It’s the 100th episode! For this milestone, we brought Sabri on to answer the most burning listener questions! We also filmed this episode so you can watch on our YouTube Channel here https://www.youtube.com/watch?v=RGXrYGzkl-o.
Topics:
:11 – When should I begin phasing out of PPOs?
16:55 – What do I need to do to build a good team?
25:50 – What is the simplest way to increase my collections?
Links:
Overhead Sheet - https://www.mgeonline.com/overhead-materials/
Fees & Plans Analysis - https://www.mgeonline.com/fees-and-plans
Hiring Ads - https://mgeonline.com/sample-hiring-ads-2/
Free Consultation - https://www.mgeonline.com/free-practice-analysis
The MGE Communication & Sales Seminars - https://www.mgeonline.com/abc
Team Training Video Courses - https://ddssuccess.com
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Questions From This Episode
When does Sabri say a practice actually needs to get out of PPOs?
It comes down to profitability. Some practices, usually in rural areas or bedroom communities with lower employment costs and rent, still run a genuinely healthy profit margin and don't need to get out right away. But once a practice's margin has dropped from the 35 to 50 percent range it used to run in down to around 20 percent, Sabri says it's time to start crunching the numbers, since taking on an associate at that margin can mean paying them more than the owner is taking home.
Why does Jeff say the standard dental payment model would never work in any other business?
In most other businesses, work isn't performed until payment or a deposit is arranged, a contractor will even file a lien if a large job goes unpaid. In dentistry, it's normal to perform a procedure, incur the lab and material costs, and only then find out whether insurance pays what was expected, with the practice absorbing the gap.
What does Sabri say is the first requirement for building a good team?
Before hiring, the owner needs to know precisely what they're "buying" from that role, whether that's a full, productive schedule or an A/R with no balances over 90 days, not just a vague need like "someone at the front desk." That expectation needs to be made clear to the candidate during hiring, so there's a shared agreement from day one about what success in the role actually looks like.
Why does Sabri say keeping a staff member who isn't working out actually creates more turnover, not less?
Owners often avoid replacing a struggling employee because it feels like a hassle or a failure to admit. But Sabri argues the employee usually already knows the fit isn't right too, and keeping them in a role where they can't succeed just delays the inevitable, while denying that person the chance to find a job where they could actually feel competent and fulfilled.
Why does Sabri say most dentists are really asking "how do I increase revenue" rather than "how do I increase collections"?
Collections is a dental-specific term; in any other business, having to "collect" money is a sign something went wrong. What people actually want is more revenue, and revenue only goes up through sales. Sabri breaks that down into three requirements: knowing how to sell, having enough diagnosed treatment sitting in existing charts to sell, and having an organizational structure that actually gives staff the time to sell it.
Episode Transcript
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Jeff: Welcome to this week's episode. This is the 100th episode of Dental Business Rx, which honestly kind of shocked me, time flies. If you're listening to this from your car on your normal podcast platform, we're also filming this one. We decided to do a couple of things that were special for the hundredth episode.
Filming it was one of them, so if you're watching on YouTube, you already know, and if you're listening in the car, you can also go watch it on YouTube if you'd like to see the episode being recorded. The second thing we decided to do for this hundredth episode was answer listener questions.
These are questions we've been compiling since we started the podcast. We distilled them down to the top six we've received most often. So we decided to spend this episode answering the first three, and we'll do the next three in episode 101.
To answer these, we brought on Sabri.
Sabri: Hi, Jeff.
Jeff: If you've listened to the podcast for any length of time, you know Sabri, our Deputy Chief Operating Officer here at MGE. She's actually in charge of all of MGE's technical delivery, she's worked with thousands of clients, and she's our top practice management expert. So I thought, who better to ask these questions, and you'll get the answer the same way a client would.
I'm putting you a little on the spot here.
Sabri: That's alright.
Jeff: But I don't think these are questions you'll find unusual, you've heard them before. They're tough questions, and they're not just being asked on the podcast, I get asked these too. Alright, let's just roll through them. Sound good?
