Dentistry Uncensored with Howard Farran
Dentistry Uncensored with Howard Farran
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1142 Lessons from the largest DSO with Patrick Bauer, President & CEO of Heartland Dental, which has 915 dental offices : Dentistry Uncensored with Howard Farran

1142 Lessons from the largest DSO with Patrick Bauer, President & CEO of Heartland Dental, which has 915 dental offices : Dentistry Uncensored with Howard Farran

2/18/2019 5:26:07 PM   |   Comments: 1   |   Views: 329

Pat joined Heartland Dental in April 1997, bringing over 23 years of experience in dental and healthcare operations management to the company. As President and CEO, he is responsible for the oversight and management of all operations and day-to-day functions of the company.


VIDEO - DUwHF #1142 - Pat Bauer



AUDIO - DUwHF #1142 - Pat Bauer



A certified instructor for the Advanced Achievement Leadership program with Dr. Gerald Bell at the University of North Carolina, Pat is committed to building and promoting professional as well as personal growth for all HDC affiliated doctors and team members. He was the founding president of American Academy of Dental Group Administrators and a certified trainer for Vantage Institute. He attended Concordia College.

Howard: It is just a huge honor for me today to be podcast interviewing the legend Patrick Bauer president and CEO of Heartland dental that has probably eight or nine hundred offices. Pat join Heartland dental in April in 1997 bringing over 23 years of experience and dental and health care operations management to the company, as president CEO he is responsible for the oversight and management of all operations and day-to-day functions of the company. A certified instructor for the advanced achievement leadership program with Dr. Gerald Bell at the University of North Carolina, Pat is committed to building and promoting professional as well as personal growth for all Heartland dental care affiliated doctors and team members. He was the founding president of the American Academy of dental group administrators which is right here in my backyard they're right up the street here in Phoenix and then he is a certified trainer for the Vantage Institute. He attended Concordia College and Pat I just I love it when you come on the show because, here's a dentist living in one office probably 75 what would you say 70% of dentists are solo practitioners by themselves?

Pat: Probably still 70% yeah 70, 75 yeah

Howard: and there they wear so many hats and they're they're barely trying to do what they do in one office and here they have the opportunity to listen to a guy like you who been in dentistry as long as I have we're the same age we're both born in 62 even look even though I look like I'm your older fat brother they're actually the same age it must be your hair and I what I want to do is get you on the show for two reasons number one what could you what have you learned a mangie how many offices are you guys up to now?

Pat: About 915

Howard: 915, so that's about 914 more offices than everybody listening on this show and like say you've been in practice management in dentistry you are a founding member of the American Academy of Dental Group Administers. I wanted to get you on to what would have you learned running 915 offices that my homies could take advantage of and help with their one?

Pat: Well it's a pretty good question because we talked about it quite a bit, all we are is a collection of offices but each one is its own microsite that is just like any other solo practitioner. So we're locally branded so all of our offices have a local brand name and act as their own small dental practice. So our biggest practice is probably McKinneydentist.com if you've heard of them but Marvin Berlin in McKinney, Texas and they are four doctors we have one in Virginia Maryland area actually that has maybe four doctors but the rest of them are one two doctor practices. So they're just like any other solo practitioner out there and what we do is support them so that they can be successful in the communities they serve. It's not complicated, it gets more complicated when you have scale and large but in the end it's about how we service and help that doctor be as successful as he can be or she can be in the location that they're in. So it's literally a solo practice we have our whole team is there to help them what do you want to accomplish doctor what do you want to do what kind of dentistry do you want to do we force them to write what are their goals and then we really help them get it. So it's even though we're 910 offices we practice as if we're one practice 915 times that makes sense and so all we're trying to do, I mean I wake up every day it's very simple all I have to do is figure out how to support our doctors and their team members in the communities they serve so they can deliver the highest quality dental care and experiences to the patients they see period but it seems more complicated because we're big and we're corporate and got on a legal team but I've got a legal team to help our doctors. I've got a you know a marketing team to help our doctors they understand the patience of those doctors so they can get the kind of patients they want to see in the communities they serve. So we're locally branded we're in my customer is a dentist and so a dentist, our dentist customers typically want to be in a middle to upper-middle class suburb where they can practice on the kind of patients they want to practice on we see no HMO we see one less than 1% Medicaid and that's by choice for those doctors and see it. So we're pretty much lots of we have lots of practices don't take any insurance, so it's whatever that doctor wants we can help them because all the back office stuff comes off their back so they can concentrate on really taking care of the patients they want to see so that's a long answer for a short question but that's all we do it's not it's not as complicated as people think.

Howard: So you support them and what what would you say HR, legal, marketing, or well what all those things are legal marketing, is it accounting?

Pat: Oh yeah all those things, accounting Accounts Payable you know maintenance if they need help all the things that distract them from taking care of their patients we can take care of over in the backside. What we also have is the luxury to be able to help them in their practice in a consultative approach. So if you think about you know Goldstein Garber and Salama are you know who John Cranham is who runs the Dawson Academy these are people that are affiliated with us, so they have some of the best dentists they can get the best advice from at the same time plus our systems work so our systems and how a practice can be developed so we hire last year we hired probably a hundred and seventy brand new grads and so we're able to give them the kind of training not only clinical but leadership and how a system works within a dental office that they can take care of the patients the best way they can. So we're just have we have both best of both worlds I can take that the burden of the back office stuff and I have enough experts that can help them within their practice that their while they're running it, so I've got the best of both worlds to help our doctors be the best they can be.

Howard: how many dental dental students did you hire last year 170ish

Pat: 170 ish

Howard: Is this 170 ish is because one of them was Irish you're not sure whether their whole? or half?

Pat: Yeah, well you know I don't have data I could lie

Howard: Well you know I this is Dentistry Uncensored and I like to just tell like it is because I'm not on this show to make friends I'm on this show to tell him you know that they're their own father would tell him what they really thought and not only a schmuck would tell him what they want to hear. When I was in graduated 31 years ago the only people that were higher associates was the Army, Navy, Air Force, Marines, and now I really commend Heartland for hiring 107 graduates because I'll tell you the truth I I don't want them I've tried them over the years you know it takes some an hour and a half to do an mod filling and then it falls out a year later and I'll tell you what I have them I have you know dental associates are tough. The you know the Millennials they change jobs a lot they have a lot of high turnover but I'm convinced from my podcasts and my data that you keep your dental students the longest mainly because they tell me that they have so much access to continue education. I mean I I've had so many Heartland dentists on this show we've done 1200 episodes and they come on and say oh my god Heartland said if I stayed with them five years I'd get my fAGD, I could get my diplomat International Congress oral implantology and they went there because of the mentorship opportunities available of something a scale of 900 offices that old farmer Joe dentists in Parsons, Kansas might not be able to hire them.

Pat: That's exactly right I mean I just got off the phone with Steve thorne cuz he's got the same problem he doesn't probably hire as many new graduates from Pacific dental services but we're all trying to figure out how can we help our doctors get the learning curve sooner rather than later, why does it have to go slow, why can't we help them be better dentist faster give them access to the right education faster so they become better to the communities they serve faster and that's all we're trying to do. Rick longtime figure it out you know what it doesn't have to be this hard why is it so hard for a solo practitioner it shouldn't be this hard and we can set up the systems properly to train them the way most dentists would want to be trained give them the right clinical not only clinical but also leadership because you know that's what makes a difference in a practice and do it faster. That's all that's all we're trying to do and so we they can get 200 CE in it's their first year I mean up to that much and thats alot.

Howard: You know your founder Rick Workman he was on Episode 37 he was one of the first guys I podcast he's episode 37 and on YouTube which our youtube channel youtube.com/dentaltownmagazine hell he had 3,000 views and Steve Thorne who you're talking about with civil dental care had a thousand views and both of those guys have flown out here and see me before. I love those guys they're some of the best guys in dentistry and they really are mean legis teeth or me he did a dental missionary and his wife adopted two kids I mean how was that I mean not many dentists take their wives on a missionary trip and come back with two children but it's but you guys are in the limelight so if you climb the pole the highest everybody throws arrows at you and I always see it the opposite. I mean like when we started a dental town online CE. Well that was a mighty I'm in Phoenix I was watching University of Phoenix just exploding and after about the 10th patient that came in working for University of Phoenix online in 2006 but I thought oh I guess I'll start that and now we have you know 400 classes with a million views all ADA approved. So I always steal from the smartest people and if you had Rick workmen aren't the smartest people that Steve Thorne has gotta be you know right behind you Rick workman was...

