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Developing a Sustainable Competitive Advantage Donald E. Machen, DMD, MSD, MD, JD, MBA, CFA

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by Donald E. Machen, DMD, MSD, MD, JD, MBA, CFA

Every business, including a professional practice, strives to gain a sustainable competitive advantage (SCA). A SCA allows market share gains, especially in difficult economic times, with far less expenditure of valuable resources. In good economic times, the practice with a SCA will experience a magnified benefit over those that lack this important intangible asset. Ultimately, when a business or practice is sold, the value attributed is far greater and characterizes the final benefit that is received by taking the time to implement the systems needed to create a SCA.

While it is true that a short-term increase in new patient visits can probably be achieved by aggressive internal and external marketing, the cost is high and the results will not last. In fact, if the orthodontic practice isn't properly structured, as suggested below, the new patient visits will likely not lead to new starts and further stress the practice causing additional problems. The results from implementing a SCA strategy aren't immediate since it does take some time to reorganize and create the proper office structure along with implementing the necessary procedures and protocols. However, it doesn't take long to see the difference in all aspects of the practice from increased referrals, improved current patient satisfaction, reduced stress, elimination of negative comments, complaints and confrontations and improved communication. Then add the elimination of the malpractice concern and the entire practice atmosphere becomes one of enjoyment and relaxation, even on the busiest of days.

Consulting with orthodontic colleagues over the past 25 years, as well as practicing as an orthodontist and managing two successful offices has enabled me to test all of these concepts first hand and to create a clear path to follow. These experiences, as well as an educational background from business school with a focus on heath care organizations, has provided me with a unique perspective on what makes an orthodontic practice successful and what doesn't accomplish this goal.

Everyone has his or her own definition of a "successful orthodontic practice." For this article, let's define it as a thriving and profitable endeavor where staff, patients, parents, referrers and orthodontist(s) are interacting in a low stress, warm and easy manner providing quality care.

Some orthodontic offices have this type of experience. A very small number of practices have it more frequently. Less than three percent of the orthodontists surveyed by Risk Management Consultants, LLC, report that they feel that this described their office environment the majority of the time. Some, in fact, reported that they experienced so much stress that staff turnover and unhappy patients and parents were the norm and that they were feeling "burned-out" and hoped that their health wasn't suffering as a result. Many reported that they were concerned about referrals, staff turnover, dissatisfied patients/parent, lawsuits, keeping up with the latest technology, and the list continued.

The solution to these issues and the method to obtain a SCA is accomplished with a three-part strategy that is outlined below. Using this outline, the orthodontist can create a plan to regain the warm and easy, quality practice and enable him or her to "smile more and worry less."

By the way, you might be wondering what developing a sustainable competitive advantage and having a warm and easy, quality practice have in common. They go hand in hand. No matter how great the orthodontic result, without the latter, the former will not occur. Furthermore, even with the latter, the information provided in this article, when implemented appropriately and professionally, will all but insure the former. So let's examine our plan.

The first stop is to take a look at the "State of the Office." Initially and each year thereafter, at anytime during the year, the practice leadership should collect and review all forms, review all procedures and protocols, evaluate all referrals and referrer relationships, patients and professional, evaluate survey results from these consumers, speak candidly with staff, etc. A calendar event should be created for an annual review. For some practices and depending on the needs and occurrences, this can occur more frequently. The findings will be impressive and informative. Most importantly, the leadership should think about how they view the past year. All practice members and staff should outline their goals for next year, two years, five years and farther out. Each person should evaluate their feelings about the success of the office. Is it increasing gross and net revenue? Does the practice have the same number of patient starts, more or less? Is there staff turnover; some patient/parent discord; and is the practice moving along by momentum? Or perhaps, like 57 percent of orthodontists surveyed, you find the practice slipping a little, "due to the economy" or other national or local factors (such as a new orthodontist moving into the area; one or more general dentists starting to do some or more orthodontics, including clear aligner treatments or business or plant layoffs, etc.).