Sabri: Sounds good.
Jeff: So our first question is: when do I get out of PPOs? This one actually shocked me, I expected it to be "how do I get out of PPOs," since we've talked about that in a lot of places. But it was specifically "when."
So let me ask you that directly. Sabri, I'm a doctor, I'm in a bunch of PPOs. When do I get out?
Sabri: Well, obviously I'm going to want to get you out as soon as possible. But there's quite a bit to how you get out, depending on how inundated your practice is with PPOs, and it's different for everybody, it does take some planning. I'm not saying it's difficult, it just needs to be planned out properly.
Jeff: And of course it depends how inundated I am. If 90 percent of my revenue is coming from PPOs, I can't just drop them off overnight. We actually had one client do exactly that once, you know who I'm talking about.
Sabri: Yes, I do. He dropped everything, including HMOs, overnight, which was a bit of a shock to the system.
Jeff: It shocked even me, and I'm pretty unshockable. But you know what's more shocking about that? That client was actually fine.
Sabri: Well, he did have his marketing act together, he was able to really market and get people in. But that's one of the actions that needs to be in place before you drop plans. So now you're making a decision: I'm going to take on this extra work to structure my practice correctly, train my staff properly, handle my marketing, my reactivation, my hygiene, all of it, in order to be ready to drop PPOs.
Jeff: So now you're trying to place when. My problem with PPOs is that they take all the joy out of business, because they cut your profit margin, sometimes into nothing.
Sabri: And that's becoming more critical, and it's funny, especially with inflation lately. People don't put two and two together, they hear the latest report was 3 percent and think that's the whole story, but that's year over year. If you look at compounded inflation since early 2020, it's close to 20 percent, somewhere between 18 and 20 percent on average.
Jeff: So if you're doing $500 or $600 crowns, even $800 or $900 crowns, your lab fees have gone up, your labor costs have gone up, material costs have gone up, everything's going up. What's funny is, for a while, "get out of PPOs" was a big marketing message of ours, and then it just went away, it wasn't a big deal anymore. People just accepted it, like the sky is blue, I'm going to be stuck in PPOs, like it was an eventuality. And then all of a sudden it's "I can't make a living, that's why I'm stuck in a bunch of PPOs," and now we're starting to get a lot more people asking about it again.
Sabri: It's interesting you say that, because after inflation really started, I was inundated with doctors who were almost frantic, because they were collecting $100,000 or $120,000 a month, which used to be a really, really solid practice, a $1.3, $1.4 million a year practice for a solo practitioner. That was always considered good. But depending on where they were located, how they were set up, whether they owned their building, all of those factors suddenly started adding up, and they were working their butts off for zero profit.
Jeff: Right, and you remember this, back in September of '21, the first time we saw CPI, consumer price index, cross 5 percent year over year, meaning if something cost you a dollar the year before, that's what it cost you now, we started banging the inflation drum. I made a video, we did a couple of podcast episodes on it, and I think a livestream too, because it was a problem.
Sabri: And what I was telling you at the same time, since I look at overhead sheets all day from clients, was that the overhead sheets were going up too, employment costs going up, things like that. Suddenly we had a real problem.
Jeff: So, back to the actual question: when do you get out of PPOs?
Sabri: It really boils down to your profitability. I've seen practices, and I still see them, running around 65 percent overhead, for whatever reason they've negotiated everything well, maybe they're in an area with lower employment costs, their rent or mortgage isn't out of control, and they don't have to spend much on marketing. So they have that buffer.
Jeff: Are those practices normally in an urban or rural area?
Sabri: Rural, or somewhere like a bedroom community where costs can stay controlled. It doesn't have to be the middle of nowhere. I still see practices with a genuinely large profit margin, it's rarer and rarer, but I do still see it.
Jeff: And do those practices need to get out of PPOs now?
Sabri: No, they don't, and some of them don't even want to.
Jeff: But I'd say, even for them, I'd personally see the writing on the wall.