Pat: Well we do the same thing Rick has stolen things his whole life and so have I. I mean but all you do is you keep going out there and you try to figure out what's working and what's not working whether it be you know what are we learning from KKR what are we learning from all the people we have that can help our doctors be better that's all we do we're not again it we're not, we're smart people not saying we're not smart but we're not dumb enough to think that we create everything on ourselves we just keep on copying genius. If it working you know when did we start using headsets after I believe you said you should use a headset in your offices because only the best stores in America use headsets if you want to help your patients better you wear headsets so all of our officers wear headsets now do I get doctors ago I don't want to wear headset well if you don't want to be world-class in helping your patients that's up to you but world-class people communicate better and that's why they wear headsets in their ears not to irritate you or your ear but to help patients and help you help your patients and so that's why I can't say all of them wear them but we do that because we listen to smart people and say if that works why wouldn't we do it everywhere.

Howard: and another thing I like about Heartlands, every time I've gone to Effingham Illinois man you've kept the same people for decades like how long have you been there?

Pat: I've been there twenty one years, started there when we had eight practices

Howard: and my Lori's been their 20s I mean you know and that shows you young doctors things. I'll tell you my dirty dark secrets I mean my dental office is 31 years but my five key management people have been there twenty years so for eleven years I didn't relegate I didn't attract and retain Who I should have I tried to do everything myself and took me 11 years of going down the highway at a hundred and fifty miles an hour driving off the road every six months and doing u-turns and flipping around and before you get your head on straight. I want to ask you a question you mention Aspen Dental why do you local brand instead of rolling out a national brown like Aspen Dental or didn't Pacific Dental brand all their stores Pacific Dental don't they?

Pat: They're kind of regional I think they're regional brand I think they have a regional brand it has something to do with modern dentistry or something in a regional area

yeah kind of like Kroger like Kroger lots of people don't realize Kroger is one of the biggest grocery stores in the world but in Kansas they're called Dylan's out here they're called frys. They got something called there's one actually called hinky binky if you can believe that but why did you choose local brand strategy instead of national brand strategy?

Pat: Well it starts with who's our customer so our customer is a dentist and what we realized early on is the dentist that we were trying to attract didn't want a brand name across all of them they wanted to be their own dentist in the communities that they serve and so we call it kind of said early that were a collection of hometown offices. Where we did a lot of affiliation from 97 to early 98 we did almost all affiliations, acquisitions and then in 98 99 we started doing more denovo or strat scratch start practices and then we ended up doing a mix and so when we do an affiliation they don't want to change their name to a brand they want they're still they're local community connection and so the research we've done on all patients is they like patients choose their dentist based upon community, convenience and then about 25% to 30% of the time the doctor referral but otherwise they're looking for community and convenience and so when you have a community name it's attached to the community. Today we believe patients choose their dentists that way and today we believe dentists would rather have that and have our support so they can tell their mom and dad look this is my practice I got hard ones help but look it doesn't say Heartland anywhere it's really my practice cuz I run it and that's the value that we bring to doctors that that we just don't think we need to will that change someday our I don't know probably not in my lifetime probably not while I'm here but maybe someday. You know there was a there's a large group and in England were 600 offices and they just ended up going to a brand called my dentist but they were locally branded but they didn't have any brands that went bad. So we had some bad some brands that were kind of gave bad reputations not Aspen I don't I feel sorry for Aspen because they get beat up I think they do a great job but they get beat up cuz they're one brand but I have 900 web FaceTime Facebook pages I have you know 900 web pages that I have to manage so it causes somewhat more trouble but that's what my customer wants. So we're just really answering to what our customer wants are our dentists customer wants that more.

Howard: What year did Heartland dental start

Pat: That's Heartland 1997

Howard: 1997 and when did you join him what year

Pat: 1997 we had eight practices when I started

Howard: You started with in 97 - yeah the first year they started

Pat: Yeah so now Rick had Workmen management group before that and he sold 21 offices approximately because they're a little bit and then started over with eight that's when I came in and so he went it was called workman yeah in 97 yeah.

Howard: Okay so let's go back to denovo or purchase, what makes you start a de novo from scratch versus act with mergers and acquisitions and purchases of an existing?

Pat: because you can put them in the location that you want to put them where today's consumer will recognize them, so we're typically a standalone dental office in a very nice retail area where hundreds and hundreds of cars thousands go buy them with big signage ten to twelve chairs two doctors that get up to 200 new patients a month right away. It's gonna be good for twenty to thirty years.

Howard:That's for your M&A; activity and act acquiring a purchase you want 10 to 12...

Pat: Thats a denovo that's a denovo

Howard: Oh that's a denovo

Pat: So why do we why do we build it de novo where do we put them we put them in a retail area where we know they're gonna be good for 20 to 30 years. So if you look at most dental offices they're hidden, so when we're doing affiliations they're not necessarily in the best locations they're usually hidden but they already have a patient base so the differences between the two is one has cash flow so that's the affiliation acquisition and the doctor we want them to stay we expect them to stay a minimum of 200 you excuse me two years and then we have the denovo that has no cash flow it's it's less expensive to buy typically than buying it but it's gonna be good for 25 to 30 years in that particular location. So there that's that the trade-off is that the actual cash on cash return is a little bit higher on on denovo's but it's pretty close if that makes sense.

Howard: So when you do two novoed do demographics matter?

Pat: Oh yeah they absolutely matter we don't put them where we don't think one they need a dentist in the area we're not going to put them in a highly competitive Varian we're gonna put in an area where we think they need dentists in that area. We know the demographics we know the exactly the households that we're going to so we use a proprietary tool that's used by a big big bigger companies that big boxes use to say here's our demographics of our patients what we're successful of Heartland affiliated offices where they're successful and then what is the demographics and does that particular marketplace match with the demographics that we're looking for and then we find that corner that matches those demographics and that's what we put them right there, we did 46 we did 47 last year.

Howard: 47 denovo's?

Pat: Brand-new yeah

Howard: So on your demographics what's the doctor per population ratio?

Pat: It has to be higher than 1700 but it's not just that we want it to be above 2000 but that's not always the case but it's not just that ratio it's also there's a competitive index in other words how far away are they from where we are, it's not just zip code it's where do people drive from how far will they drive to us. You know we know our average patient drives about 18 19 minutes away that's that's how what our patients drive. So we're looking in that particular circle what what is it and how many of those different we call them tier 1 to tier 3 patients where will they come and how will they find us and so we are able then to study. Now remember Howard 20 to 15 20 years ago we said oh there's a target there how about we put it right by the target now we're more sophisticated than that today but back in the day and we would be wrong every once in a while we'd be wrong because the demographics weren't right there was too much competition we didn't realize it because we only use that one metric that's a pretty good metric but there's other metrics it could be it could be how far the drive time I mean this is just a bunch of different and then you have to still go with your gut so then we evaluate every one that they bring to us Rick and I are on the committee and we look at every one to decide if that's really one we want to take a chance on or not. We're gonna build will do 60 this year.

Howard: and you like them to be two dentists

Pat: Yeah

Howard: Is that for the well in an MBA school they called the Mack truck theory they said you know when they were studying the 60,000 personal bank, you know when people say the government is incompetent I mean free enterprise has 60,000 bankruptcies a year so people are people and you can't say that all the people in government aren't good in business and all the people in business are but when they look at those 6,000 businesses that go failure. A lot of them are great businesses just ran out of cash didn't cash flow they were incurring costs today and not getting paid for 90 days and I'm cashing on another one is the big the Mack truck theory where one employee quit move died whatever and it caused them to fail. Does two dentists is that more for in case something in case one dentist gets ran over by a Mack truck you got another dentist in there until you get someone in is it more Mack truck theory or is it more to cover more hours of the 168 hours a week.

Pat: It's to cover more hours and patient flow so we typically get so many tips you know every doctor would love to have 200 new patients right away and then you just basically they're just falling all over you and it's really easy to get some case acceptance but what happens is is that that with two you actually treat them better their experience is better and so we want that experience better. We typically start with three hygienists as well so we're going three hygienists two doctors you know three dental assistants three ba's and were fully in because...

Howard: So say it again, two dentist, three RDH, what was the rest of the formula?

Pat: Yep three dental assistants potentially sometimes four and then three business assistants receptionist whatever you want to call them we call them business assistants an office manager basically practice manager we call it and so we're thinking we're gonna get loaded with new patients and that process because a new patient is so volatile. Man you've got to be careful and you gotta be on your game so they got a practice assistants practice their communication because these guys typically we typically put a more experienced doctor in with a young doctor so we don't put two young doctors in we have sometimes have no choice but most of times we don't and if I can get an experienced doctor in there where the young doctor it goes a lot better because the treatment planning goes a lot better, how they treat the patient goes a lot better, they know what they're doing and so we had a whole integration team de novo an integration team that works with them for the first really 90 days before they move on to the next one and so they're there on-site helping them with their systems on how do you process and take care of a patient the best way you can, it's a whole system.

