By Drew Hinrichs, CPA, CEO of Engage Advisors
Dentists have done a good job of weathering the ups and downs of the pandemic, but we’re not out of the woods yet. While most dental practices are back to pre-pandemic levels of productivity, the virus has triggered a cascade of developments that could have a major impact on profits. Here are a few ways to manage the COVID economy and make sure you avoid taking an unplanned pay cut in 2022.
Challenge: Increasing Cost for Staff
Paying your staff is the single biggest expense related to running your business and that cost is going up. The current labor shortage affects every industry and puts employees in the driver’s seat. Before you agree to wage increases you may not be able to afford, consider some options.
- Leverage Technology – Since there currently aren’t enough people to fill the available jobs, one approach is to look at how you can do more work with fewer people. There are a lot of great software solutions designed to help you do just that. You’ll need to evaluate your options and make a realistic plan for implementation but leveraging technology can significantly improve efficiencies and reduce the number of personnel hours you need to get the same work done.
- Offer Employee Bonuses – Consider a bonus structure for the entire team where they’ll make more money when the office makes more money. This approach incentivizes employees to help grow the business and increase profitability while rewarding them for their hard work. Everybody wins!
Challenge: Fee Schedules that Don’t Keep Up with Rising Costs
When it comes to getting a fair deal on reimbursement for services, the big carriers can seem intractable. This lack of flexibility is hard to take given that during the shutdown, everyone kept paying their dental premiums even though most providers were only treating emergencies. Now, when practice owners are still trying to deal with the backlog of patients, Cigna, DenteMax and Aetna have all announced plans to lower their fee schedule in 2022. It’s a good reminder that it’s important to pay attention to your PPOs. If you’re concerned that your PPO is becoming a financial drain on your practice, you have options.
- Renegotiate Your PPO Contract – If the idea of trying to negotiate with insurers is daunting, don’t worry – you don’t have to do it on your own. Firms like PPO Advisors know all the tricks insurers use to lower reimbursements and can negotiate a new fee schedule for you. They offer a free analysis so you can find out exactly what kind of increase you’ll get before you’re asked to commit.
- Cancel Your PPO Contract – This may sound extreme but it’s a decision more and more practice owners are making. With some planning and thoughtful communication, you can avoid losing those clients who will become out-of-network. You can also look at how an in-house membership plan can take the place of your PPOs, possibly giving both you and your patient a better deal.
Challenge: Rising Costs Due to Inflation and Supply Chain Problems
We’re all bearing the brunt of higher prices due to COVID-related supply chain problems, which means you’ll probably pay more for supplies this year than last year.
- Consolidate Buying Power – Your best bet for minimizing higher prices is to enhance your own buying power. One way to do that is by evaluating your list of suppliers to determine if it makes sense to consolidate purchases. By becoming a more important customer to one supplier, you may get a better deal. Another option is to leverage your buying power by joining a group. A growing number of dentists in private practice have found they can maximize their purchasing power by working as a collective, allowing everyone to lower their costs.
Be Proactive to Avoid Loss of Income
By planning ahead and being proactive, you can minimize the financial hits to your practice and avoid taking an unplanned pay cut this year. If you have questions about how to protect your practice from the ups and downs of the pandemic, schedule a call with our team at Engage Advisors. We are ready to help you navigate the unexpected twists and turns of the pandemic and help you build a financially healthy practice.