Dave Ternan, OrthoFi's president and CEO since May 2013, brings a unique blend of experience to the team. At the University of Michigan, Ternan earned a bachelor's degree in mechanical engineering. After college, he spent a decade working with Fortune 100 companies, and then got into the fast-paced and high-risk world of startups, where he excelled at using his knowledge of technology operations to bolster new companies in the modern marketplace. Leave it to a mechanical engineer to build something that works!
Reynolds, Ternan and the rest of the team at OrthoFi are showing how the company is quickly becoming the gold standard in orthodontic practice management. Read on about how it's rewriting the books on everything from down payments and collections to dealing with insurance claims—and even the "untouchable" concept of outsourcing.
You were practicing in Detroit during the recession. That had to be tough—but there also had to be lessons learned there, right?
Jamie Reynolds: Absolutely! Economically, Detroit has been a hard-hit place, but something unique about our city is how it adapts to struggle and comes out stronger. When the economy began to spiral, Detroit saw some of the worst of it and along with that, I watched my practice have a drop in conversion rate and flat-lined growth. That's the lifeblood of any ortho practice, so it triggered a fight-or-flight reaction.
At the time, I was lecturing about Insignia with Dr. Jeff Kozlowski, and we sat down and examined our footing and found that we were standing on a mountain of industry myths held up by nothing more than complacency or fear of change. Those myths were causing us to make poor decisions regarding our financial practices. We needed a new approach, so we went on a sort of "myth-busting" spree, using our practices as the guinea pigs. We discovered that the old ortho standards hindered us well more than they were helping us. Now I advocate for what I call the "new gold standards"—standards that have worked not just in my practice and Jeff's practice, but have been shown to be wildly successful in practices all over the country.
The first standard you recommend doing away with
is going to turn some heads:
You think that tying the patient's payment window to the window of treatment time isn't a necessity anymore. How can you be so sure patients will pay you everything?
Dave Ternan: I know it goes against conventional thinking. But conventional thinking doesn't have the stats to support the idea that as soon as we debond those brackets, patients run out the door and never pay us another dime. Delinquency rates in ortho are already extremely low—we're talking 3 to 5 percent past-due beyond 30 days.
Also, I think it's important to note that I'm not suggesting this method because it worked in one practice and one practice alone; we've collected data from more than 70,000 starts and $300 million in production.
One of the keys we discovered is something all practices do anyway in their clinical planning: Start with the end in mind. It's also how you should treat patients when it comes to their payments. Change the way you handle collections by remaining vigilant and consistent, and always engaging in a professional manner. Respect is vital, because patients who owe you payment are far more likely to work with you on that overdue balance if they feel like they're being "worked with" on the issue, rather than hounded.
How we've done this is by hiring collection experts who know exactly how to reach out to patients effectively. Across more than 160 practices, we see an average of 0.7 percent past due after 30 days, far below the national average of that full 3–5 percent. That equates to real money.
Let's talk down payments. For the longest time, practices have lived and died by the standard of covering costs or getting 15–20 percent up front. Why isn't this relevant anymore?
Reynolds: Honestly, I'm not sure if it was ever relevant; it's just what we docs did for the longest time. Patients are consumers, and consumers everywhere expect customization—now more than ever before.
The idea of asking for a certain amount up front makes sense on paper. You're trying to make sure you cover your costs. But today's environment is different. Not only is it well-documented that many consumers only have $400 of disposable income at any one time, but we're now trying to cover for much higher-premium treatments with high lab costs. Asking a patient to pay $1,500 or more down to start with aligners is a huge obstacle, and is likely killing the conversion. If you just expand your options, you'll see that in aggregate, patient-customized payment options will bring in as much or more cash than this old transactional concept we've lived with for so long.
Ternan: It's also good to mention that most practices offer a discount for patients who can pay in full. This gets about 20 percent of new patients to go that route. The rest of the patients have no incentive to fork over a substantial down payment—there's no discount and we generally don't charge any kind of interest, even for patients who end up finishing their payments post-treatment. Patients not only see no incentive—they see no risk.
