As your financial advisors, our work begins after money transfers from your patient to your bank account. Collections are the lifeline of your business, and although we’re not technically responsible for how you collect money, as your financial partner we take great interest that you do collect money.
When our clients want to grow collections, a very common response is to throw more money at marketing, intending to bring more patients into the practice. Or worse, they may be tempted to bring on more insurance PPO contracts to attract new business. But oftentimes, these solutions don’t address the real issue.
The Revenue Cycle
The process of collecting money, which we call the Revenue Cycle, has many moving parts. I like to compare it to the process of pumping water from a well through a system of irrigation pipes to a field of crops. If more water is needed for a particular crop, you may pump more water from the well – but if there are leaks or debris in the pipes, water will become blocked or seep out before ever reaching the destination.
In your practice, the “well” is all patients – prospective, new, and existing. When you expend resources on marketing, you are “pumping the well” to generate inbound phone calls and ultimately send more patients through the “irrigation pipes,” or steps that make up the Revenue Cycle.
This is the process of converting a prospective patient to a happy, healthy, paid-in-full patient. In order for water to flow from the “well” to your “crops” – or from a phone call to money in your bank account – each step in the cycle must operate at full capacity to prevent losing patients or revenue in the process. The steps that make up this Revenue Cycle include:
Driven by paid marketing efforts or referrals, this is where a prospective patient first hears about your practice.
- New Patient Call:
The goal of a new patient call (and this is important to recognize), is to persuade the patient to schedule an appointment.
- First Office Visit:
When a new patient steps into your office, what do they see? How do they feel? How are the treated? Important judgments about your clinical expertise will be made by how they feel when they come to your office.
- Diagnosis and Treatment Recommendation:
Diagnosis includes imaging, your (and the hygienist’s) exam, and listening to the patients about their goals for their oral health. The treatment plan is the bridge between where the patient is now and where he/she wants to be.
- Case Acceptance:
This is the sales-oriented function of the cycle, where you present the treatment plan to the patient and encourage them to accept it. The acceptance rate equals the difference between the cost of services presented versus the cost of services accepted by the patient. (For more about the Art of Selling, click here).
- Performance of Treatment:
When a doctor performs treatment on a patient, the time spent, tools and materials used, and processes impact the overall profit.
- Billing & Collection:
Do you have the appropriate systems in place to efficiently record, process, collect, and deposit the money from the patient?
- Patient Retention:
An ideal patient experience is a reoccurring one. Focusing on retaining patients – not solely attracting new ones – is critical to growing and scaling your practice.
A Tale of Two Practices
I’ll share two examples of practices that, after examining their practice, found their collections stagnation was not related to a lack of new or existing patients, but rather the experience they were providing to those patients.
Practice A: A pediatric dentist was attempting to fix what they felt was an issue with patient volume by considering increasing their $17k per year marketing investment. But after taking a hard look at each step of the Revenue Cycle, they decided to focus on steps 3 and 8 above – First Office Visit and Patient Retention.
They uncovered that their focus had been so centered on the clinical work and meeting production goals that they’d overlooked how each person felt when they came to their office. Today, this practice ignores production goals altogether and instead focuses on making each person—child and parent—who comes into their office feel loved and well cared for. In the past five years, their patient retention has skyrocketed, they’ve cut 8 of their 9 PPO’s, and collections have grown by nearly 40%.
Practice B was in a similar boat as Practice A – they were ready to pull the trigger on a pricey marketing program, but instead took a step back to assess the “piping” of their operations. They found that the team working the front desk had very limited training answering phones and scheduling appointments, which resulted in a negative experience for first-time patients (step 2 above, New Patient Call). Instead of spending money on marketing, the client invested in a training program for their reception staff which resulted in better customer service, a streamlined execution and a lower margin of error. In the past three years, their collected revenue increased 30% with no additional investment in marketing.
Where to Start?
Thoroughly assessing each part of the Revenue Cycle can be daunting, but there is a principle to follow: first find the metrics that indicate performance in an area, then measure and track those metrics over time. This process alone will often be the cause for performance to improve.
|Revenue Cycle||Ways to Evaluate|
|Awareness||· Track the number of new patient calls per month
· Track how patients hear about you (e.g. Google Review, patient referrals, etc.)
|New Patient Call||· Ask a trusted friend to call your office as a “secret shopper” and record the phone call
· Track the number of new patient calls vs. new patient doctor exams. What is the conversion rate?
|First Office Visit||· Ask a trusted friend to visit your office as a “secret shopper” and provide feedback on their experience|
|Diagnosis &Treatment Recommendation||· Record the cost of recommended treatment at each doctor exam|
|Case Acceptance||· Compare the production recommended vs. the production performed (production / production recommended = acceptance rate) over time. Strive for improvement here.|
|Performance of Treatment||· Using a stopwatch, track the time it takes to perform routine procedures (e.g. a crown prep). Try to get faster while keeping quality high.
· Consider having a more experienced doctor shadow you for a day and provide feedback on your clinical work
· Consider what areas of your clinical work could be improved upon, and which procedures could be added. Seek appropriate training programs
|Billing and Collections||· Track the time and cost of production vs. collections over time
· Run an Accounts Receivable aging report each month to determine the effectiveness of collection procedures
|Patient Retention||· Track your “Patient Recall Cycle,” or the average months in between visits for your active patients (total active patients in past 12 months / number of hygiene appointments seen)|
Please don’t misunderstand the point of this post. At PFG, we believe in investing in your practice, which can include spending money on appropriate marketing initiatives to drive more patients through your doors, when needed. However, before you pump more water from the well, we highly recommend you do your due diligence to ensure the “irrigation pipes” are operating at their capacity. Regularly working on this process won’t only help your practice financially, it will create a better overall experience for your patients, your employees, and yourself.