Howard: That brought back so many romantic memories for me so my dad owned five sonic drive-ins in Wichita and then he had one in on Childress, Texas, Abilene, Kansas, Kearney Nebraska and Louisville, Kentucky. So my high school years the summer before the summer between all the high school years I was on that new startup team so I suppose summer and Childress and my dad left me his Lincoln Town Car in a hotel with everything painted the desk for the restaurant. So ever I was in Childress it was amazing I was 14 and he left me his Lincoln Continental and so I got to drive a Lincoln Continental all summer in Childress Texas without a driver age of 14 oh yeah back then I mean that was a long time ago you know those small towns the farmer needed you to drive but anyway I really had so much fun so I spent a summer in Abilene, Kansa,s Kearney, Nebraska, Childress, Texas and Louisville Kentucky and Louisville, Kentucky was the only place I in my whole life I was ever shot at. I was so I was so dumb I I saw this tobacco fill with his old shed and I just thought it'd be neat to explore I had no idea that you don't trust pass a tobacco field and I would yeah I didn't know that and when I told everybody.

Pat: That your experience in those offices that made a difference did it they started better because you were there how they work

Howard: Absolutely

Pat: I mean it we have to have a system that helps these dentists cuz you know my nephew graduated from university of Pacific with $500,000 with student debt and when he came out he said what should I do because first of all I talked him into being the dentist because it's great it's a great career and and so he went to UOP and he gets out and he said where should I go, well you should go to a doctor that can help you be successful and you went with into Wausau, Wisconsin where Tim Quirt. Where I think today it's like 40 below literally and Tim Quirt is a great mentor and so he got the best experience he's just kicking ass and taking care of people and just loving being a dentist. Now he's been out two years and he's just loving it and probably one of the best young doctors we have because he's just opened and positive and mentally flexible, so it's a but he couldn't do that on his own he'd be he'd be sucking wind with $500,000 with the debt trying to start a practice or being associate where you don't have patients coming at you. He's taking care of his own patients his massive patient base that he has that he can take care of and it's just uh it's a win-win for him and win-win for us.

Howard: So back back to demographics um are some states better than others is rural better than urban and the downside of going rural is it might be it's always harder to find a dentist to go work for you or to sell. So talk about demographics rural versus urban or in any states that you just acts out because they're too crowded and other states that...

Pat: You know we don't have there are there are some states there anti DSO that we step out so

Howard: What are the anti DSO states?

Pat: New Jersey doesn't really care for DSO is that much so we don't we're not in New Jersey. There are some states that has lost more Texas gave us hassle for a while but you know we work that through, we weren't in Washington until just the last year because they were going after Pacific and everybody else until the new laws passed which was just literally a year ago. We stayed out because Steve was in a battle of his own we supported him all the way and and now they've changed the laws and it's no problem at all and so we're there and now we've got already I think ten offices in Washington somewhere in that range and so it's there some states so there's no from a marketing perspective it's can we recruit and what's the competition. So I can't go to rural where I can't recruit somebody but I don't want to be too urban where there's too much competition. So we've got we've got three two affiliations acquisitions in Manhattan. I would start a denovo there that just wouldn't be something I would ever do because I don't know the first place about the marketplace is very complex. I mean the competition, their's so many dentists there and how do you differentiate yourself where if you're in a suburban area where you have I know the demographics I know the competition I can put them there and I can recruit there then I'm in. So it's really about one recruit ability and then I mean I have a lot of beautiful practices that come our way that are so urban and I just look at I'm good luck you have a very nice 1.3 million dollar practice that nobody's gonna buy unless somebody wants to live here and they buy it from you and your price is gonna go down because you have nobody to sell it to. I would buy it if you were 45,50 miles further into a city you know closer to city but I can't it's a beautiful practice but I can't get anybody to work there so that's that's a real problem for a lot of solo practitioners that are in urban or her way out.

Howard: So back to demographics participation is there a median household income that you like or years of education?

Pat: For us we like to be between you know sixty to seventy thousand income wise there are some people that will be lower than fifty we just don't think that that works for our demographics for what our doctors want to see, sometimes we go higher than that but we seldom go lower than that. So we're in a in a nice in a nice area.

Howard: So sixty to seventy thousand that would be median household income?

Pat: Household income, yep

Howard: Median okay yeah and I'm sure everybody listening is thinking how the heck you get two hundred new patients a month what what's hot and what's not in marketing is it is it let me backup and before that and do you own your own real estate do you like to be in the real estate business or you prefer to rent?

Pat: No, we rent everything you know we have one we have one person who owns about 25% of our buildings and that's a guy you probably know Dr. Workman also owns a real estate company. So we have one he builds offices for us as well so he's kind of my way to have a friendly landlord in a place that I want to build someplace and he so we work and partner well together but I rent from him. 75% of our not said yeah so many of our renters, 900 what would they be 800 other landlords. So I've got a lot of other landlords but when I want to build in a certain area and develop an area then I'll have him do it. If I do an affiliation and then the doctor wants to sell his property I'll ask Rick to buy it. Now he doesn't buy them all so I have to sometimes have a dentist for the landlord but I don't like to have dentists as a landlord unless it's Dr. Rick Workman because he's a friendly partner.

Howard: You know it's funny the founder of Pizza Hut is Dan Carney and his wife was Beverly she passed away but I was lucky in my high school he he was the founder of Pizza and he's you know he's same our town and he was so sweet, whenever me and Jim Bell would get a crazy business idea we're in 14 we go to pizza at headquarters and and he they'd let us and in his office he talked his forever and when I got out I asked him if I should rent the space or build my own building and he tried so hard to tell me that you don't want to own you're not in the real estate business you don't want to get into that it's too much debt he goes I got a hundred Pizza Hut locations that I can't even giveaway and just put all your money in the business and I've seen so many dentists that they come a school four hundred thousand dollar student loans and then they go buy an acre and then they spend six months on construction and the land and buildings like another million and they haven't even got there also but it's something territorial about a human being that wants to own the whole ranch the land and put a fence around it but it's really it's a whole different business even we had on the show who's the the real estate guru 10-plus who's the big real estate guru?

Pat: I can't remember, it's on the tip of my tongue

Howard: He was saying I'm that it's not even a profitable business until you own about 16 units and oh my god who is that guy he's the same and my son Greg shouldn't kill me for not it's his favorite podcast but anyway so he's always saying you're not in the real estate business to get locations. So with so would you say your locations are pretty retail looking I mean are they usually?

Pat: Oh yeah very retail looking, I mean it's...

Howard: Grant Cardone

Pat: Oh yeah

Howard: He's been on the show I've had him on the show twice because so many dentists are so into that question should they own or not and he's saying do you have a management team, you know like you have a manager name if you own real estate you need to have you know an office manager you have the maintenance guy you're gonna have the guy then you need this nucleus of a couple two or three key people and that's not gonna cash flow to you have about 16 property. So owning your own dental office

Pat: and I need to I need the cash flow to continue to expand and grow my footprint so I don't need to own the real estate to expand my footprint in the end the number of offices that I want to and I want to own or manage. So it's a whole process that do I want to use my cash for that or real estate and the return on honesty practices is way higher

Howard: Right

Pat: Way higher and that real estate, Rick's making a good living don't get me wrong but it's not the return that we get on them on the business side. So yeah and it's risk there's a lot of risk to it but there's a lot of doctors who do and then they got their real estate and they think they own something which is great but you can own stock in Heartland and it'll be just as good.

Howard: and never let your money get too far from cash because another thing got a sort of send its liquidity they'll buy a beach you know they'll buy some nice getaway cabin in the winter and then when they decide they want to get their money out they find out it takes some three to four years to sell it for 25% less than what they bought it for. In fact I just unloaded my home I was very lucky I love my home it was it was for sale for three years I mean I bought that house had four boys that each had their own bedroom and then the next thing I know I'm living in there alone with four one-ton air conditioners. So I put on the market and it took three years and I finally had a lower what I purchased of is a for by a third and yeah and basically all agreed the real estate agent, everybody agreed just well at least you got out of it. So now I'm looking for a trailer to move to and but yeah it's just weird when you're not five thousand-square-foot at home by yourself it just it just seems like this is just too much house. So 200 new patients a month how the heck do you get that what's the breakdown location, Direct Mail, social media?

Pat: Direct mail still gets the the most quantity okay so we do a typically uh you know $79 let's get acquainted but you know come in and try us that kind of thing.

Howard: What is it, $79 let's get acquainted?

Pat: Yeah kind of thing

Howard: and what's that cover like an exam and x-rays or?

