This is number six blogpost in this series The Business of Owning a Dental Practice. If you haven’t read the first five blogs in this series, please take some time and check them out.
Todays topic is all about dealing with Benefit Plans. I know this is such a hot topic these days. There are specific coaches and consultants out there who’s sole mission is to help dentists get completely out of these Benefit Plan contracts and others who help dentists increase the payments they receive from the insurance companies, and yet others who help with efficiencies and team training. Nothing wrong with any of these approaches and in fact these consultants do good work.
My approach here will be purely from a profitability perspective because that’s what I do. I believe good business decisions are made from true data. It takes some work to make sure the data you are analyzing is true data. It’s only true if the input data is correct and if all of the information needed is included.
Profitability must include cash flow. In order to have true profits available for distribution, there must be more cash coming in than going out. Seems so simple but I find a lot of business owners are not able to see these true numbers.
A profit and loss report doesn’t work. A balance sheet doesn’t work. Even together these reports don’t give the full picture. And that is why Mike Michalowicz developed the Profit First method. I’m happy to say it works! I am a Mastery Level Profit First Professional. This means I have training and am certified with Mike Michalowicz Profit First program and I use the core principles of his system.
However, I realized that dentistry is different – that’s why I wrote the book, Profit First for Dentists. I have tailored this system to dentistry.
But now back to the topic of Benefit Plans. I believe you must first know your true profitability from your true cash flow numbers. These numbers are key to then figuring out a specific spending plan. You need to know exactly what you spend for all the things in your practice. What is spent in each category of overhead must then be factored into the Cost Per Procedure along with the amount of time it takes to do that particular procedure.
Once you know your actual cost that also includes Profit – because why would you keep doing something that does not generate profit?, then you can complete a true analysis of all of the benefit plans you are contracted with. You can then make an educated business decision about each plan.
Do I stay or do I go? Collect the data, do the math, and then make an educated decision.
Stay tuned here and I’ll be back next week with another topic in our blog series, The business of Owning a Dental practice.