In this situation, you are probably saying to yourself, "Things will improve when the economy improves." All of us certainly hope that is true. However, have you ever wondered why that small percentage of practices mentioned above, approximately three percent, is still thriving and growing even in this economic environment. You might have concluded that these few practices are in "special" areas or locales. They must be recession-proof.

To some degree that might be true. However, the answer is quite straightforward and far more basic. These practices provide good quality patient care, in a patient/parent/referrer/staff centered manner. These practices have adopted the mindset that looks at everything they do not from their perspective but from the perspective of the "consumer." The consumer isn't only the patient or parent, but includes the referrer as well as other treating and consulting dentists and physicians.

An interesting revelation occurred when general dentists were surveyed as to why they referred fewer patients, stopped referring and maybe even started providing orthodontic care to their own patients. The key takeaway from these and other insightful comments is that inadequate and infrequent communication between and among all the "consumers" has led some to feel undervalued and not part of the treatment team or partnership. Maybe patients and parents are thinking something similar. Such thoughts might consciously or subconsciously work to negatively effect referrals to the practice. In reality, there is so little difference in the perception of quality in orthodontic care that is provided by the majority of orthodontists that it will be all but impossible to develop a sustainable competitive advantage by focusing on quality. The specialized training, education, skill and experience that orthodontists have developed needs to be professionally explained in focused communications, written and verbal, so that the consumer appreciates the extensive, sophisticated and complete diagnostics and treatment planning involved.

What do the highly successful practices do? What are the three differentiators that lead to developing a sustainable competitive advantage? Their communication is superior. Their organizational architecture is superior. Their interpersonal relationships are superior.

Communication
Highly successful practices don't send the same type of form letters or forms to patients, referrers, etc. They prepare customized and specific correspondence, whether mailed or e-mailed, that contains a clearly outlined path from diagnosis and treatment plan to completion and retention. Customized, yet different depending on the recipient, correspondence is sent to all: patient/parent; referring dentist; other treating dental specialists; all physicians involved with caring for this patient; and, any other health-care providers who have contact with the patient.

The patient/parent receives a customized, comprehensive, clearly outlined and carefully prepared correspondence with a detailed diagnosis and treatment plan, specifically providing the steps and timeline for achieving the desired results. Also included is a review of the informed consent sections presented during the treatment conference and that are relevant to this patient, as well as an addendum regarding the treatment fee(s), office and referral procedures and transfer protocols. The correspondence is composed from modules but is further customized and compiled via word processing. The format is easily adapted to any management program or stand-alone word processing package.

Organizational Architecture
Highly successful orthodontic practices understand that before the first patient is treated, the infrastructure must be in place to facilitate the stress-free care and professional image required for developing the desired sustainable competitive advantage. Many practices might need to reorganize. This allows the practice to take a fresh look and revitalize and re-energize.

The most successful organizational models were formulated after a careful evaluation of their personnel needs and capabilities, scheduling, patient flows, delegation of duty, patient needs and priorities to name a few criteria. However, the specific model is customized and specific for the philosophy of the practice. It should be an easy fit for the personality of the doctor and staff. The perception by patients regarding the difference in attitude and atmosphere after an organizational change is often dramatic. This low-cost, easily attainable modification, which permits the other two key elements (enhanced communication and improved interpersonal relationships) to occur, creates the foundation for development of the sustainable competitive advantage.

Interpersonal Relationships
In a survey of 100 orthodontic practices several years ago, the most frequently cited reason for poor referrals to the office or mediocre practice success was patient/parent dissatisfaction with staff or orthodontist interactions. Poor interpersonal relationships also serve as the basis for the initiation of more than 50 percent of the malpractice cases filed. As related in Risk Management in Orthodontics, less than five percent of the malpractice actions were initiated due to poor orthodontic results. After analyzing the results further, it became clear that the two most significant reasons for this dissatisfaction were poor communication and poor interpersonal relations with staff and the orthodontist(s). Also, this dissatisfaction led to unpleasant office interactions and malpractice lawsuits. But, even more significant, it led to a substantial loss of referrals.