Pat: Exam x-ray and cleaning all three of them and what we're trying to do is is you know have the patients say have you ever been treated like this and in the practice that's what that's what the goal is and so they they needed dental home and so we're trying to help them find out so that but the location brings in a lot. So we a lot you can't say that there are walk-ins because they get the ad they see it they go to the grocery store they go to the store they go somewhere retailing oh there's that dental office that just sent me that direct mail or I was looking at my friend said go and look these guys up and so we do a lot of paper click stuff a lot a lot of digital marketing today as well we probably spend half our money now used to be a lot less but we're getting online appointment request now that three years ago we never get any. So there's now 10 percent of our patients come on online you know looking to make an appointment there they're actually requesting an appointment online which is...

Howard: 10% are requesting a patient online at your website?

Pat: Of all of our new patient of all of our new patients

Howard: and do they come from Direct Mail or is that from a digital advertising like?

Pat: Typically digital

Howard: Digital, what kind of digital?

Pat: Facebook I'm not the marketing expert Howard

Howard: Right

Pat: Facebook I mean they do so many different things Instagram and they doing I mean they're just doing you know just just Google AdWords. I mean we buy Google AdWords just like everybody else and we're looking for to be our SEO is really high when you look for one of our if you're looking for dental in one of our areas because of the way they're going about it we jump to the top. So there's a lot of things again what you know you talked about internet brands or WebMD the whole thing is how do we have the right tools so every dentist out there says I can't beat Heartland I might as well join them and so if I can't be better at all those things and they can do that on their own they won't want to join me but if I can show them I have better tools and you might as well just come with us because we can both win you have an exit strategy and you can also practice the way you want to practice with us why not because it's hard. I mean when when the state of when the federal government dropped the plan called drawing a blank on a plan but it's um it's a it's the plan for families of the military they dropped it to a Medicaid rate well all the dentists started freaking out we got more calls from doctors says that I am sick and tired of being sick and tired I am done with fighting these PPOs and this thing and they just keep on lowering my fees and my costs go up and I don't know how to compete and we can compete so that's a big difference.

Howard: So but when you're talking about Medicaid and PPOs and all that kind of stuff um there's a lot of consultants that talking about they do PPO fee negotiation with the companies I imagine if you got 900 plus offices don't you get to negotiate like on that examiner that Medicaid the military were you able to call them and get a better deal than an individual that.

Pat: We dropped out of that one, we dropped out of that one yeah we dropped it and our doctors what we did was just will give free dental care to the to the families of the military because it's just not worth it because what they'll do is once you start taking a lower fee everybody can everybody knows what fee you take and so if you're willing to take a low fee everyone knows what you're willing to take and so we're just not willing to take that law for our doctors our doctors deserve a higher fee and so we just won't take fees that are too low and and when you have our size you have you have more negotiating capability.

Howard: When you do a merger and acquisitions and you acquire a practice do you usually go in and renegotiate their PPO fees?

Pat: Yes they usually get an uplift when they you know 15, 20 percent if not higher so, we're going to get them high fees.

Howard: That's all profit margin because when it's talking about profit they don't realize you know they'll say okay the 88 says your average overhead is 65 percent so then dentist will say oh so then it's 35 percent profit and it's like no because you worked all day you have a job. You have to pay yourself what your replacement so like in Phoenix I pay my doctors 25 percent of adjusted production so when you can go in there and and raise the PPO negotiation I've looked at 20 percent of if when you have the office overhead you get down paying the doctor. I mean that that's just all gravy I mean it almost makes it look like it's you have a fail-proof business model if you can get the PPO is to go 20% higher.

Pat: Yeah unfortunately the PPO's don't want to so the solo practitioners are really having a tough time because they're what's their leverage point I'm gonna leave well now what do I do because it used to be what now it's probably 90% PPO hardly any indemnity is left it's all PPO. So people say well I don't want to take insurance well if you can do it great I mean I we just affiliate with somebody who doesn't take any insurance that's fine this there's no problem if you can do it. Not everybody can do it and so you have to then take a PPO and if you're with Delta I mean their Delta is no longer easy on any dentist they know what they have they have to compete for an employer so why would they say I'm gonna give you a higher fee if you're not willing to take my discount fee so you have to take their discount fee if you want the other one and dentists don't want to do that well then you're kicked out and so Delta's like I can't compete with everybody else out there if you're gonna take a higher fee than I can then I can compete with the PPO down the road, it's all about employers.

Howard: So you'd say what percent of dentists would you say then take PPOs in America?

Pat: Oh probably 80%

Howard: Just 80%

Pat: Maybe it's 90 but I don't know in the exact number I'm guessing

Howard: You consider Delta a PPO correct?

Pat: Yes but if they might not did yeah probably with that now it's probably jumped up to 90 you're probably right.

Howard: I gotta tell you 31 years ago with Delta

Pat: Yeah it's probably 90%

Howard: You know I would go have lunch with the Delta director Ed Judd and he was just a great guy but whatever my fees were I would send it to him they pay a 100% exams and x-rays absent fillings root canals and a half the crowns of whatever my fee was and now they don't care what my fee is they tell me what the fee is and I'm doing crowns and molar endo for less money 31 years then I was 31 years ago. So it's a more competitive market but I see me get

Pat: They make it tough

Howard: I've seen people go without any insurance but my god it's always a super dentist they're always intense they take 500 hours of CEA year they got all kinds of those muscles I want to focus back to a 915 offices this is such a amazing pool to learn from equipment, do your dental offices do better if they have CAD/CAM or CBCT or lasers or any do you see a return on investment of any of these high-tech investments?

Pat: The only thing that I've seen a high return on is right now as a scanner so a digital scanner.

Howard: I love it, because all these people spreading that you know you got to have CAD/CAM usually they make a living off teaching CAD/ CAM or selling the CAD/CAM money is the answer what's the question is incentivize behavior I just don't see it I mean I take a $17 impression with Impregum, send it to my lab man for a hundred bucks he makes a crown and you're telling me to buy a hundred and forty thousand dollar machine and then spend an hour milling it out myself what do you think of the CAD/CAM.

Pat: Well Dentsply hates it when I said I was actually talking at and an investor conference and I didn't realize they were in the room but I said you know we have never purchased one Cerac, now we own about a hundred so we never bought one but we own a hundred and guess what 80% our our coat racks 20% get used so you've got 80 out of a hundred that never were used there dusty and the 20 them to it they figure it out but they're not as productive as other dentists now we have some one doctor who's extremely good at it but very few can do because if you see one crown sometimes you have to know what you're gonna sit there for that long to get that. Is these are some market places that you need to have it yes and the other thing it's not efficient.

Howard: If you came in and saw me you know they tell you that you know that you diagnose it scan it prep the tooth mill it, the whole thing's an hour you just don't see that in the real world it's 2 hours and a lot of times it's three hours but if you Pat Bauer were in my chair and three hours later I go to cement that crown it's not quite right I don't have the guts to tell you hey Pat can you stay in the chair another hour or two. So you're actually emotionally or emotionally committed to cementing something that you wouldn't cement if your lab man made it, plus your lab man has made 10,000 crowns and you went to dental school you're not a lab tech yeah and if you think Dentsply Sirona gets mad at you, you should see my advertising team because I own a dental media company and my staff loves to tell me oh we lost this advertiser off of Dentistry Uncensored issue and I'm you know what I mean and they say well you just quit slamming companies and I say no it's Dentistry Uncensored and I'm telling my homies the truth and a lot of times I tell you the truth and I lose serious six-figure advertisements in the magazine and I don't care I don't care what the you know the truth. So what a oral scanner do you like?

Pat: We are our doctors picked so everything that we make any decisions on is a dentist makes the decisions we have committed and they picked iTero. So they it was really between three shape and I taro but I taro really had we're the largest Invisalign provider in the world. So we want our doctors to be able to give that product to their to their customers, that's what they want or really for function more than for more than looks but it's about the iTero can also sell more Invisalign. So you have the when you call it the simulator so you can do a simulator in an eight month eight you do a scan and in eight minutes you have a simulation of what their teeth could look at. So you're having conversations about function you're having conversations not not only just about Invisalign for looks you're talking about function and care and so plus it works really well with crowns every one of their crowns get sent to Costa Rica and a dentist is marking the margins. So they're they're checking the margins because what every dentist wants and what I want is that crown to just fit beautiful right away for that doctor cuz the most expensive thing in the dentist office is the dentist time, not the lab fee. So if I force them to use a lab that they have to grind away at it they'll quit every time. So we have what we call Diamond trusted labs probably I don't know eight of them because not one dentist can our lab can handle all of our volume and they get really good pricing Howard, they get the best pricing and our doctors get a share of the profit so they're looking for the best crown of the best price. So my job is make sure they get that well they use the scanner they save another $10 so you've got your you're getting massive savings on all porcelain crowns that are going in boom our error rate went from 5% to less than 1% ,our return rate, that's literally what it went to.

Howard: 5% to 1% when you started switching from impressed materials to oral scanning when you went to the iTero.

