Orthodontic practices may use a variety of tools and assessments to address the question of whether they are consistently reaching their full potential for profitability. While determining the best approach for an individual practice is a complex decision, two practices profiled in this issue of the Practice Management Bulletin offer interesting examples of how to incorporate profitability management into practice operations.

The practices use data analytics and a systems/team communication approach, respectively, to help ensure that profitability remains consistent. While the methods are somewhat different, both practice founders set efficiency and profitability evaluation as priorities early in their careers – and as a result, have maximized their success over the long-term.

Both practices have also closely monitored and worked to address two key obstacles to profitability that impact many orthodontic practices: emergency and repair visits and situations in which treatment is not finished by the patient’s estimated completion date.

Sherman and Balhoff Orthodontics

Stay on Track with Profitability

When Dr. Stephen Sherman Sr. first opened his practice in Baton Rouge, Louisiana in 1985 he quickly became concerned about implementing strong operational management into his practice.

“When you’re a young doctor, you want somebody to help you with business issues,” he says. “I had a strong interest in seeing how efficiently my practice could be run and believed that would be an effective path to profitability. Among my questions was the fact that I was not sure how to evaluate our scheduling.”

After joining a regional study group with about 50 other orthodontists, Dr. Sherman began finding answers to his questions.

“The network was very helpful,” he says. “Many of the study group members were using a consulting firm to help with evaluation of their practice metrics. In 1988 I began working with the consultant as well, using metrics to evaluate both clinical and financial areas to improve the quality and efficiency of care.”

Fast forward to 2019 and the practice now has three orthodontists, with Dr. David Balhoff having joined in 2008 after completing
the residency program at Louisiana State University. Dr. Stephen Sherman Jr. joined the practice in December 2018 after completing the residency program at the University of Oklahoma.

“In December my second son, Kramer, will also graduate from the University of Oklahoma residency program and will join us in January,” says Dr. Sherman. The practice now has three locations in the Louisiana cities of Baton Rouge, Prairieville, and Central.

“We continued our metric analysis without interruption after we converted to Gaidge as a business analytics provider in 2011,” says Dr. Sherman. “At that time we were converting to a new software and Gaidge, which was just beginning, was compatible with the new software and so the change made sense for us.”

Gaidge is a tool that automatically and seamlessly provides practice owners with the ability to track and monitor critical practice data, set and track performance to goals and compare performance to other similar practices. Gaidge clients receive comprehensive data points to measure their practice’s success as well as many comparative data points across the US. All essential business metrics are automated and displayed in graphical visuals as well as charts. Users will find their financial metrics such as net production, net collection, average contract amount and average initial fees as well as new patient and starts metrics with new patient adds, exams, starts, completed appointments, case acceptance ratio and even more throughout the treatment process with completion dates and scheduling disruptors such as repairs.

Detailed Analytics Show How Efficiency and Profit Are Impacted

“When doctors look at analytics, I think it can be easy to get caught up with focus on big categories like productivity and collections,” says Dr. Balhoff. “For us, though, paying consistent attention to some of the more detailed numbers has yielded a lot of intelligence about our efficiency and where we needed to improve.”

Sherman and Balhoff closely monitors these metrics from Gaidge reports:

  • Percentages of patients finishing treatment by their estimated completion dates (ECDs);
  • Emergency and repair visits;
  • Value per patient visit;
  • Discounts and write-offs.

“Of course, many factors impact whether a case is finished by the estimated completion date,” says Dr. Sherman. “But since our fees are based on the projected length of treatment, if many patients are delayed the costs of that add up quickly. And of course, a major contributing factor there is the number of emergency visits and repairs over the course of treatment. To get those numbers down, we worked with our clinical team on processes to prevent the need for repairs, and on reminding patients and parents about the foods that can lead to emergency visits due to broken wires and displaced brackets.”

“The costs of the emergency visits themselves also impact profitability,” says Dr. Balhoff. “We saw one estimate that each emergency visit costs a practice $250.”

“I think it is also important to note that practicing for efficiency and profitability also improves the experience for the patient,” adds Dr. Balhoff. “Patients want to finish treatment when they were told they would finish, and no one likes to have to come in for additional visits to address emergencies. We don’t want to base our patient care simply on profitability – but making everything more efficient is good for the practice and the patients.”

