February, 1999

The Management Revolution

Jerry R. Clark, DDS, MS

Preface

Over the past 10 years, Orthodontic Management Group (OMG) has been asked by more than 250 orthodontists to visit their offices in order to research and analyze the business aspects of their practice and provide advice to enable them to manage their practices more efficiently and profitably. The purpose of this article is to provide a very general overview of our detailed and in-depth analysis of what makes successful orthodontic practices successful. A secondary objective is to describe how the growth of orthodontics and orthodontic practices will be affected by the current environment and the changes likely to bear on our specialty.

How Has the Clinical Side of Orthodontics Changed Over the Years?

Recent technical advances and product developments have dramatically changed the nature of orthodontics—and we believe this culture of change will only escalate in the future. Custom fit bands, direct bonded appliances, space-age heat sensitive wires, advances in surgery, new treatment techniques, computers, expanded auxilliary utilization and many other technical improvements have allowed orthodontists to become much more efficient. More patients can be seen each hour and each day, and treatment can be completed more quickly. With these technical advances, there is the potential to achieve high quality results with fewer visits by the patient. This reduction in ‘chair-time’ can produce an office environment that is both more productive and less stressful.

How Does This Impact the Business of the Practice?

Increased productivity has resulted in much larger practices. In order to function at this more productive level, however, staff sizes have increased, insurance issues have multiplied, OSHA regulations increase, sterilization requirements are more complicated, there are larger inventories to control, and a myriad of other responsibilities that the doctor is forced to confront. Our lives as orthodontists have become much more complex and we find ourselves having to take time to deal with issues that divert our attention from the reason we went into orthodontics in the first place—straightening teeth and obtaining satisfaction from creating beautiful smiles. From the small office professional practice of only a few years ago, the private practice of orthodontics has become a complex business/profession.

What Management Options are Available to Orthodontists?

Contemporary orthodontists are confronted with many options in choosing how to manage the business side of their practice. Some focus exclusively on the individual patients they treat—an understandable focus, but often a costly and tragic mistake. Others try to keep pace by spending more and more of their time ‘managing’ their practice and quickly learn that they are ill-equipped to handle many of the complex issues of management. In addition, these orthodontists find that the extra effort they devote to management takes time away from what they enjoy most—orthodontics! We all know of offices where this situation has lead to frustration and burnout. As one of our clients noted, "If I were interested in business in the first place, I would have gone to business school."

What About These ‘Management Groups’?

A relatively recent addition to the orthodontic scene is the Management Services Organization (MSO)—an organization that offers to provide management services for a fee—usually tied to a percent of practice gross income. Although this can free the doctor from many of the business management responsibilities, in most cases the doctor gives up considerable control, and in some situations, is no longer the owner of the practice. When this occurs, the doctor loses the critical element of why they became a private practitioner—the independence and the freedom that comes from being one’s own boss. Far more unpleasant is to imagine what happens if the management group to whom you have sold your practice sells out to another management company or worse, goes bankrupt? Unfortunately, this has already happened to some of our professional colleagues—in both medicine and in dentistry. What might look good from the outside may not be quite so pretty when you’re on the inside…wanting out!

Doesn’t Joining These Groups Provide an Exit Strategy for the Older Orthodontist?

Yes, it does, but usually an uncertain one. When you take the time to evaluate the numbers carefully, in many cases the doctor ends up turning over the practice to the management company and actually receives very little additional financial reward for all the years of hard work spent building the practice. The financial return to the doctor is usually tied directly to the performance of the stock of the management company, and currently these stocks are not performing well. Any doctor considering selling their practice to one of these groups should go through what we term ‘due diligence’—study and research all the issues long and hard. Certainly one should seek counsel from knowledgeable individuals and discuss all aspects of the association with their own trusted advisors before even considering joining one of these management groups.

What About Practice Management Consultants?

Orthodontics is blessed with a number of excellent, dedicated, and knowledgeable practice management consultants who can help with specific issues within the practice. If you have financial problems—Paul Zuelke will help you. If you have staff or schedule problems—Hummingbird Associates or Charlene White will come into your practice and offer their expertise and assistance. These specialized consultants can be very helpful, although when they depart, the doctor and staff are often left to implement and carry out the suggestions and recommendations.

Is There Another Option?

If the orthodontist is not the one best suited to manage the practice, if signing up with a management company is problematic, and if specialized management consultant involvement within the practice is less than comprehensive, then what is the answer to the management dilemma? Orthodontic Management Group has seen many of the finest orthodontic practices in the country employ a ‘management team’ concept. The doctor becomes the leader of the practice and concentrates on providing the service of outstanding orthodontic care. An organizational structure is put in place so that a ‘management team’ becomes responsible for all aspects of the practice’s management, the personnel, the finances and all the management issues. This team approach is now being used by many of the most successful corporations throughout the United States.