Pat: Yep

Howard: Hey by the way I'll be your best friend for life if you get me the CEO of align technology on the show Joseph M Hogan. How do I get, tell him he's already been on Kramer I always see him on Kramer, that's a bald crazy guy he usually shows a bald crazy...

Pat: I'll reach out to him I talked to Joe quite a bit so I'll reach out to Joe and I met,  Joe and I we were just reminiscing Joe and I met three years ago February at the winter conference it'll be three years and he gets it, he gets how he works with heartland struggled working with Align for many years because they just weren't didn't understand that dsos they didn't understand what we were but now he knows that we grow our invisalign by 25% a year. I mean that means he's doing a lot more volume that's where he get he wants a partner that he can actually not only try new things but we're gonna get scale and help grow his business so yeah we're very we're very close.

Howard: Tell him I'm as crazy as Kramer and he's you know I own Dentaltown but I also own Orthotown and they're dying to they every time I talk I would say I would say why don't you podcast Joseph M Hogan. Yeah well let's talk about them for a while because now I'm in I'm in Phoenix Arizona my dental offices in Phoenix and Align has now opened their own store and it was in the richest demographics it was a Scottsdale Fashion Center which is nested between uppity rich Scottsdale and Paradise Valley.

Pat: I've been there, I've been to that store.

Howard: and now smiles direct Club has opened up five locations and is about to do an IPO. So what do you what do you think about you know what you consider those what do you think of it invisaligns business model of having their own stores and what do you think about smiles direct Club what do you what do you think about those two companies in their business models?

Pat: Okay so first Invisalign you know is is a much superior product so it the technology it's for much more complicated cases. Smile Direct Club is for the simple cases it you know they used to call it like do-it-yourself ortho it's a dentist looks at it that doesn't mean they're perfect by any stretch of the imagination but there are a lot of people think about they did two hundred and fifty thousand cases and only 20% of the patients qualify it's gonna do the math Howard how many people were interested in Smile Direct Club because only 202 and a thousand or 250,000. It's over a million people requested to have their teeth straightened through Smile Direct Club and they only did 20% of the cases. So those people have to go someplace obviously and they're typically in somebody's dental office today and nobody's talking to them about ortho. So they're trying to do is they're just helping people who have simple cases now some dentists would say they're doing cases on people that they shouldn't be doing. I'm not a dentist I can't judge that so I'll let dentists judge whether they should be doing the cases or not but I can tell you this a dentist is doing the diagnosis and the dentist is deciding whether or not they get the case or not I know that. Now Invisalign is just a higher end much better product I think it's it's taking over the whole ortho world, Joe believes probably 90% of all cases will be able to be done by Invisalign I'm in it right now I am Invisalign on in. I don't think I'd see it but I have another 14 weeks to go and it's because my bite my teeth were straight but my bite was off and so I'm I need my bite to be right and so for for Joe it's it's really how do I get more general dentist to take care of patients who are requesting it. Now they're getting in a teen they're doing they're trying to also probably compete with with direct and a Smile Direct Club but the stores really today are they're trying to get to the Invisalign experience to get people to be recognized hey come by we're gonna you're going to be still referred to a dentist it's not they're not doing the Invisalign in the store it's an experience that they're doing and they're gonna send patients that are really interested in it to dentists and so to me it's a brilliant strategy you've wanted to compete with with a smile direct Club I think they're in some kind of lawsuit but that's not for me to talk about but it's you know is there room for both they probably would well say no but I would say yeah there's probably room for both because it's about getting patients to know that there's there is help for their teeth and for their function and that's that. I mean that's in the end it's about taking care of patients isn't it and so if they can take care of patients. I mean people why would you pay a lab fee when you can just do it I don't want brackets I don't want brackets some people do but I don't want brackets and some if they want to make and still get them it's not like it's again they can't but so why we think both of them are fine I don't you know we don't we don't we have a very good relationship with Algin I can tell you that that's that's our best relationship well it's amazing is you know today.

Howard: You know they say about five million Americans are wearing braces right now and eighty percent of them over twenty ages of six and eighteen and that's where dentists that's where orthodontics was when I was a little kid. When I was a little kid you know big families five six kids and the most crowded teeth got braces. Well now people get braces when they're a teenager and then they come back when they're 30 the biggest cosmetic market every cosmetic guru I've talked to for tummy tucks, boob jobs, facelifts it's always the the divorce remake market and you know you're you're going back out on the market again and so they're trying to straighten whiter brighter teeth.Sso I think the upside for do-it-yourself orthodontics SDI or Invisalign stores or general dentists doing Invisalign I just think it's amazing but I'm gonna go back to that technology and a lot of kids come out and they complain they're $400,000 in debt then they buy $150,000 CAD CAM $100,000 CBCT and $100,000 when a laser or 125 thousand with training yeah and they they make three decisions and they double down their debt and you are the master. I mean you're the operations and you're I mean Rick workman it was his idea his vision all that but you're the brains buying the operations and logistics and you're basically saying that the only high-priced thing that you see your turn investment is an an iTero oral scanner and it took your remakes from 5% to 1% and Invisalign is not covered by Delta's PPO schedule. When I let you around the world I mean I go to countries where the the government reimbursement, like in Malaysia Cambodia Indonesia I think the government reimburse or Medicaid is so low but these doctors will run a big Medicaid clinic in Cambodia losing money on everything because out of that base they are able to upsell one person a week to Invisalign and one person a week to an implant. Which leads me to my next question is you know what are the attributes of your super dentists, are they more likely to place implants or do Invisalign or molar endo or what would be because the question im going at is she just walked out of school and she's saying Pat hello I got out of dental school I didn't do what Invisalign case I didn't place one implant I did fifteen filling's two root canals and she sees all these classes to take. What is the return investment what would you recommend her in order to learn is that molar endows and Invisalign is a place then planned sleep apnea I mean there's so much what would you...

Pat: It's bread and butter first so basically you have to be able to get a patient out of pain. We've done a study Howard you're gonna you're gonna like this if a brand new practice doesn't do seven root canals in their first month that practice will not make it very long.

Howard: Wow

Pat: So think about that

Howard: So denovo has to do 7 root canal is the first month.

Pat: but it's an early warning system for us if you're not doing root canals we've got a massive problem because what then what happens is they go tell everybody of their friends they don't take care of you do you stay in pain you're done and so we have to make sure they know how to do root canals. So when they first start when that class of 170 starts in July we have in Effingham for a week approximately the less than a week and they're getting endo training from the likes of Dr. Breuder out of New York's Stony Brook people like that that are giving them hands-on experience we just had a whole class I think there was probably thirty people at the Kavo or no Dentsply's a new system in Charlotte where they do hands-on endo and we use their whole their whole training center.

Howard: So Dentsply Sirona has a hands-on endo place in Charlotte?

Pat: Yes either that is Kavo

Howard: Well Kavo is out of LA, or Orange County

Pat: Yeah these guys are these guys  they have a new place in Charlotte I think it's Dentsply

Howard: Yeah that's Dentsply in Charlotte.

Pat:  So here's the deal you know think about where Rick started. Rick started in Effingham, Illinois. Where was the closest root canal and endodontist for him?

Howard: St. Louis

Pat: So he had to figure it out so our whole basis you know some people start with HMO we started with we have to create super GPs. They've got to be able to do everything they can possibly do so that a patient is taken care of I don't expect to do complex surgery complex endo's, redos. I don't expect them to do that but if they aren't willing to say no I'll take care of a patient they're probably not a match for us at some point they're gonna go you know I don't want to do endo. Well then let's bring in an amount of sin okay happy to do that as long as we don't we're taking care of people that's what an in the end that's what the community wants and if you don't do that you're gonna suffer in your own practice. Now when you get older like we affiliated with a lot of doctors who don't do endo then they get here and go why don't I do endo why did I stop doing endo because it was nobody was there to support you. Well we work with DENTSPLY Tulsa and all their raps no exactly go into a Heartland office cuz it's gonna help you so we have a whole system to say okay this doctor needs help with with endo we get the rep and our our clinical person working with that doctor to help them take care of patient. Not to be raid em not to you suck it's well if you're struggling let's help you not so it's different than dental school it's not I don't know your experience with Rick talks about his experience at dental school it wasn't that Pleasant for him. So for us though it's about being helping them take care of their patients and does it work 100% of the time no but it's good it's gonna work most of the time.

Howard: So do you know tulsa dental was started by Ben Johnson until so clomid did you ever meet him?

Pat: Never did

Howard: He is so damn cool he started Tulsa Dental products until Oklahoma but anyway he bought the film of the old of the first root canal ever filmed and it was on by Dr. ml Rynn MD DDS in New York City in 1917 and I posted that on dental town it has over 3300 views and what's amazing is nothing changed. I mean 1917 it's now 2019 and it was find all the canals get them all cleaned out and then operated and and how do they fail you don't find all the canals you don't clean it out and when Millennials tell me that they don't like molar endo I say we know what I had four boys in sixty months and one of them got up every night for 30 minutes an hour. I didn't like that but you suck it up buttercup I mean they think I think about how I mean homo sapien is a two-million-year-old species where they think a hundred and seven billion of them have lived and there's seven billion I'm alive today how many of those hundred and seven billion humans that came and gone had to do things they didn't like for us to get here. Like...

