Over the past three years, many practices have suffered serious declines in new patient exams. Some have also seen accompanying declines in their rate of conversion (case acceptance). In general dental offices, new patient flow has declined slightly but the rate of case acceptance, as measured by production per doctor hour worked, has declined dramatically. In orthodontic and most other specialty offices, new patient flow has declined sharply while case acceptance has only declined slightly. In all affected practices, production has declined and profitability has crashed.
This has happened in each of the six previous national economic downturns we have tracked over the past 30 years, as well as during each of the 15+ regional “recessions”. Remember what the Spotted Owl debacle did to the west coast and what the Caterpillar Tractor strikes did for Peoria? Everybody should remember when the running joke was “Would the last person to leave Seattle please turn out the lights?” when Boeing had its problems.
It is the length of this down turn, not its severity, that has made daily life within these practices awfully uncomfortable. Many doctors are in, or very close to, panic mode. In that situation many doctors make poor choices and become much more susceptible to lousy recommendations made by others, which brings me to the point of this article.
Roughly 18 months ago, after seeing their clients’ numbers in steady decline for the previous two+ years, a couple of relatively well-known consulting firms starting making recommendations to join Managed Care, to accept Welfare, to initiate television and radio advertising, to increase their Yellow Page presence, and/or to utilize discount coupons, all in an effort to increase new patient flow and to increase case acceptance. That consultants I consider to be reasonably intelligent and consultants who have been around almost as long as I, and who know full well the true cost to a practice of traveling that path – the path of “short term gain for long term pain” – is unconscionable to me.
Unfortunately, even a few of our own clients were susceptible. One story in particular I thought would be worth mentioning. This doctor had seen a 12% decline in new patient flow over the previous two years. His case acceptance was actually up one point but the total start count was down and, after the second year of very low profitability he began to panic. He hired a Practice Management consultant who promised to help him with marketing. The consultant’s first recommendation was to print $250 discount coupons and to distribute those coupons to each of the general dentists in his community, even to those who were not referring. The doctor gave ten of those coupons to each of 16 local general dentists, two of whom were good referral sources.
A few months ago, I had a scheduled call with this client to discuss his performance. His new patient flow had increased quite sharply during the 3-4 months following the issuance of his coupons. Although his case acceptance rate declined dramatically (even with the $250 discount!) his gross production was up enough during that period to more than make up for the lost profitability related to the reduced fees. Sounds OK so far, but wait, there’s more!
I noticed that in spite of that temporary increase in production and revenue, his overall performance for the recent year was miserable – much worse than the previous year. Even with his short term increase in new patient flow, his overall new patient flow for the year had declined almost 25% from the previous year and his cash flow was the worst it had been since his second year in practice. He related a very sad story.
Five of the sixteen doctors, none of whom had ever referred before, had passed out all of their coupons and one had even called and asked for more. Roughly 35 of those patients came in for exams, only four of which were “A” category patients. Turns out that those five dentists all were advertising dentists, with big Yellow Page ads, who, besides “Catering to Cowards,” also catered to the weakest segment of the patient population. Thirty of the patients were diagnosed as needing treatment and nine patients (30%) started into treatment.
Three additional doctors receiving the coupons sent 2-3 patients each which resulted in four additional case starts, and six of the sixteen sent no patients. Here is the most disturbing part. Of the two great referring doctors that our client had, one used up all of his coupons – to patients he would have referred anyway. The second doctor referred no one at all since the date he had first received the coupons. Our client had a staff member speak to the hygienist at the no longer referring practice who said, “Dr. X was shocked to find out that your practice was in so much trouble that you needed to offer discount coupons and he is no longer comfortable referring his patients to you.”
It is going to take our client a very long time to recover from the horrible impact this type of marketing has had on his practice.
The moral? There is no easy way out! Orthodontists and dentists sell an elective product. When the economy is weak, or when the public’s attitude about the economy is poor, those who sell elective products and services will always suffer. Those who take the high road, those who maintain a healthy fee structure, those who do quality internal, community and referral based marketing and never cross the line into advertising, those who resist seeking new patients from PPO’s and other forms of Managed Care, and those who are unconditionally committed to making their patient’s experience in their office beyond their expectations, are always those who go through economic downturns with the least damage and are those who recover the quickest when the economy rebounds. Stay the course!