Sabri: I would too. I'd have to ask, why would you cut your profit margin like that, even if it's still good, and be controlled by insurance companies who control your fees? I'd never put up with that personally, but that might not be the focus of an owner if it isn't actively painful yet.
Jeff: It's like the patient with the crooked front teeth, you look at it and think that's easy to fix, and personally I'd fix it, but the patient may not care.
Sabri: Right. So when do you need to get out? Let's say a practice now has a 20 percent profit margin instead of the 35 percent they had back in the eighties or nineties, before PPOs became systemic. When they were at 35, 40, 50 percent profit, they were doing great, they could take on an associate whenever they felt like it. But at 20 percent, now you need to start crunching the numbers, because your margin is getting to the point where if you take on associates, pretty soon you're paying those associates more than you're taking home yourself. And that starts creating resentment over time.
Jeff: So just to clarify, "get out of PPOs now" is your first answer, but if someone says, "well, I'm okay for now," your response would be, what's your profitability, and what are you trying to do with this practice? Are you trying to bring on associates, do you want it eventually run solely by associates, are you trying to cut back your own time? What are you actually trying to do with this business? Or is your margin sitting at 15 percent, what are you waiting for, for it to hit zero?
Sabri: Exactly, it really is entirely dependent on the profit margin of the practice. Which brings up another issue: very often the owners we work with don't have a good grip on their finances or their overhead. They're depending on their CPA to tell them what the P&L says, but the P&L isn't actually useful for this, and neither is that overhead number by itself. It's good for getting loans and for the IRS, and it's fine to glance at quarterly or yearly, but it's not real-time financial management. It doesn't tell you how much you need to spend, not just to run the business, but to expand it. So a lot of owners don't have a good grip on their overhead, and that's the first thing you need to fix, learn how to calculate your overhead properly. That's not something to leave entirely up to your CPA, it's something a business owner needs to know how to do themselves.
Jeff: And from there?
Sabri: From there, determine how long you can sustain this before the profit runs out entirely, with inflation still increasing and these insurance companies not raising their reimbursement. It's almost like an hourglass that's already been flipped over, the sand is running out. I just don't think it's a good idea to operate at that thin a margin for error.
Jeff: You know what's funny, there are all kinds of reasons I don't like PPOs, but the thing that would bug me most, and you know me, if you haven't guessed, Sabri and I are married, is having an external force controlling what I'm allowed to charge for my own services. I can't operate with zero flexibility as a business owner like that. If someone told me, "you can only charge this much for this seminar," that's crazy. I could charge too much, to the point where people don't want to pay, someone could charge $6,000 for a crown and people would say no thanks, and that's fine, that's the market telling you what you can charge. But a company mandating what I'm allowed to charge, that's nuts.
Sabri: It's like the blood flow into your business, money is what keeps the place going, it's how you pay your team, how you reinvest and improve. If someone's controlling that flow, you no longer have control of your business.
Jeff: That reminds me, and you know I'm from the Netherlands originally, my father was a business owner over there. They have a very different economic structure. He owned a large company that manufactured gas fireplaces, and they were very successful, but the way things were set up, the government would tell you and your competitors how many units you were allowed to make and sell that year, essentially a planned economy. So he could never expand the business, despite his marketing, his sales, his superior product, he had the best product, but he could never truly control his own business. We don't have that setup here in the United States, which is great, it gives you the opportunity to build something and control your own future. If you make something people want, and it's good, and you deliver good service with a friendly, well-trained staff, you can do really well delivering a great product to anyone who wants it.
Sabri: And PPOs take that joy away from you by dictating how much you're allowed to charge. It's the same as telling a business how much they're allowed to manufacture, it's really the same as telling a business how much profit they're allowed to make, and what they're allowed to charge for it.
Jeff: And even worse, patients tend to conflate their yearly insurance maximum with what treatment they actually need. What my insurance covers has nothing to do with what treatment I need, zero to do with it. The fact that I have a thousand dollar yearly max, which is also a joke, that was a thousand bucks, maybe fifteen hundred, back in 1994, that was considered good insurance back then, and the patient is programmed to think that number is tied to how much treatment they actually need, as if, well, if my insurance doesn't cover it, I must not really need it. That's crazy.