Pat: I come from a family of sixteen I can assure you I did a lot of things I didn't want to do.

Howard: 16 their were 16 kids in your family

Pat: I'm the 14th of 16 yeah

Howard: You have to do to be Catholic or Mormon

Pat: Catholic

Howard: Catholic, so are you Irish too?

Pat: No, no German

Howard: German, yeah that's interesting. I just read a demographic thing America is basically four tribes it's German Irish african-american and Latino. Those four tribes in fact do you know your German did you know that when the United States did their constitution Imperial math beat out metric by the Germans only by one vote and no no that was two votes but the language English only beat out the votes by German by one vote. So we were one vote away from speaking German and two votes away for being on metric so three votes just three more votes

Pat: I did not know that

Howard: We would have been Germans doing metric and it was in the year 2000 I was in at MBA school at ASU and that that Mars mission crash-landed and ASU was so embarrassed because the ASU development team did it in imperial math miles and the Jet Propulsion Laboratory did it in metric like intelligent people and then when it started to enter it froze because it couldn't crunch you know miles and kilometers and crashed. A two hundred million dollar mistake and the country still at that time that Bay they should have switched to metric and here it is 2019 and we're still teaching kids. I'm so I'm gosh this is so amazing I'm I have another historical question that I think you might have prospective on, in 1900 there were no specialties and a doctor did everything from amputate your leg to deliver your baby and now the year 2019 the MDS have 15th specialties the dentists have 9 and you see some of these young kids that think they want to be super dentists I want to do molar endo and place implants and do pediatric doesn't they just want to do everything like a super dentist and it's do you really think it's good advice to be a super dentist and do everything or again let's go back over that list you said I endo get them out of pain what else was?

Pat: Extractions, so it's so basic oral surgery I'm not saying they should be super you know you know oral surgeon type surgeons but if you know of anybody that's ever been on a mission trip they come back and they not know how to take out teeth and they're not afraid. So I think every day I should go on a mission trip and take out teeth because you become unafraid to take out somebody's tooth and that's a real service for patients they are looking for somebody to help them get them out of pain and so that's just one aspect that doesn't mean they have to be take out thirds they don't have to do complicated surgery but they have to be able to take care of people that are in pain because what we do know Howard you know this patients don't want a flag go all over for their care they want you to take care of them to the ability that you can clearly and so we're not we don't when we say super GP I don't want them to be a super everything but okay Howard, hundred and seventy brand new doctors in Effingham Illinois this July what percent will say I want do implants what do you think?

Howard: All of them

Pat: Hundred hundred percent how many have ever done an extraction or an endo

HOward: None of them

Pat: Very few, so oh you can't this is surgery you want to put something in somebody's bone but you won't do an extraction or you won't do endo. You've got to get used to it so we've started a whole continuum that starts with surgery that starts with you being able to you know help gets bone in there and do some real surgery with with mentors that are looking over your shoulder before you're just doing implants and I won't put a CPT scan in any office unless they're doing 50 if you're doing bit the implants then okay up over the CBCT but otherwise on the hopes. I remember talking to a very large implant company and they said we'd love to work with Heartland let's start talking about what we would do got first thing we got to do is put a CBCT scan in every office I said well you have to non-starter we might as well just be done with the meeting. You want me to spend that much money on the hopes they do implants that's that that the return is just not even clear. Now if you can help them do implants what's the easiest time to sell somebody on an implant when they just are losing a tooth so but if you're already missing a tooth well that's the harder sell and so the guy who does the most implants for us about four or five hundred a year I think 450 doesn't have a CBCT scanner cuz he does almost all of them or immediate placement implants and so he knows where everything is he can figure it out and that's not the standard. The standard isn't you have to have a CT scan on my sharing any books

Howard: Have him come on my show, has he been on my show?

Pat: Oh probably not he's pretty quiet guy

Howard: Email him and CC me Howard@dentaltown.com because I got a remind people like the greatest implant legends were like Carl Misch had placed 25,000 implants before they even invented a CBCT and so you know when you say yeah

Pat: RIght and sometimes it gets in their ways what I've been told

Howard: So let's go back to that so you're a bit when I asked you about equipment you said iTero air oral scanner. So you're you don't you don't routinely put CBCT's in offices?

Pat: No no no only if they're already doing implants and they are they you know proven that they've done implants if it's a doctor who says no I've already done this is and I have the data so I know who's doing it and yeah then that they're gonna do more and more complex cases absolutely but if you even talk to them they can go I don't use it as much as I probably should because I've done them now I know what I'm doing but if it's gonna be a complex case yes but these guys they have to get good at surgery first before we do have

Howard: but if you say...

Pat: These are doctors so I'm looking at doctors and saying tell me what works tell me this is not Pat Bauer or Heartland making these decisions it's doctors that are making these decisions that are deciding whether or not they need it and I'm just saying okay you've prove it to me that you don't need it unless you need unless you're gonna do that so their guidelines.

Howard: and youngins out there when you're hearing a lecture speakers saying the CBCT is standard of care I mean do you raise your hand and say do you make money from the CBCt company when you read an article in a magazine that says you got to have a CBCT at standard of care do you ask him did you give this magazine money to advertise this promotional material I mean come on. I mean you know a Warren Buffett set at the bus he he taught in my freshman business class and I went to Creighton University in 1980 and the chairman of the deal knew Warren Buffett he was the Oracle of Omaha he came by and gave us a guest lecture and I'll never forget he said two things I just not now each other said if you can't explain to me your business on it on a five by seven index card with a number-two pencil you don't know what you're doing and I'm not investing you and and then the second thing he said that knock me out of my chair says 95% of the most elite CEOs the CEOs of the sp500 ninety five percent go to work every day trying their hardest to take profit earned and destroy it in reinvestment and all these crazy schemes. He goes only 5% of them take their money off the table and say this is our profit dollars and dentists are just always you know they haven't paid off their student loans and paid off their house they haven't paid off their car they they're in debt and they're and they're getting five-year leases on CAD cams and CBCT's and lasers. It just like they got a DDS degree must stand for just once to spend money and get in more debt and maybe its debt service doctor of debt service that's what a DDS is yes is a I'm gonna write that down.

Pat: Oh Howard you know it will be affiliated with a lot of doctors so we see a lot of profit loss I could assure you

Howard: Yeah and it's like and then yeah and then another thing you know they talk about their $400,000 student loans well a kid is 200,000 so you your 16 kids in your family.

Pat: Yeah

Howard: Well just have 14 instead of 16 and you say got your 400,000 back what do you think the average doctor pays on a divorce

Pat: Oh no idea I'm sure

Howard: I mean it's got it's over

Pat: I guess 752 yeah

Howard: 750 a million so I mean you know every time I listen to someone talk about financial planning they talk about everything but financially and they're talking about ETFs and this and commission-free broke and it's like that has nothing to a financial planning you know if you don't get married you'll never get divorced if you don't have a kid if you don't get married you don't have a kid all you got to do is is work at the IHOP and you're gonna be a millionaire someday. I may not you know that financial planning is don't get married or if you are don't get divorced and a quarter of the baby boomers had no children and they say a third of the Millennials are gonna have no children and my gosh so anyway. So back to your super dentist attribute you were saying you know bread and butter Success offices are getting you out of paying a new practice must use seven or gals its first month it's gonna fail extractions oral surgery anything else come to your mind root canals exams oral surgery.

Pat: Basic crown and bridge you know also being able to do just even you know how do you take care of a kid how do you what do you do when you have a lot of people don't want to see kids but you're going to especially if you're in a brand-new office and so how do you deal with them so we talk about that. You know just basic composites how do you do it with you know we do a smile design so we call it a they have everybody has the opportunity to do it so we do a lecture and it's by Maya sake Maya Sokka - I think it's Dr. Mayasake I think he does it and he he basically teaches them and we do live hands-on so last year I think we did I want to say a hundred and eighty live cases where we had mentors labs there but it's not just about doing a smile design it's called our aesthetic continuum. It's about how to do it with the right composite material it's really gives them the the ability to understand what they're doing with the with the patient from a whole mouth perspective because they come out of school thinking okay I've got a modbl here what am I going to do I get, their only doing surfaces and so we've got to teach them but not think about surfaces think about the patient think about what you're really doing how you're doing it and that's a transition from what they were where they came from so their whole system is try to set up how to do that so they have that continuum that they that they can do and its regional. So they can do it in their own region and not have to travel very far so we do that too.

