For many years I have been fascinated by the debate, often it has seemed acrimonious debate, about the merits of “early” or Phased orthodontic treatment. In my early years as a consultant focused on the financial side of the practice this seemed to be a purely clinical/philosophical debate between orthodontists who had received different types of training while in school.
But then I started noticing something: our clients who did 20% or more of their new starts as Phase I (the first part of a two phase treatment plan) were significantly more profitable than the practices who put their 7-10 year old new patients into recall.
Now, before I get a ton of emails from irate orthodontists telling me that clinical decisions must have nothing whatever to do with financial well-being, remember that I am a financial consultant! I know little about clinical orthodontics, and do not need to know anything more about clinical orthodontics. My concern is exclusively the financial well-being of my clients.
So, why are our clients who enjoy doing phased treatment more profitable, generally speaking, than those who do not? Although deeply flawed, the most popular school of thought today is that fewer patient visits create more revenue per patient and therefore greater profit. But does more revenue per visit equate with more profit per patient? The opposing argument is that more revenue per patient generates far more profit than revenue per visit. Evidence says that this latter argument is the more accurate.
The argument is not nearly as simple as it seems. With most of our clients, the Phase I fee plus their Phase II fee is equal to at least 125% of their full start adolescent case fee. By itself, this greater combined fee would probably not be sufficient to create more profitability per patient than a regular adolescent full start due to the increased number of patient visits and the increased staffing and workload requirements. But again, it is not that simple!
At the age group where Phase I treatment is normally diagnosed, both the patient and the parent are highly motivated. Mom often has peers whose kids are in early treatment. Mom is worried about their beautiful child’s physical appearance. Kids at this age have no social stigma attached to appliances in their mouth and, to many kids, orthodontic treatment at this age is kind of cool! On top of that, Phase I treatment is not expensive. Case acceptance rates on patients with Phase I treatment diagnosed averages 85% and is 90% in many practices! When these motivated kids and motivated parents are told they don’t need any treatment now and that they can wait a few years and come in to have regular braces, within a couple of weeks a significant percentage of them can be found to be in Phase I appliances from your competition. But there’s more!
A minimum of 20% of all patients put into recall never get to the point of having treatment diagnosed. Some move out of town. Some have financial setbacks. Some have different priorities a few years from now than they have today. Sometimes it is more simple and mom has decided she doesn’t like this young teenager nearly as much as she did when he/she was 10. But there is still more!
The case acceptance rate of young (age 7-10) kids placed into recall and then diagnosed as needing treatment when they are 11.5 to 12.5 is only about 75% to, at best, 80%. So, you have lost 20% of those 7-10 year old kids who did not remain in your recall system and you lose another 5% to 10% of them who simply choose not to start once treatment has been diagnosed. On top of that, remember that the combined case fee for a Phase I plus a Phase II fee is at least 125% of the fee for that full start adolescent!
The bottom line is that the Production Per Patient (PPP), calculated by dividing gross production by the number of first time (no Phase II’s) starts, is more than $900 greater for our client’s doing Phased treatment than the PPP of practices doing little early treatment. That additional $900+ in revenue creates a great deal more profit than the overhead created by having 8-10 extra patient visits – especially since almost all practice overhead is fixed!
If early treatment is not your thing, then you should not be doing it. If you enjoy doing early treatment though, you are very likely to have a good deal more net than those who do not.