Sabri: It really is. And the most successful clients we have have simply stopped playing that game. They'll still file insurance for their patients, the whole thing, but their practice isn't built around insurance coverage. The other thing they're doing, maybe without realizing it, is giving the patient control back over what they want their own health to be, instead of letting the insurance company dictate that based on what it's willing to cover or cut costs on.
Jeff: So beyond the personal, moral struggle I have with the insurance game, from the patient's side, the doctor's side, the business side, when it boils down to it, it's pure numbers. What's your profit level, and how much risk do you want to be operating with as a business owner if something goes wrong? Can you adjust your business quickly enough to keep making a profit? And the more you get squeezed, the less buffer you have to actually take the time to get out, because you're not making money anymore. It happened very quickly for a lot of dentists I spoke with a few years back.
Sabri: It really did. So from there, they need to figure out their actual overhead.
Jeff: Which, if it's useful, we've offered this on the podcast before, we have a very thorough overhead sheet, we'll put a download link on the episode webpage, and if you're watching this on video, it'll be in the description too. We also offer what's called a Fees and Plans Analysis, where you talk to one of our practice management experts, they'll look at your fees and how competitive they are for your area, tell you straight up whether they should be raised, and take a look at what plans you're currently in and help you figure out how to get out of them.
Sabri: That's pretty important, honestly.
Jeff: So that covers the how and the when to get out, and I think Sabri answered that pretty thoroughly. All the resources are there, and if you need help with it, we're always willing to help.
Alright, our second question, and this one's a pretty big one, you saw the questions ahead of time.
Sabri: I did see them ahead of time, yes.
Jeff: I think that would've really been putting you on the spot otherwise. So, question two: what's the best way to build a good team?
Sabri: It's interesting, when I looked at that question beforehand, my exact thought was, are you kidding me, in 30 minutes or less? How about "just do it"?
Jeff: But try hard, right?
Sabri: Right, okay. So what I finally landed on is, these are the things you should do, and I'm not going to get into a huge explanation of each one, but it boils down to this. First, you have to work with people who are competent, who fit your practice, and who can actually deliver what you hired them to do.
Jeff: That's a good point, because we're seeing, especially when personnel became scarce, and I remember you telling me this story, I've used it in multiple seminars myself, where a newer client had hired a scheduler, paying top dollar for that area, over $20 an hour, and that person didn't like making phone calls.
Sabri: It was funny, because she ended up moving that person to something like insurance verification, but she didn't have the skill set for that either. And yet the owner kept paying her the same as if she did.
Jeff: So obviously, when you're hiring somebody, you have to first know exactly what you're hiring for, not just "I need someone at the front desk," that's far too general.
Sabri: Right, and I've said this before, but I'll say it again: when you're paying somebody money for anything, you're essentially buying something. So you have to first be really clear with yourself on what you're actually buying from this person. I'm buying a productive, full schedule, that's what I'm buying. I'm buying accounts receivable with no balances over 90 days. Whatever it is, you're not buying the person's time, you're not buying their companionship, that's not what you're paying for, you're buying a product. So you need to know what you're buying, and the other person needs to understand exactly what you're expecting from them too.
Jeff: That's a good point, so that needs to be clear from the start. "I'm hiring you to handle my collections, I'm expecting my A/R to be at this level, it's currently at this level, and that's how I'm going to evaluate your performance." Or, "I'm hiring a scheduler, and I'm expecting $7,000 worth of production on the schedule every day, along with this many sales opportunities."
Sabri: Exactly, you know precisely what you want from this person, and they understand it too, so when you're hiring, there's a basic agreement in place from the start. From there, it's a matter of training that person within a reasonable window to understand how to actually deliver that product in your business. You need a training structure, and checks and balances built into that training, to see whether this person is moving at an acceptable rate of comprehension and execution, based on what you're actually teaching them.
Jeff: Can I ask you something about that? So you've onboarded this person, they've started working, and you're watching to see if they're getting it. How are you actually judging that?