What Does the Management Team Actually Do?

Good management involves a process which, when put in place and properly monitored, allows an organization to run more effectively and efficiently. Modern management can be a logical stepwise process. For an orthodontic practice, the first step in this process is an evaluation of the practice environment—in business this is called Environmental Scanning. Next is an evaluation of the practice itself in relation to its environment as it is today—in the business world this is called Benchmarking. Next comes Strategic Planning, a logical series of steps that sets the course for future activities. It is the key to the long-term success of any organization. Then current issues and opportunities are addressed in light of the strategic plan and all practice systems are evaluated and measured against the goals and objectives established in the strategic plan, the so-called Outcomes Assessment process that is currently receiving great attention in the corporate world. At the completion of this process, all aspects of the practice are tracked and monitored over time in order to work towards Continuous Quality Improvement.

What Does Strategic Planning Involve?

Every well-run business operates according to a Strategic Plan, and an orthodontic practice should too. A useful and effective orthodontic office plan involves the creation of a vision statement, a mission statement, defining practice values, evaluating the practice’s strengths and weaknesses, identifying critical success factors and setting ambitious goals. We have seen many examples of orthodontic offices that have gone through this process and greatly increased their productivity, while at the same time markedly improving the quality of the professional life for all members of the practice family.

What Organization and Management Issues Need to be Addressed?

Every successful business has developed systems to allow it to run smoothly and efficiently. Some of the ‘systems’ in an orthodontic practice include: organizational structure, budget development, a marketing plan, ‘zero waiting time’ scheduling, job descriptions for all the staff and the doctor, performance reviews, establishing management departments, development of a procedures manual, and various other management issues—many of which are beyond the interest and expertise of the orthodontist to design, monitor and manage.

Profit Realization

For years orthodontists have tried to define successful or admired practices in many different ways. The questions we ask of our colleagues in an attempt to probe them and compare our practices to theirs have run the gamut.

"How many patients do you see a day?" or "How many staff people do you have now?" or we might ask them, "How many square feet are in your office?" or the bold ones among us might even ask, "What’s your gross?"

In an attempt to quantify whether a practice is successful or not, we have always asked the wrong questions. Putting aside the most important issue—that being quality of treatment. There is one statistic we can look at which clearly demonstrates the efficiency and productivity of a practice. It is not questions like those we mentioned above. The key practice statistic is PROFIT PRE DOCTOR HOUR WORKED—or what we term PROFIT REALIZATION.

This number can quite easily be computed as follows:

• Take the gross income for a period of time (perhaps 3 months)
• Subtract from the gross the true expenses from each of the 4 major overhead areas
  • Staffing expenses
  • Your occupancy expenses
  • Orthodontic expenses (brackets, bands, supplies, etc.)
  • Business expenses (postage, stationery, computers, accounting & legal services, etc.)
• Divide that number by the total hours worked by the orthodontist
• The result is the true PROFIT-PER-DOCTOR-HOUR.

This is a clear demonstration of how efficiently run your organization has become.

Now, let me give you some numbers to help you determine how you stack up…

If your PROFIT-PER-DOCTOR-HOUR-WORKED is:

• Less than $200/hr—Needs Improvement
• $200-$300/hr—Acceptable
• $300-$400/hr—Above Average
• $400-$500/hr—Excellent
• Greater than $500/hr—A goal to strive for

Particularly gifted clinicians and business managers may even see their profit exceed $500/hr by utilizing the efficient appliances and techniques available to us and employing a well-trained, well-organized staff.

What Does the Future Hold?

Nothing but great things for the pro-active orthodontist! The good news is that it now appears that insurance companies and the Federal government will have minimal negative impact on the practice of orthodontics for the foreseeable future. The real news is that orthodontists who wish to develop outstanding practices yet remain independent must be aware that changes will continue to occur and all of us must come to the realization that orthodontics is now a complex business/profession. It is no longer possible to attend exclusively to the ‘orthodontic aspects’ of a practice. Attention to the business/management side is important as well. With all of the technical advances at our disposal, the quality of orthodontics will only get better. Add to this the infusion of modern management techniques and it is clear that the future of orthodontics has never been brighter.

Contributed by:

Jerry R. Clark, DDS, MS
Graduated from the University of North Carolina Dental School in 1969 and received his Masters in Orthodontics from St. Louis University in 1975. Doctor Clark is Board Certified and has maintained a highly successful, full-time orthodontic practice in Greensboro, North Carolina. Additionally he is CEO of Orthodontic Management Group (OMG), which offers comprehensive total management services to the independent orthodontic practice. OMG can be reached toll free at 800.621.4664 and at www.orthomgt.com.