The practice works closely with patients on other aspects of compliance as well.

“When my daughter was in high school she did a research project at our practice, tracking patient compliance with elastic usage against length of treatment,” says Dr. Sherman. “She found that those who complied with wearing elastics were 50 percent more likely to finish treatment on time.”

The doctors determined that getting the number of patients not completing treatment by their ECDs to less than 10 percent would help the practice enhance its profitability.

“We have succeeded with that goal,” says Dr. Sherman. “One year, we had just 8 percent. That’s compared to 15 to 16 percent in the past.”

Value Per Patient Visit Also Reflects Profitability

As the practice moved toward increased use of aligners in recent years, the doctors found their value per patient visit metric improved. They noted that treatment type, such as braces vs. aligners, impacted that metric.

“Treatment with aligners can often necessitate fewer patient visits as opposed to treatment with braces,” says Dr. Sherman. “Since our fees are based on the anticipated number of visits, that makes a difference. Again, of course, compliance with treatment requirements may vary from one aligner patient to another and that will impact the patient visit numbers.”

“Looking at our treatment type numbers, though, we saw enough of a difference that we began making a strong effort to ensure that we always discuss aligners as an option with new patients who are eligible for aligner treatment,” says Dr. Balhoff. “We have also found that being very knowledgeable of the mechanics of treatment with aligners is necessary if you want to reduce the visit numbers for aligner patients.”

Pro Bono Care: When Is it Too Much of a Good Thing?

At one point as the doctors continued reviewing various data on their Gaidge reports, another metric jumped out: discounts and write-offs.

“Many orthodontists are concerned, as we should be, about the fact that there are a lot of people who could benefit from treatment but cannot afford it,” says Dr. Sherman. “Many of us give away a great deal of treatment, but taking a look at how those costs are adding up is important.”

Drs. Sherman and Balhoff were taken aback when they looked at the total value of the pro bono treatment that their practice was providing.

“We then set a goal in terms of how many patients we would treat at no cost and we have worked to stay within our goal numbers,” says Dr. Sherman. “The amount of pro bono treatment that we were doing was simply too much for the health of our practice, and for our ability to grow and continue providing excellent patient care.”

“There is a fine line between being generous and providing so much charity care that your profit takes too big of a hit,” says Dr. Balhoff. “With constraints on your profitability, other beneficial opportunities may not be possible. You may not be able to open the new office you thought of opening – which would benefit the staff working there as well as patients who live close to the new location. Tightly squeezed profits may mean you can’t invest in new technologies that would make workflow processes more efficient for your team, and/or improve patient care.”

Involve the Team in Analytics Monitoring and Jump on Short-term Challenges

The team at Sherman and Balhoff is also actively involved in reviewing the practice’s metrics and raising any concerns about specific numbers.

“We have specific staff members in charge of monitoring particular data points on the Gaidge reports and we rely on them to bring any concerns to our attention,” says Dr. Balhoff. “They take ownership of their metrics and that responsibility helps them buy into the process of measurement. It also challenges them to develop ideas on how we can be more efficient. And as they see how we are using the data and how important the process is, they are motivated to ensure that everything is input into our system correctly. That ensures that the data we get back are accurate.”

The doctors also work to quickly address short-term challenges to profitability. For example, the practice recently lost a key staff member in its Finance Department and as a result, collections soon began to suffer.

“Seeing that metric on our report helped motivate us to make it an urgent priority to find a qualified replacement for that employee and get the new staff member onboarded and trained quickly,” says Dr. Balhoff.

“We always try to keep in mind what Mary Beth Kirkpatrick of Gaidge says, ‘You can’t improve what you can’t measure,’” adds Dr. Balhoff. “Most importantly, though, knowing that our practice is on solid ground from a business standpoint frees us up to focus on what we really want to do: Make certain that we are providing the best possible patient care, and that we are building a good relationship with every patient.”

Click here to learn how Dr. Sami Webb and Dr. Jason Webb built and sustained profitability with effective systems and accountability.