Sabri: Whether they're executing what they're supposed to execute.
Jeff: So how often do you run into this: someone's hired somebody, they've been there two weeks, and you can tell they're just not getting it, but the owner or executive doesn't want to go through the trouble of letting them go and starting over.
Sabri: That happens a lot, and on top of that, it almost feels shameful to them, like they don't want continuous turnover at the front desk, which I understand. But by keeping the wrong person in the wrong position, they're actually creating continuous turnover anyway, because sooner or later it's not going to work out. And the owner needs to understand the staff member usually already knows it's not working out too. In a way, the owner is robbing that person of finding a job that could actually be good for them, where they could feel happy and fulfilled, because when you're doing a good job, you feel competent, and when you're not, you know it, and sooner or later you go looking for somewhere you do feel like a productive part of the team. People want to be happy.
So the owner has a responsibility to train staff properly, and the staff member has a responsibility to take that training, understand the job, and execute it to deliver the amount of product the owner is expecting.
Jeff: So those expectations should be made clear early, as part of the interview process itself?
Sabri: Absolutely. And if it's not working out, it's usually not a matter of "this is a bad person," it's more about what they needed to know, understand, or have the aptitude or experience for, that maybe just wasn't there, or the role simply wasn't a fit for their natural inclination. Some people are good at some things and not others. I have things I'm good at and things I'm terrible at.
Jeff: Well, I can only really speak to the things you're good at.
Sabri: Not on camera, of course not.
Jeff: You're good at everything.
Sabri: Thank you. Anyway, let me get back on track. So, how do you build the right team? It starts with making sure you have the right people in place. Don't hold onto people who don't fit, it doesn't matter why they don't fit, it just doesn't. Train them properly, and quantify that product statistically, so everyone knows whether they're doing well or not. From there, don't let people into your group who are a bad personality match, that happens too, so the team stays tight and there's harmony in the group.
Jeff: We actually have a question later, question six, about exactly that problem, so you can save some of that answer for then.
Sabri: Good. Make sure the group has a shared sense of purpose, that they feel it's worthwhile to work there, that what they're doing matters. And dentistry genuinely is great, you're helping people far more than just giving them a nice smile or clearing up an infection, you're increasing their overall quality of life, it's actually a really cool profession. So let the staff in on how important the work is. Reward your team when they perform well, make it fun, build something where everybody wins, and don't settle.
And don't get lazy about hiring. Sometimes you have to interview 20 people before you find the one who fits. I know it's a pain, and I know after the sixth interview you're tempted to just hire whoever's next, but don't, because you'll just be doing this all over again soon.
Jeff: Trying to save time ends up costing you more time.
Sabri: Exactly, and a lot more hardship, not just for you, but for the rest of the team too.
Jeff: I think that's a great answer, thank you. We don't have a specific download for that one, since what you're describing is really more of an executive and organizational structure topic, which we do teach here at MGE. We do have hiring ad templates you can download for different positions in the practice though, we'll put that as a download, it'll be in the episode description if you're watching, or on the episode webpage if you're listening.
Alright, our third and final question for this episode, with three more next time: how do I increase my collections?
Sabri: It's interesting, because it seems like such a difficult question, but it's actually the simplest one you've asked me so far.
Jeff: I think a lot of people, and I know what you're about to say, but I think a lot of people focus on things like collecting patient over-the-counter portions better, or giving insurance companies a harder time, things like that, which you obviously need to do anyway. Go ahead.
Sabri: So "collections" is an interesting word, because it's a very dental-specific term. In any other business, collections is a dirty word, it means you're chasing after your money, that's not good, that's "getting sent to collections." In any other business, you'd just call it revenue or income. So people aren't actually asking "how do I increase my collections," nobody wants to increase their collections, they're really asking "how do I increase my revenue," how do I make more money.
And in any business, including a dental practice, how you increase revenue is through sales, that's the simplicity of it. If you want more money, increase your sales, not just your production, because you can't actually increase production unless you have more sales in the first place.