Howard: Rick said one of the greatest particles ever did it was with Rick Workman it was I say it was right when I started doing podcast he was the first guy he called and he was so busy it took took a month for him to come on I think he was episode 37 but he was saying back then that another secret sauce you guys have is a call center that there's 168 hours in a week and most dentists only answer their phone 32 hours a week. Do you think your call center is part of your secret sauce?

Pat: It is now what we realized how it is we were not answering 39% of our phone calls so we did a study and we were released into five thousand phone calls using whisper technology which is just basically you can track the call and what who the demographics of the patient are. Well I found out from all the experts who all that's all they do that's the average in America so we were

Howard: 3?5

Pat: with answering our phone 39 39 percent of the time we were not answered the phone and so what we are a decentralized company. So I don't centralize billing I don't say I don't centralize anything that to get in between the doctor and the patient. So I don't want to ever get in between that relationship, that relationship is with the patient is with the doctor not Heartland. So we don't see patients the doctor does and so but my customers a doctor and they're not answering the phone they're wasting marketing dollars and so what we do is we have a rollover call center they don't answer it we answer it Effingham. We now have 185 people in Effingham who when the phone rings it comes up in front of them where I have their den tricks in their office and their demographics and I answer it like I'm sitting at their front desk and so they don't know that I didn't that they didn't get the office not they asked him I at the office we tell them the truth but they don't even need to know and so we can schedule. I just heard today month to date we've scheduled 16,000 new patients on to that call center from phones not being answered now we answered on Sunday

Howard: Is that 16,000 had a month or period?

Pat: Less than a month because it's only January 29th so that was through yesterday so we still have two more days we think we'll get up to probably 17000. We honestly we answer a lot of phone calls we answer on average 11 to 14 calls per office per day.

Howard: Say that again

Pat: 11 calls per office per day are answered there.

Howard: After how many rings?

Pat: Three rings three rings

Howard: 11 calls per dentist per day or per office?

Pat: Per office there's some that I get print of some I get 40 some way to get to so it depends on the size of the office but you know and then we chart we charge that office a per call in a monthly fee. So they have to what a charge is cheaper.

Howard: What do you charge them?

Pat: $1.43 a call,

Howard: You only charge $1.43 to answer a phone call?

Pat: Well I'm not trying to make money I'm just trying, I'm not trying to make money all

Howard: Can I roll over my cell phone to you? I'm the dumbest dentist overall. I've given my business card to every at every lecture so every dentist has my cell phone number and my email. I always love it when I talk to him but anyway. So you charge them a $1.43 if after three rings it rolls over your call center and you got a hundred eighty five people at scheduling 17,000 appointment a day.

Pat: A month so that's 17 new pages now that's also we also are scheduling we you know wreak air we're answering billing questions we're taking we're taking credit cards I mean we're we're basically taking the burden off the business assistants who are dealing with patients who are coming at them and so the whole process that the really smart offices go okay I can either hire another one but that's expensive this is cheaper if you guys help me. Now think about that you're in your morning huddle the phone's ringing you don't have to worry about it because it's somebody's gonna answer it you know what that what's the number one number of most amount of calls time and day of week that we can't even answer come close to answering all the phone calls what time and day of the week do you think it is that we can't even come close to answering the number phone calls we can't even staff it properly

Howard: Monday morning at 8 o'clock

Pat: Friday at 3 p.m. Monday at 8:00 is second

Howard: Friday at 3 because everybody's closing

Pat: Everybody's closed I don't want nobody I mean are often people don't want to be open and so we answer there oh we're open on we're open in the evening on Friday we're opening every even during the week and then we're open on Saturday and Sunday then we answer that phone

Howard: The call center?

Pat: Yep the call center yep.

Howard: So what are you what are your hours are your call center then Monday through

Pat: Monday I think it goes six or seven I think might open at 6:00 to like 8 o'clock at night central and then because we have some West Coast offices and then Friday I think they're only open till six or seven but their start at 6 and then Saturday they're 8 like 4, Sunday 8-2

Howard: and Sunday 8-2, so you know one of the things I always talk about these people that are scared to open up their own office you know is what they're really afraid of is just commitment and hustling I mean  graduate in dental school married my high school sweetheart dropped four boys in sixty months had student loans my dad wouldn't give me a dime because he said if he gave me a dime I'd be a loser and basically what I do I was seven to seven Monday through Saturday for a decade and got debt free and rich and these guys they come out of school four hundred thousand student loans they want to Monday through Thursday 8:00 to 5:00 not do molar endo. I don't like blood I just want to do bleaching bonding veneers and Invisalign it's like okay well go call Walt Disney and tell him to star in a movie because

Pat: Here's the deal Howard is that this is the beauty of our system. So our system allows doctors to have that flexibility without the risk so for our doctors they can work 36 to 30 40 hours a week and not have to worry about things because some doctors don't want to be you they don't want to work seven to seven and the Millennials want a lifestyle and so we're a perfect, when all these people are hating DSOs it's like seriously we're just an answer I don't hate solo practitioners I love them it's just it's another way for doctors to be able to practice the way they want to practice that there's nothing wrong with that, they don't want to work 7:00 to 7:00 Monday through Friday they just don't want to and they shouldn't have to if they don't want to. Now if they do god bless him I'll support him if I doctor says Pat I just always wanted to open my practice well then let's you ready cuz you better be ready when you're gonna start your own practice so let's help you cuz you're always gonna be an alumni of Heartland you'll always be on alumni. So let's make it work let's make it so that it's a smooth transition so we don't get hurt you don't get hurt and you can open your practice the way it, as long as you're not gonna take our patients which is they won't do.

Howard: So are you still running on Dentrix

Pat: Yeah on Dentrix, we have we used what we called DX1 which collects all the data every night from the offices but they're on their own standalone Dentrix system out there. We have tools that we can interact with them change fees with them so we chose

Howard: That just blows my mind because you're in Effingham where Eaglesoft is. How did the mother ship of Heartland and Eaglesoft in the same damn town not how did that happen?

Pat: Well we were very well we were very good friends with Scott Kabbes I remember when Scott Craig now his brother now works for us he's our CIO and left Patterson but Scott when he when we were looking for

Howard: What was his last name?

Pat: Kabbes, Scott Kabbes he started Eaglesoft and sold it to Patterson he actually ran Patterson dental for probably two or three years in Minnesota but he Scott basically came to us and said look guys we're not ready for a group practice this was back in 2000 I want to say probably around 2000 when we switched to Dentrix and he said you know I'd rather be your friends than you be up because I don't think we can handle your business and so that was it was just a very honest discussion and Scott with me we are Scott ended up on our board for five years. So we have a great relationship with Scott and hired his brother Craig who worked and started Eaglesoft with him and so it's it's just that was why and even now now we're working we're working really very close because KKR owns Internet brands and internet brands owns all those other smaller practice so those smaller things that now own part of Henry Schein one which is Dentrix. So we're lucky enough to have a relationship with Internet brands which is now owns Henry Schein one with Henry Schein so it's it's a great relationship.

Howard: Well you just walked into that that a subject let's continue there because I am I was blown away well KKR I mean that's one of the biggest investment houses in the world what would you call them private equity or

Pat: Private equity

Howard: and my gosh I mean let me I mean these guys bought Webmd for 2.8 billion they bought you guys about demandforce, office I, sesame Communications, Heartland dental, dental plans, ehealth forms, healthboards.com, Fit day, vein directory. What are they what is their what what are they doing and and how long has your new partnership. So originally one of your greatest investors was a Teachers fund in Canada and then they sold they didn't sell all your stock but they sold a big chunk of it to KKR from the Ontario teachers pension plan. So what's going on there? Why is KKR buying WebMD and Heartland and all these dental companies?

Pat: Well I think they're looking for good investments so if you think about what the future is so for us as an example that they looked at us in 2012 when when Ontario teachers pension plan invested in us and they didn't get the chance to invest so they watched us for five years and we met we've known them now and we were friends with them and so when teachers was trying to decide okay what do we do we said well at least let's KKR take a look as well because we know them they've been around they understand our business and they absolutely said we really want to invest in the business and KKR Invested and Ontario teachers kept a 16 percent interest in the company and so what KKR is doing is they're saying look we know good operator so can we see them I hate to say it that way but Rick and I have been around a long time our business model has not changed they saw what we said we do in 2012 and where we are it was actually the end of 2012 beginning of 2013 and where we were in 2018 and so we closed them in April but they basically said you guys did what you said you were going to do and your returns on what you do and your doctor satisfaction and your patient satisfaction and everything that you believe in and do you've actually done and so we want a safe investment that we think can grow because if you think about it we're 1% of the market we're the biggest in the whole market and

Howard: Their's so much upside

Pat: and so there's so much of a need for groups like ours to do it well if there's people that don't do it well I'm sure but to do it well and this market if you know they bought HCA they they look at things that they think that can grow and and they're not looking to flip us in five years they want us for a little bit longer longer than that they're typicals hold again I can't speak for KKR sure that information is out there but I've been told their typical is seven years and so us there they want to keep rate 10 years plus because it's a very safe growth model that they don't have to you know worry about us designing the next iPhone you know to compete with all these different people. We're you know in a very nice market that do the right thing we believe for dentists and can continue to grow. So they're looking at dental I think they're looking at dental list what a great opportunity what a great investment.

