“Whenever you see a successful business, someone once made a courageous decision”-Peter Drucker
Peter Drucker is one of the best-known and most widely influential thinkers and writers on the subject of business management. His writings have predicted many of the major developments of the late twentieth century including the emergence of the information age. His wisdom helped American businesses thrive and his teachings are especially relevant in the current challenging economic times.
You may know that I purchased my dental practice in May of 2007 in partnership with Dr. Paul Nielson. We bought what might be generously described as a ‘fixer upper’ and have been working diligently ever since to evolve this practice into our ideal practice. It hasn’t been easy. In fact, it has taken a massive amount of effort, but today it is a much different practice than the one we purchased. We faced our courageous decision early on.
About four months into our ownership, we had our best production month yet. However, all was not right. By the end of the month we had a cash flow crisis. I checked the computer reports and discovered that our collections seriously lagged behind our production. This seemed odd to me because I knew that our business team members did a great job of collecting. Further analysis revealed that the problem was massive insurance company adjustments. We didn’t have a collection problem, we had an adjustment problem!
Dr. Nielson and I reviewed our options. Early on we had created a practice philosophy that is really quite simple; namely, to follow ‘The Golden Rule’, to treat patients the way we would like to be treated. As we were reviewing our options we could have used a cheaper lab to allow us to be profitable with the reduced fee schedule of some of the insurance plans. However, this decision would have violated our ‘Golden Rule’. If we wouldn’t accept inferior lab work in our mouths, then we wouldn’t place it in patient’s mouths. Our courageous decision was to eliminate any insurance plans that would not allow us to follow our practice philosophy and maintain an acceptable profit.
Approximately six month later, we had eliminated all but five PPO plans. The decision to eliminate most plans in our practice set about an entire chain reaction of consequences that we had to navigate. Perhaps most significant is that we had to develop a comprehensive marketing plan to attract new patients since we could no longer rely on being listed in insurance company directories as a source of new patients. In future blogs I will share our marketing plan and other strategies we used to grow. While it hasn’t been easy, our courageous decision has proven effective. In 2010 our practice grew 24% over 2009 (a record year) with the same team and the same hours. More important than the financial performance is the fact that Dr. Nielson and I can sleep soundly at night knowing that we are providing our patients with the care that we would want if we had the same condition. Keep smiling!