Jeff: I want to stop you there for a second, because that's a pretty astute point worth sitting with for a moment. The normal dental business model looks like this: I talk to a patient who needs four crowns, we decide to do two this year because that's what insurance is going to cover, we may or may not set up good financial arrangements, the patient pays however they end up paying, I don't necessarily chase down good arrangements up front. I produce the two crowns, I incur the labor cost, the material cost, the lab fee, everything, and I may or may not get paid in full by their insurance company, maybe the patient's upset because insurance didn't cover what they expected, but I've already incurred the expense. That's the accepted way dentistry has been practiced for a long time, it's changed a bit for the better, but that would never happen in any other business. A plumber or a contractor doing larger work will file a lien on you if you don't pay, and they don't feel embarrassed asking for half down before they start, it's just, half down or we're not doing it. It's funny that dentistry ends up being the exact opposite.
Sabri: That's a good point, thank you for bringing that up. So it comes back to sales, which is a big subject, and something we do full training on, we have the MGE Communication and Sales Seminars, we'll put a link on the episode webpage or in the description. We also have professional sales training, not cheesy sales training, on our online platform, DDS Success, we'll link that too.
Sales isn't a dirty word. Sales is the ability to communicate with somebody and get them to understand what's already clear in your own head. When a doctor looks at a patient, there's no question in the doctor's mind that the patient needs whatever's being recommended, nobody's going to walk around with an infection or with their mouth looking a certain way if they don't have to. So it's really just getting what's in your head into the patient's head, getting them thinking the same way you are, and then money is just a logistic at that point, that's what sales is when it's done well.
Jeff: How to sell without selling.
Sabri: I had to say it. But really, proper sales is just good communication, that's really all it is, and the money is almost incidental.
Jeff: I think the reason sales gets a weird reputation is everyone pictures the car sales guy.
Sabri: Right, but it really isn't like that at all. As a matter of fact, if you're good at selling as a doctor, patients will actually like you more, that's the truth. You might think a patient's going to resent you if you sell to them, but no, people actually like you more when you're good at it, because you're just communicating, you're just talking to your patients.
Jeff: It's a simple answer, but a lot of simple things are extremely powerful. You have to learn to sell better, just not like a car salesman.
Sabri: So it really comes down to three things. How do you increase revenue, not collections. One, you need to know how to sell. Two, you need enough to actually sell, and I don't mean just new patients, you need treatment that's already been diagnosed. If most practices looked at their incomplete treatment list, there's probably millions of dollars sitting on it. New patients only really matter for a brand new practice with no patients yet, most practices with a decent number of charts already have a ton of treatment sitting there, it's just a matter of calling those people back in for hygiene or otherwise, presenting it, and making sure there's enough time to actually diagnose it properly.
And the third thing you need is a correct organizational structure, because if I have enough to sell, and I know how to sell, but I have no time to sell and nobody's helping me, I'm still not going to sell anything.
What's great about all of this is you don't have to be good at it, you just have to be a little better than you already are in order to make more money, that's genuinely all it takes.
Jeff: That's why, when we run our initial sales training with clients, and this is our shameless plug, it's not unusual to see a client come to one of our sales seminars and be up 20 or 30 percent the very next month. The average increase across the first year is almost 300 percent.
Sabri: And they're not even experts at it yet. You'll talk to a client and they'll say, "I've only implemented maybe 20 percent of what you told me so far." That's the lovely thing about it, it just takes a little bit better, sometimes just a little more attention, "hey, you need to present this treatment to your patient," sometimes that alone is enough to increase revenue.
Jeff: It's easy. Alright, that was awesome, thank you. I'm going to cut us off here, because we could genuinely go on for another hour easily about any of these subjects, but we're going to end this episode here. Thank you so much for being on.
Sabri: Of course, this was fun.
Jeff: We'll pick up with the next three questions in our next episode. Until then, folks, we hope this helped, and if you have any questions about MGE, you can find us online at mgeonline.com, or call us at (800) 640-1140. Have a great week, and we'll see you at the next episode. Goodbye.