Surveys of referrers have revealed that when similar comments have been made to them by patients, their referral patterns have been effected. As a result, the practice can sustain an economic loss and a significant loss of growth opportunity that increases algebraically. For example, if an orthodontic practice should be receiving a referral from 25 percent of its patients and is only receiving them from 15 percent, and if the practice starts 200 patients per year (thus having 400 to 500 existing patients), the practice is losing approximately 20 to 50 new patients the first year. This number will increase year after year. The only additional costs associated with these "lost" patients are essentially the supply costs since all other fixed costs have already been paid. Therefore, just from a referrals perspective, without considering the physical, emotional and social costs of any negative patient comments or lawsuits, the costs are high. Extrapolate the loss to a practice starting 300 to 400 new patients per year. Year after year, the total lost revenue is huge, and does not include the lost increase in enterprise value at the time of sale.

Great marketing and advertising programs might bring patients to your office. Once the patients arrive, with the three-component SCA program, which includes the communication protocols mentioned above, the appropriate organizational architecture and optimal interpersonal relationships, they will start treatment with your office, and when they do start, they will refer others. These new patients and their referrals, when added to your own satisfied patients and their referrals are now yours forever. The difference is the obtaining of the sustainable competitive advantage.

Year after year, orthodontists ask for forms or samples of correspondence, such as informed consent forms, referrals forms, progress review forms, pre-finishing checklists, consultation letters and the list is endless. Consider putting the specific forms and correspondence aside. Once the style of communications and the organizational architecture are optimized, the interpersonal relationships are easily developed and repaired, if necessary. The change will be dramatic and will include: lower stress levels in the practice; patients who are happier and very well informed, eliminating most requests to speak with the orthodontist; an increase in referrals, both patient and professional; referrers who are more willing to refer; treatment quality that is easier to attain; and, fewer malpractice lawsuits, all while revenue and overall practice value increase.

Your orthodontic practice is likely to be your greatest asset. You should care for it and protect it appropriately while maximizing its value and your overall success.

A Note Regarding Transfer Patients

As some orthodontists have learned, careful advance discussions about transfers are important. Transfer patients offer an additional set of issues and potential problems and require a specific series of procedures and protocols that should be followed. In some regards, transfer patients can be the most problematic additions to any orthodontic office. Omission of a special section in your informed consent addressing transfers, fees, timing of treatment and completion, etc. has led to malpractice actions, which often include both the initial orthodontist and the receiving orthodontist.

During treatment, the Encounter-Based Risk Management Program (EBRM) which has been developed to attain the following three important goals of optimizing patient care, eliminating malpractice actions and increasing referrals. As treatment progresses, EBRM provides the framework for regular correspondence to each of the key people mentioned earlier. The purpose is not only to keep them informed as to treatment progress, but also to facilitate the team/partnership approach to the care of this patient. This is a critical component needed to achieve the three goals mentioned above.
Author’s Bio
Donald E. Machen, DMD, MSD, MD, JD, MBA, CFA, is the recognized authority on risk management in orthodontic practice having initiated the discipline in the mid-1980s. He developed, moderated and presented at the AAO's first national risk management telecast to more than 2,600 orthodontists. He has represented orthodontists, dental specialists, general dentists and physicians in malpractice lawsuits and other legal matters as a trial lawyer and currently is a trial court judge in Pennsylvania, having served for more than 14 years. He is a board certified orthodontist maintaining a part-time practice and is on the orthodontic faculty of Case Western University Dental School and The University of Pittsburgh School of Dental Medicine. He is also an adjunct professor of Law at Duquesne University School of Law where he teaches malpractice litigation. Dr. Machen was the editor of the Legal Aspects of Orthodontic Practice column in the AJO, writing a monthly column and has authored columns in JCO and Ortho Tribune. He lectures extensively to orthodontic groups, both large and small, focusing on developing highly effective systems for eliminating lawsuits, optimizing patient care and increasing practice referrals. Dr. Machen is the author of Managing Risk in Orthodontic Practice and is managing director of Risk Management Consultants, LLC. He can be contacted at: drmachen@orthormc.com.
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