Tiered-down payment incentives are part of the new gold standard. Try offering a 5 percent discount for patients who can pay in full, and then create smaller incentives for those who can pay 50 or 75 percent down. Furthermore, provide patients with even more payment options, using an open-choice payment slider, where patients can customize their down payment and their monthly payment into a flexible (but secure) option. We've got a pretty impressive set of data that proves this system works. Customization is the future of collecting payments, and the kind of system that I've seen achieve a 99.5 percent collection rate again and again.
This combination of payment solutions creates a proven system of aggregate cash-flow management, which keeps the practice not just sustainable but growing—especially when your practice handles collections professionally and honestly. When you're managing in this aggregate manner, it means your practice is seeing an eventual increase in same-day-cash and overall collections. I don't need to explain why that's a great thing to strive for.
Now for the part nobody likes to deal with: insurance. Most practices process their claims in batches—usually whenever staff has time to devote to this task. You think practices should be doing this daily. Why?
Ternan: Insurance companies love a busy ortho practice, but in a pretty selfish way. The longer it takes your practice to send in claims and continuation paperwork, the longer the insurance companies can wait to pay you. It's a simple matter of where that cash-in-reserve is sitting. If you're waiting to the end of the month—or even the end of the week—to send in those claims, you're giving insurance companies a free pass to wait until the last possible moment to put the insurance money in your pocket, not theirs.
This ties back in with the aggregate system of how your practice should be handling payments from patients. Well, insurance companies don't get a free pass on this, either. Hold them accountable in the same way you do with your patients.
Allocating time each day to file those claims will lead your practice to see an increase in cash on hand, and a consistent bit of cash flow coming back in from the insurance companies, compared with practices that wait until the end of the week, month or whenever the staff has the time to send off a few claims. This is your money we're talking about. Get on it every day, and every day you'll be a little less stressed about it.
Outsourcing is an ugly word. It conjures up stories of American jobs being shipped offshore and putting hard-working people out of work. When it comes to outsourcing work in ortho, most docs tense up and fear the loss of control. There's a myth that outsourcing any part of the practice will weaken it, but outsourcing collections and insurance brings two big positives instead: building better relationships with patients and making your operations costs more streamlined and efficient.
A successful orthodontic practice engages every opportunity it can to build a relationship with a new patient. Meanwhile, collections are about the opposite: chasing down treatment that's already happened. Why devote your professional and personable staff to focusing on the rearview mirror of your practice? Collection efforts are draining for staff, who would be far better suited (and more passionate) to be interacting with incoming patients and creating the kind of positive relationship that translates to treatment starts.
"Consider the associated factors," said Dave Ternan, president and CEO of OrthoFi. "Partnering with a company on collections means putting that work into the hands of professionals who do nothing but focus on collections on an everyday basis—meaning they can do it faster and more efficiently, which allows you to scale your business while giving your team more quality time for building lasting patient experiences."
OrthoFi is the brainchild of Drs. Jamie Reynolds and Jeff Kozlowski. During hard economic times, the docs were faced with the challenge of keeping their practice thriving amidst a devastating recession. By questioning long-held standards in orthodontics and debunking many myths, these clever docs teamed up with savvy business professionals like Dave Ternan (OrthoFi's CEO) to develop an entire system of time-tested and proven methods that have grown their practice—and now hundreds of others. Today, OrthoFi is a complete software and service solution that offers end-to-end flow with an undercurrent of metrics to make sure every decision doctors make is based on stats from more than 70,000 cases.
OrthoFi uses its advanced research and clinical experience to offer solutions in all major areas of practice, including growth, insurance processing, billing and collections, and business analytics.
OrthoFi has rewritten the approach to running a successful practice. With a unique philosophy of patient flexibility, a core understanding of collections and delinquency, and a humble take on outsourcing insurance claims, OrthoFi is quickly establishing its way of operating as the gold standard in a field of old standards. And there's no shortage of rave reviews.
"The OrthoFi process is designed with an understanding of how the orthodontic practice runs and how treatment is delivered," said Dr. Jeffrey Mastroianni, a St. Louis-based orthodontist who's seen 67 percent more same-day contracts since he began using OrthoFi. "The Patient Slider makes it easy for patients to determine a payment plan that's manageable for them, including payment plans that extend beyond treatment time. Trust me, I know many of us are a bit nervous about finishing treatment while leaving payment unfinished. That's no longer a concern."