How would your practice cope if you were suddenly down by one third of your revenue?
For most dental practices and small businesses in general, losing that amount of revenue would be devastating, possibly even the end of the business. Suddenly you’re frantically trying to cut back costs or bring in new sources of income.
Those are really your only two options besides shutting down.
Unfortunately, this scenario has been playing out in dental practices across the country. Incomes tend to have remained stagnant since the Global Financial Crisis of 2007-2009, and businesses are often vulnerable to volatility in their revenue streams.
We were no different. In fact, we had some issues go down that really forced us to scramble when we lost a third of our business revenue.
Let me tell you a story about what happened in our Illinois-based practice.
To give you a bit of the back-story about what lead to the decline in our revenue, we are based in Springfield IL and no state in the history of the Union has gone as long without a State budget being approved as Illinois has right now. Besides a temporary partial budget approval in June 2016 (which didn’t include paying dentists), at the time of writing this, the state has gone nearly two years without a budget.
What does this have to do with our own financial crisis?
We, like a number of other dental practices are contracted to provide care to patients who use Delta Dental, the insurance company that happens to be the provider for the state-funded dental plan. Given that we are in the state capital, a number of locals tend to be employed somewhere within the government system, which is certainly true for our patients.
Two years ago, we received notice from Delta Dental that they would cease payment on the state-funded dental plan. This was a roll-on effect from no state budget being approved—the state isn’t paying them and they’re not paying us.
The problem for us and other practices like us? We are still contracted to see those patients and cannot collect any money upfront. From the patient perspective, they’ve still been doing their part by paying premiums and should expect to get care for their money, but from our end, we have to incur the care expenses without getting paid any time in the near future.
Our revenue dropped by a third almost instantly.
What would you do? Would you seek to end the contract with Delta Dental? Well, if we had tried to do that, we would have been in an even worse position. Other local, private-sector employers also had Delta Dental plans and we would have lost patients from all of those other companies had we let that contract go. We also didn’t want to lose the relationship with our government employee patients. We had grown significant long term patients relationships that we truly didn’t want to lose. Also, we’d worked hard to grow the business from scratch over 13 years and it’s not something we were willing to risk.
We needed new ways to bolster our revenue or create new revenue streams, and we needed them fast.
What could we do differently to boost our practice? Being in the situation where revenue has dropped dramatically can be a catalyst for some big changes.
I had always had an idea for how I would build a way for dentistry to be consumed that is different from what people had been used to. If the old ways got us to this point, perhaps now was the time to implement a new way of managing our practice and patients.
Is there a better way to reach dental patients than what you’re doing now? Click To TweetMy thoughts were that there had to be a better way to reach patients and to provide a service that actually made it easier for them to consume dental services. How many patients have you met who only come in when there’s an emergency? What about those who have to pick and choose the work they get done because their insurance just doesn’t cover what they need?
Another factor that is important to our practice is that we remain patient-centered and build relationships based on the mutual desire to bring them to good health. We dislike the model of short-term, low-value, impersonal transactions that has characterized a lot of dental care in recent years.
Sometimes the whole idea of pushing through “numbers” of patients seems so transactional and greasy, something which we were keen to avoid. (I wrote a book called Dr. FriesWithThat, which talks about this problem and how we need to focus on getting patients to health again). A lot of advice that you see for growing a dental practice tends to fall under that transactional variety, without any focus on the relationships with patients.
We decided to take this opportunity to bring the idea for Health Assurance Plan, which had been brewing for a while, to fruition. Put simply, it allowed us to build plans that suit our practice and our patients, where patients pay a monthly fee for a membership plan.
Unlike traditional insurance, Health Assurance Plan allowed patients to take a plan level in alignment with their needs, get good dental care, and not face any surprises when it comes to billing. This opened us up to reach new types of clients, many who had been under-served previously, had problems with insurance, or who simply couldn’t afford insurance. The idea was to make health simple for patients with a plan that was simple for our practice to manage.
So, what happened in our practice when we put Health Assurance Plan in place?
First of all, the feedback from patients was universally positive. We began by running Health Assurance Plan as a pilot program for a year to see how it went. Patients love that it is extremely transparent as far as what things cost and that they actually saved an average of 34% on costs.
Previously, we had been unable to offer discounts for uninsured patients, but with Heath Assurance Plan we were able to offer discounts that incentivized patients to seek care. It also helped them to get on the right path to good dental health. Instead of only coming in when there’s an emergency or having to be selective about care because of cost or insurance limitations, they can see a clear pathway to getting and maintaining their health.
You know what else we found? When you make the conditions and plans simple, patients will consume more. Removing complexity goes a long way when creating health with patients.
The bottom line for us was that when we added Health Assurance Plan, not only did we make up a good deal of revenue that we’d lost, but we grew our patient base, community size, and overall revenue. We also stabilized cash flow with regularly recurring membership payments. Both of our practices in Illinois are profitable.
One of the huge pluses of Health Assurance Plan is the ability for practices to design plans that meet the needs of different types of patients. You can design your program as an incentive to get patients to health and keep them there.
For example, a patient who needs a lot of care to get to a good level of dental health might start out on a higher tier plan. Now, we know cost is often a barrier for dental treatment and people don’t want to face a difficult time if they need to scale back, as they would with insurance companies.
Once that patient has reached good dental health, they have the ability to easily downgrade their monthly plan to one that is designed for maintaining their health. On average, our patients have saved 34 – 38% on the cost of care compared to what they would be paying with insurance.
We have been able to build our practice around proactive, health creation, without the constraints that are often involved with dental insurance. Health Assurance Plan has proved to be a straightforward solution that has allowed us to live our mission and better serve our patients.
Losing a third of our revenue could have turned out to be a total disaster, but it became a catalyst for change that has been win/win for the practice and our patients. Would we recommend Health Assurance Plan to others? Absolutely! It just might be the boost you need to grow your dental practice.