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Game Changers: Why do Orthodontic Practices Decline or Fail? by. Dr. Roger P. Levin

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Categories: Practice Management, HR and Accounting;
Game Changers: Why do Orthodontic Practices Decline or Fail? 

by Dr. Roger P. Levin

There are times when it is very instructive to learn about success through failure. Over the last 41 years, my consulting firm has had the opportunity to observe more than 4,000 orthodontic practices. Through these observations and several national orthodontic surveys conducted annually, identifiable patterns have surfaced that show factors that can lead to the decline or failure of an orthodontic practice.


A quick historical overview of orthodontics economically
There would have been no need to write this article 30, 20 or even 10 years ago. In the past, very few orthodontic practices failed, and those that did were typically led by orthodontists who were in the later stages of their careers. Today is different. First, you have more delivery models for orthodontic services. In addition to orthodontic practices, there are general dentists who provide aligners, dental service organizations and direct-to-consumer companies. All of this adds up to the reality that orthodontics has much more competition than in the past.

Second, we are seeing the beginning of “fee wars.” In my last orthodontic presentation on behalf of an orthodontic software users’ group, I was approached by an orthodontist who wanted to know how her $6,800 fee could compete against the $3,700 fee of a new orthodontist in the area. This is a different question than if she was competing with a general dentist. This was an orthodontist not far from her.

Third are the limitations of dental insurance. For many orthodontic practices that begin to decline or move toward failure, one strategic move frequently enacted is to quickly enroll in dental insurance plans with the hope of making up some level of revenue and covering overhead. However, in recent years, most dental insurance companies have not increased their reimbursements and a few have decreased them. Relying on dental insurance as a last-minute strategic opportunity to aid or save the practice is no longer a viable strategy.


Reasons for decline or failure
1. No referral marketing program. In the past, orthodontic practices with no referral marketing program were able to reach a reasonable level of revenue. This is no longer the case. Not having a referral marketing program today will eventually mean a decline in referrals. Maybe you opened in an area that had low competition with many families moving in, which is a great benefit to an orthodontic practice. However, eventually everything stabilizes, which reduces the impact of a rapidly growing market, and the practice situation can change. I have personally counseled hundreds of orthodontists that had very little competition starting out and within a few years of opening had new competition that was also causing a decrease in their practice revenue.

Recommendation: Develop a referral marketing program with the right strategic emphasis on parents, patients, referring doctors, social media and the community. Eventually, most orthodontic practices will need referrals from all five categories. Remember to keep your referral marketing program consistent and continuous. Inconsistency is the No. 1 reason for failure after not having any referral marketing program at all. Don’t rely simply on a “good situation” for referrals without having a referral marketing program, thinking you do not need it now. You very likely will in the future.


2. Underdeveloped customer service. Most parents and patients judge the quality of orthodontics by the aesthetics of the final smile and how they are treated. Practices with poor customer service will eventually find they are losing both referrals and conversions. In addition to being more demanding, people today read reviews, pay attention to how customer service translates into convenience for them and analyze whether or not they believe they will end up with a beautiful smile.

Recommendation: Identify 10 ways to immediately improve your customer service. There are no businesses on the planet, even with the best customer service, that cannot improve. Even the Ritz-Carlton has a meeting before every shift every day to review customer service principles with their employees. As an aside, they also have the lowest turnover rate of any hotel chain in the world.


3. An outdated (and ineffective) treatment coordinator process. As the orthodontic world is shifting and changing, the treatment coordinator (TC) process, a pivotal part of the process to create a start, must be reinvented. Parents and patients today approach orthodontic practices having already independently conducted extensive research into the various types of orthodontic treatment and the fees associated with each. They are very likely to have contacted multiple different orthodontic practices in order to compare service and fees. TCs require advanced and sophisticated training that focuses on your practice’s competitive advantages, which to some extent go beyond the clinical excellence of the providers. Patients are making decisions based on their perception of customer service and convenience, and the TC process must account for that. Michael Porter, the brilliant Harvard Business School professor who has written the top textbook on competitive strategy and competitive advantage, makes it clear in his work that competition can wipe out businesses that do not implement change early enough.

Recommendation: Access information, education or training that encompasses all of the new competitive factors that have emerged in orthodontics, then reinvent and redesign the entire TC process from start to finish. Start by asking the key questions that parents or patients want to know to understand the competitive landscape.


4. Remote monitoring. As any of you who are following my articles in Orthotown are aware, I am a proponent of remote monitoring. Even as a relatively new technology, it offers tremendous advantages to expand or grow an orthodontic practice. Our analysis already shows that an orthodontic practice can grow by 200% to 300% in production and volume by opening chair time for more patients. If the referral marketing program is properly and scientifically designed to support this increased capacity, orthodontic practices can manage more active patients than ever before. This will create three key dynamics:
  • Orthodontic practices will have unprecedented levels of higher production and revenue, and therefore tremendous success.
  • Some orthodontic practices will leverage the higher volume of patients to enable a strategy of lowering fees to attract more patients and still perform well above average financially.
  • Remote monitoring will help to achieve lower costs per patient by reducing the number of in-office visits per patient. Lower overhead means a higher profit.
Recommendation: Evaluate the impact remote monitoring can have on the efficiency and volume potential of your practice. Begin laying the groundwork for a shift to remote monitoring by exposing your team to webinars and case studies of practices that are currently using and benefiting from it.


Summary
Orthodontic practices in the past had little danger of failing, and even a below-average orthodontic practice still gave the orthodontist a significant income, offering a reasonable retirement age. This is now shifting because of new competitive factors that have created a different landscape and a need for new strategies.

Weaker practices will be affected first if they do not take steps to invest in new technology like remote monitoring, improve their management systems and update their referral marketing, but all practices could be in danger.
Author Bio
Roger P. Levin, DDS Roger P. Levin, DDS, is the CEO and founder of Levin Group, a leading orthodontic practice management consulting firm that has worked with more than 30,000 practices to increase production. A recognized expert on orthodontic practice management and marketing, he has written 67 books and more than 4,000 articles, and regularly presents seminars in the U.S. and around the world.
To contact Levin or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit levingroup.com or email rlevin@levingroup.com.
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