3 common financial mistakes and how to avoid them

When it comes to making a dental practice profitable, some financial mistakes are all too easy to make. This is largely because dentists get very few if any business classes in dental school. Yet launching a private practice makes you the CEO of your own company while you’re also working in your company.

It can be very difficult to see the financial mistakes you’re making and the opportunities you’re missing. The good news is you can learn to avoid them and gain the financial freedom you’re looking for.

Sarah Traeger.

In this article, I will share three common financial mistakes that dentists make, which range from taking one’s financial health for granted, keeping the same fees for years, and holding onto old software or outdated systems. By understanding these financial mistakes, you can see how to avoid them for your own sake and everyone in your practice. 

1. Believing all is well without regularly reviewing your practice performance and staff billing processes

When the dental practice is doing fine, it’s easy to become complacent. This is risky, though. Too many dental teams work long hours without tracking how productive and profitable the practice is. It’s important to let the numbers tell you how efficient your team is in collecting payment for all the services you’ve produced, even when it looks like everything is going well. 

Now I’m not telling you to do a weekly one on one with every staff member. No one should be micromanaged. However, it’s not unreasonable to run certain reports and take note of each team member’s performance to see where changes may need to be made. 

Regularly run reports

Reporting should be a regular occurrence at the dental practice, but we’ve seen many fail to do so. When you keep an eye on production, your collection rate, your aging report, what your write-offs look like, and more, you can gauge what adjustments need to be made. 

You or your admin team should run the following reports (all of which can be done in your practice management software): 

• Production report (gross and net)
• Write-offs report (insurance)
• Adjustments (courtesy, no charge, etc.)
• Collections report (gross and net)
• Accounts receivable report (insurance and patient and aging)
• Daily deposit report (broken down by cash, patient checks, patient credit cards, insurance checks, electronic funds transfer, electronic remittance advice, and insurance credit cards)
• Total outstanding insurance claims by insurance company over zero days
• Total outstanding insurance claims by insurance company over 30 days

These are all financial reports that show how well your dental billing process is working. If your process is efficient, you’ll see good numbers such as:

• Insurance claims over 30 days that are 10% or less of outstanding claims
• Write-offs that are within a consistent range month to month
• A collection rate that is 98% or higher

If one or more of these looks different than you anticipated, you’ll need to pinpoint where the issue is. It could be an issue with your team’s schedule of performing tasks. For example, if your total amount of outstanding insurance claims over 30 days old exceeds 10% of the total amount of outstanding claims over zero days, you may want to explore why.   

Why are there so many unpaid claim payments on your books that are not in your bank account? 

To find out, ask yourself the following questions:

• How often are claims that are over 30 days old being worked by your team? 
• Why are your claims getting denied? 
• Are successful appeals being sent? 

How often is someone figuring out why claims are denied, and what are they doing to get them appealed? If it’s less than once a week, that process needs to be revisited and addressed. This also means addressing the performance of your team members. It’s what they don't know about running a clean, efficient billing system that can hurt your bottom line. 

Assess whether training or a change in operations is necessary 

It’s very common for dental practices to have long-term team members. We’ve seen office managers stay at dental offices for 20 years.

Unfortunately, 20 years of loyalty can sometimes cloud judgment. If collections are low or processes seem old-fashioned or inefficient, some outdated skills or habits might be holding you back. Some training to update current staff or maybe a change in how you complete certain tasks can improve your cash flow.

This doesn’t necessarily mean firing anyone, but perhaps you need to make sure that whoever handles your insurance claims is devoted to staying up to date on insurance codes, regulations, and best practices.

Think about looking into dental billing training or outsourcing some part of your billing process. Dentists are sometimes resistant to using a dental claims service, because outsourced billing is relatively new in the dental industry. But it can help your team improve their processes while also bringing in more money. Most medical practices outsource their billing, why shouldn’t dentists? 

2. Not balancing your dental fees annually

When was the last time you assessed the fees you charge at your dental practice? If you haven’t adjusted your procedure fees in your system in more than a year, that’s already too long. 

Your fees are determined by:

• Time
• Laboratory and material expenses
• Total overhead used for the procedure
• The practice's overhead
• Education and training to continue to provide quality dentistry to your patients

A general dentist should balance their fees to the 75th to 85th percentile for the practice's  ZIP code, while a specialist would balance their fees in the 85th percentile and higher.

Many practices only update the hygiene fees every other year, while the dentist’s fees are updated annually. Patients may notice the increase during the hygiene visit, but they rarely know how much a mesial occlusal composite on tooth #3 is. Balancing your fee annually helps to avoid big jumps in your fees.

Take a look at your explanation of benefits (specifically the section on nonparticipating plans). Do you see your full fee accepted, or are you slightly higher than the insurer’s accepted fee? If your full fee is accepted, your fee may be low for your ZIP code. To continue to grow your practice and maintain your profitability, it is necessary to increase your fees.

3. Using outdated systems and software

You know the phrase, “If it ain’t broke, don’t fix it?” Well, we happen to disagree! You might think as a dental professional you don’t have to evolve and adapt your software and systems, but it’s pretty crucial to your profitability, productivity, and professional growth as a practice. 

Is your dental practice management software, patient communication software, or insurance verification software up to date? Are there software updates that have some great new features to explore with new service offerings? 

Do you use your software charting program for clinical notes, perio charts, tooth conditions, treatment plans, etc., or are you using paper charts/files? Is your current internet connection strong and fast, or are you using an outdated internet provider?

Your choices have a huge impact on efficiency, which saves time and money. All of these factors can affect your profitability. It can also improve your patient’s dental visit experience. 

Always be adapting, evolving, and changing with the times

If everything in your office seems outdated -- especially your methods of payment or scheduling system -- your patients will notice. Many patients, regardless of age, want to feel confident that your tools and techniques are up to date with the latest and best treatments in dental care.

Not only do your hardware and software need to be up to date, but your team needs to be continuously educated on the insurance industry.

Insurance rules, regulations, and policies are always changing, and you can also count on codes changing every single year. Keeping up with this information and always taking time to learn it is what makes or breaks your claims process.

If you choose to ignore the ever-present changes in the insurance industry, you’re going to face more claim denials and possibly even commit fraud through noncompliance.

Ready to run a profitable dental practice?

When it comes to your dental practice, you deserve to enjoy going to work every day with confidence that your systems are promoting your financial health. When you do, you’re better able to provide a great patient experience, help employees make their best impact, and also feel proud to take great care of your patients and increase your revenues.

Avoiding financial mistakes common in private dental practice can help you in reaching your goals. The overarching theme is to always be open to seeing how you can improve your processes, run your reports, evaluate your team’s performance, make necessary changes, assess your fees according to the economic environment, and always evolve your systems.

Sarah Traeger is the content manager for the dental billing company Dental Claim Support.

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.