. Let's get this done,’ instead of tooth by tooth by tooth by tooth . . . There's no good reason unless you haven't built the value to the patient like, ‘Let's do this.’” (24:19—25:03)

“We're in a time of inflation. We're in a time of decreasing insurance reimbursement. We're in a time of increasing costs. And so, our margins, our profitability, are getting tighter and tighter and tighter. We can decrease our write-off if our fees are aligned, if we raise our fees to where they should be. So, we're not going to say just randomly raise fees.” (26:45—27:07)

“Your fees are your fees. Don't compare what somebody else does because if you're listening to this podcast, you're probably already in the top 80%. Most dentists don't really listen to podcasts. They're just looking as a means to an end. That's my first thought. My second thought is, you’ve got to know where you are, overall . . . Here's why both of those are important. You have to have a master fee schedule. And people don't pay for the tooth. They pay for your time, your skill, your judgment, your expertise. Please hear that. Secondly, most great dentists that we get to see, they're not even close to the top. So, we'll go into their practice, and they're in the 40th percentile. I'm like, ‘You've been to Pankey and Dawson, and you're in the 40th percentile.’ And they are amazing human beings, but they're like, ‘You don't understand. I practice outside of Mass, and people don't have money here.’ I'm like, ‘Oh my gosh, stop.’ Your fee is important. You have to make sure it's right where it needs to be so that you can afford to pay your team, have some margin. And sometimes, dentists can't do that on their own. They need some help. They need somebody saying, ‘You need to raise your fees.’ And what you said is exactly right. We're going to do this later because that doesn't fix anything, just by raising your fees at the beginning.” (27:19—28:44) -Kirk

“If you're providing 90th percentile dentistry, then you’ve got to charge 90th percentile dentistry. And you talked about it, most people are at 80%, that may be listening. But what's going to happen is they're not, and they think they are. And I was the same way. But when you look and find out the data, then it's like, ‘Oh, okay.’ So, if you are a dentist listening and you haven't raised your fees in a couple of years, it's time. Because everyone else has in the world except you. Not even dentists, I'm talking about your suppliers, your resin manufacturers, the bottled water you buy, the electricity, the utilities — everyone has raised, the dollar is less. You have to raise. We're not saying gouge people. We're saying make incremental fee increases in the fees that are not meeting the level of dentistry that you're providing.” (28:47—29:43)

“Every dentist, let's say a dentist has some PPO participation. They are a contracted provider for three dental insurance companies. Those are three segments. So, insurance company number one, that's a patient segment two, three. Maybe they have a membership plan. That's a fourth patient segment. Every dentist has a patient segment of patients that pay 100% of their fee. So, that is cash paying-patients, uninsured, or a patient that's insured with a with a PPO that you're not a contracted provider. You get 100% of your fee. We want to maximize that segment of your population. We want to see more of those people.” (30:59—31:40)

“There are dentists out there listening right now that are participating in plans that have write- offs as high as 50%, 60%. And two weeks from now, they have new patient blocks that are already booked with someone that they're barely going to make any money because they have to write it off for 60%. And tomorrow, there's going to be a cash paying patient that says, ‘I heard about you. I want to get in.’ And what are they going to hear? . . .  ‘I'll see you in September.’ So, a cash paying patient or an uninsured, they are a true consumer. There's no reason for them to go to any dentist because no dentist is on his list. There's no list. So, it is about your brand, your differentiation proposition, your reputation. How much do they value? So, if they call you like, ‘I am motivated. I heard about you. I want to come in,’ and you say, ‘I'll see you in September,’ they're like, ‘I'm finding someone else.’ So, we have to be knowledgeable of that. And I think it's very fair and ethical to manage your schedule, to leave some spots open for different segments of patients.” (32:32—33:42)

“Fee-for-service dentists basically get 100% of their fee from all their patients. Now, many of those patients pay via a PPO plan that allows you to see non-listed dentists. But the more patients that pay you 100% of your fee, the less write-offs you have, the more net production you'll have without having to increase your gross production. Every time you shrink that write-off gap, what happens? You get to make more money without doing more dentistry.” (35:53—36:26)

Snippets:

0:00 Introduction.

2:22 Why this is an important topic.

3:31 Statistics to know.

5:30 One cause of stress/burnout and how to overcome it.

8:26 Track your write-offs.

11:05 Concept 1) Team compensation percentage is too high.

13:30 Achieve balance.

15:33 The real reason your team compensation percentage is high.

16:07 Concept 2) Before adding capacity, maximize your output.

19:49 Concept 2.1) Fill your chair.

21:44 Maximize the efficiency of your schedule.

24:08 Do more in each visit.

26:22 What to do with your fees.

30:43 Concept 3) Think inside and outside of insurance.

35:19 How many patients pay your full fee?

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Dr. Barrett Straub Bio:

Dr. Barrett Straub practices general and sedation dentistry in Port Washington, Wisconsin. He has worked hard to develop his practice into a top-performing, fee-for-service practice that focuses on improving the lives of patients through dentistry.

A graduate of Marquette Dental School, Dr. Straub’s advanced training and CE includes work at the Spear Institute, LVI, DOCS, and as a member of the Milwaukee Study Club. He is a past member of the Wisconsin Dental Association Board of Trustees and was awarded the Marquette Dental School 2017 Young Alumnus of the Year. As a former ACT coaching client that experienced first-hand the transformation that coaching can provide, he is passionate about helping other dentists create the practice they’ve always wanted.

Dr. Straub loves to hunt, golf, and spend winter on the ice, curling. He is married to Katie, with two daughters, Abby and Elizabeth.