Howard: And what percent does KKR own of heartland you said you said the Ontario...

Pat: 50 ish, 53% percent something like that

Howard: 53?

Pat: Yep something in that range

Howard: So KKR owns a Heartland and Henry Schein one. What which owns so many things what what's your thoughts on Henry Schein one?

Pat: Well I think they're trying to figure out how to help dentists get patients is what I would think. I mean you could think about how do you interact with in this digital world with Dentrix with demandforce with the web site deal with the dentalplans.com with, how do you interact with patients these days and so what they're what I think again I I don't know them well enough to know because you should ask them but it seems to me that they're trying to help doctors who use Dentrix have a way to contact and internet interact with patients so that they can get more patients. I mean if you think about that's what internet brand started in was in the auto business and they basically were able to be referral generators for different car dealers and so that's their start that's where they started and if you think about WebMD how many hits a month you think they get I mean they get millions and so how many are dental questions a lot of those and so those patients need to go someplace and they have the demographic information. If you think about what they know about you Howard whenever you get on a website they know who exactly who you are how much money you spend what you spend it on what you look for and so they know you like a and me like a book and so they're gonna send you information that you they think would you'd be interested in it's a it's the whole thing it's a facebook phenomenal I mean I am the least technical person I know how to use my computer.

Howard: So if they own over 50 percent of Heartland is technically Heartland part of internet brands

Pat: No no we're cut well I would call us sister companies we're not I mean we have a good relationship because the same owner owns it but the way they're set up it's a separate ownership. Their's no ownership in between but we are sister companies.

Howard: Does Internet Brands would be a cousin then of Henry Schein

Pat: Yeah well Internet Brands now bought 30% of Henry Schein Dentrix, so they own 30% of I think that was public information. So Dentrix and combined with Internet brands to make Henry schein one which I think and internet brands is a minority owner so Dentrix is still Henry Schein is still the main owner.

Howard: So internet brands owns what percent of Dentrix?

Pat: This is a guess only I think it's 30% I know it's a minority

Howard: Well forty eight point seven percent of all statistics are made up so we'll just go

Pat: There you go, I say that on stage alot

Howard: Do you meet Robert Brisco the CEO of Internet Brands.

Pat: Honestly he's honestly brilliant is the only word I have.

Howard: He's a genius he's a genius but is and I always tell these dentists I mean don't be don't think in fear and scarcity I mean when my dad would open up a sonic I remember he would be so scared because then next thing you know McDonald's would open up a cross the street and then he learned over the years that the more restaurants on the corner the busier you were got because instead of being out in the middle of nowhere now that intersection was an end destination where families were just gonna go to first street and Street Main and they might swing through three different but anyway so don't lean fear in scarcity and what you should be thinking of is when McDonald's opens up a cross street and you see that forty percent of their sixty percent of their sales or to the drive-through and you own a hamburger joint across street and have a drive-thru you learn from the best don't be afraid of by the way did I ever tell you my Rick Workman McDonald's story?

Pat: I think y'all I know it because I was there when you guys did it I think, actually I think it was afterwards.

Howard:  That was so cool he knew I grew up in Tucson and my daddy wanted me to go in with him and I just home I said daddy I don't wanna make hamburgers and I go to were my dad the love my life but I go to work with my next-door neighbor Kenny Anderson who's still a dentist after 51 years and he was taking x-rays through teeth and doing root canals and I wrote my dental school in and the 6th grade tell them I want to go to dental school and he so then he thought maybe it was a dad thing so he took me over to Dan Carney and Dan Carney he's like oh yeah let's get you into pizza and he even got me even back then it was hard to get a McDonald's franchise and he he met me with the McDonald's people and I could have got into that but I just want to be a dentist and but anyway when I was in visiting Rick in Effingham you were there and my gosh so I was telling me about

Pat: You and Cordilla Harrington I think as you and Cordilla Harrington and Rick Workman and Cordilla is now the bun lady makes all the buns for all the McDonald's in the world.

Howard: Oh my

Pat: Did you know that?

Howard: No

Pat: Yeah she is now the bun lady in Tennessee

Howard: Please tell me she's single

Pat: She is not

Howard: I finally was gonna marry bun woman and then she said but but it was so cool because she was I just love passion and you can tell their passionate. I told him I said man it's been so long since I worked out at McDonald's I'd love to go back there and see their new technology and she's like come on down we went down there was like midnight back there and I told her I always wanted to cook my own Big Mac so I got to cook my own Big Mac she was so damn cool but her passion is contagious just you just gotta go for her. Oh so I'm heard you got any more time are you out of time and which I actually have a call at 3 o'clock which I have one minute.

Howard: So okay one minute one minute what is okay a million different stories on overhead what do you like to see on overhead and please don't mix the cost of the dentist with the profit dollars employed from having capital invested in a dental office what would you.

Pat: our whole comp model our whole compensation model is set up that the average practice in America is about sixty four percent overhead not not counting the doctor and so excuse me yes not counting the doctor so we expect that that practice should if you have a better than sixty four percent overhead then you should be you should make more than an average per doctor because you're giving me an average overhead. So that we think that the hygiene should be at it should be eight six and six so that's 20 percent of cop labor not counting taxes

Howard: What do you mean 8-6-6?

Pat: Thirty percent revenue eight percent of the revenue hygiene six dental assistance six businesses system so that's twenty.

Howard: Okay so

Pat: If you below 20% you have a healthy practice

Howard: So a total overhead 64 percent hygiene 8%

Pat: Dental assistant 6% businesses assistant 6% Anything underneath that is less than twenty percent of staff salaries that is what we would call thrive then your lab right now our lab fees and supplies are under nine percent.

Howard: Lab and supplies

Pat: Should be under nine five four labs and for for supplies. The average practice we look at four four supplies is about seven and a half percent and we bring that down to four maybe even lower for less than 4 and then on lab we typically see eight to ten and that goes down to about five.

Howard: Okay so hygiene eight percent assistant six percent business admin six percent total staff salaries should be what?

Pat: Twenty percent are lower

Howard: 20 percent lower and how do you get the word thrive out of that

Pat: Well thrive is just we that's when you're a thriving practice

Howard: How the lab that supply is four percent what about dentist a dentist pay?

Pat: Well we pay him twenty five percent of their personal collections and so plus fifty percent of the profits above sixteen percent of the revenue. So I can go slower there but twenty five...

Howard: Plus 50% of net income over 16 percent

Pat: Yeah so we keep sixteen percent the PC does and the doctor gets twenty five percent of what they do in that particular practice and then the PC splits the profit with that doctor fifty-fifty after then after the 16 percent

Howard: Wow and so

Pat: Our average doctor I average doctor makes about thirty two percent of what they do of what their personal net production is but they can make up to 40 plus percent if they're a profitable practice. So but but it depends on what you're delivering so we really look at it as Howard it's the same way a solo practitioners paid. You get paid for your dentist and then you get paid to be the owner so in the same way we get paid to be a dentist and you get to be paid to be the leader of the practice owner. So if you think like an owner you'll make more money so it's the same concept as a dentist and a solo practitioner because a lot of people say all these DSOs they give people incentives and it's just a bunch of crap that's how every solo practitioner and the world is paid but they think that they're paid differently no you're paid as the dentist and you're paid is the owner which one are you gonna get and we do it basically the same way. It's the same model it's seeing what you just mentioned earlier.

Howard: Final question what should we name this podcast today I mean I could say Patrick Bauer presidency of Heartland dental which has 950 offices but what I want to do is get it to where they can learn from someone like you. I mean you run more dental offices than anyone in the world should I say lessons...

Pat: Lessons from a DSO, how about that?

Howard: How about lessons from the largest DSO with Patrick Bower

Pat: Yeah we can do that okay

Howard: Sey seriously seriously it was a huge honor that you would take your time to talk to me and my homies and my gosh if you can get Robert Brisco and Joe Hogan that'd be amazing because I'm on I just want to get the biggest stars in dentistry down into their YouTube and their their phones so they can just make better decisions if they make if they can make better faster easier higher quality lower cost decisions they're gonna live happy ever after.

Pat: Absolutely they will and thank you.

Howard: I have the most respect for you thank you so much for coming on the show.

Pat: Thanks alot Howard

 

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