Episode #382: The Numbers Dentists Must Know to Reduce Insurance Dependence with Gerilyn Alfe

Intro: This is the Less Insurance Dependence podcast show with my good friend Gary Takacs and myself, Naren Arulrajah.

Intro: We appreciate your listenership, your time, and most of all, we appreciate your intention to reduce insurance dependence in your practice. Our goal is to provide information that will help you successfully reduce insurance dependence and convert your practice into a thriving and profitable dental practice that provides you with personal, professional, and financial satisfaction.

Lester De Alwis: Hello, everyone. Welcome to the Less Insurance Dependence podcast. I’m your cohost, Lester De Alwis. This podcast is designed to help dental professionals gain control of their practice, reduce stress, and grow without relying heavily on insurance. Before we begin, a quick message from our sponsors, Ekwa Marketing. Ekwa Marketing is offering a complimentary marketing strategy meeting where their experts will show you how to attract high-quality patients and grow your practice with strong online visibility. So, if you’re ever wondering about your online visibility, how well you’re doing, you can visit lessinsurancedependence.com/marketing-strategy-meeting  to schedule a complimentary session. And if you’re interested in moving towards a fee-for-service model and you’re looking for mentorship, you can always book a complimentary coaching strategy meeting with Gary Takacs at thrivingdentist.com/csm. 

Today I’m excited to welcome Dr. Gerilyn Alfe. Dr. Alfe helps dentists understand the numbers so they can make better decisions, set clear goals, and build healthier practices. In today’s episode, it’s titled, The Numbers Dentists Must Know to Reduce Insurance Dependence. We will focus on the key metrics that reveal how insurance is affecting a practice and how dentists can use those numbers to set strong goals for the year ahead. Dr. Alfe, we’re excited to have you here. Thank you for joining us.

Dr. Gerilyn Alfe: Thanks for having me, I’m excited.

Lester De Alwis: So, to start, when dentists want to understand how insurance is impacting their practice, what key numbers should they look at first?

Dr. Gerilyn Alfe: So one of the most important metrics they want to be starting to track, if they’re not already, is what is the difference between their gross production, which is based off of your office’s particular UCR fees, and what your net production is. Because the difference between those is the amount of adjustments that you’re forced to make if you are in network with any of those insurance companies. And the challenge is that a lot of offices will input the insurance company’s fee schedule, and that is what they are listing on the walkout statement, as well as when they send into the insurance companies. And the problem is you can’t track how much money you’re losing by doing that. I know a lot of the practice management software companies recommend that you input the insurance fee schedule and utilize that for patients that are within that plan, but you are blind to how much money is walking out the door constantly when you are seeing patients in those particular plans.

Lester De Alwis: Exactly. I think that gives a strong foundation to this conversation. Now, what metrics clearly show when insurance participation is hurting profitability or growth?

Dr. Gerilyn Alfe: I’m sorry, say that again, Lester?

Lester De Alwis: Yeah. So what metrics clearly show when insurance participation is hurting profitability or growth?

Dr. Gerilyn Alfe: Yeah. Well, as everybody knows, the only amount that you can ever collect is your net production. Mm-hmm. So when the office has a better idea about what their gross and adjustments and net production is, then they need to look at what are their collections, what is the turnaround time for their collections as well. Because one of the things that a lot of offices don’t consider is if you are billing out and waiting to get paid from insurance companies, you have a 30 to 60 days, sometimes even longer, lag time. So the time value of money decreases, it reduces your cash flow and your spending capability. And so if you’re not tracking what the amount of AR that you have is, what categories they fall into as far as current, or 31 to 60 days, 61 to 90, 90-plus days, there are a lot of offices that have a ton of money just sitting out there waiting to be collected. And if you don’t have someone in your practice who’s very good at following up on that, you may be wondering, why am I producing so much and I’m still strapped for cash? And it’s probably because your cash flow is not as healthy as it needs to be.

Lester De Alwis: Amazing. I think that’s very eye-opening. You just mentioned, mm-hmm. And now many dentists feel busy but not profitable. How can metrics help them see the difference between production and true profit?

Dr. Gerilyn Alfe: Yeah, so whenever I start talking to a new client, I always say, you know, why did you contact me? And they’ll say, well, you know, my practice seems like it’s doing well. I’m really busy. And I always say, okay, you’re busy, but are you profitable? And I sometimes get a weird look because they haven’t been taught that those two things do not go together. Sometimes doctors look at their schedule and they think, oh, this is great. I’m booked out for, you know, four to six weeks, and hygiene is booked out fully for six months. And that’s not actually a good thing, because now you don’t have time to get new patients in. Now you can’t service emergency patients who might end up becoming a regular patient for you. Mm-hmm. And if you want to start to pivot away from being insurance dependent, you have to start factoring in what is your hourly overhead, which a lot of doctors have no idea about.

Dr. Gerilyn Alfe: So you have to calculate your regular overhead first. Figure out, for the number of hours that you work throughout the course of the year, how much does it cost you to have the doors open every single day? Because that’s a very eye-opening number as well. And that is the number that everyone on the team needs to have in the back of their mind when a patient calls to cancel an appointment. Because sometimes you’ll hear them say, oh, it’s not that big of a deal, it’s only a cleaning. Well, it’s never only a cleaning. Never mind the physical ramifications of a patient missing their hygiene appointment. Mm-hmm. It is that production fell off of the schedule, and it costs the doctor probably somewhere between $300 and $500 per hour on average for most general practices. So you not only lost the production, you lost the ability for the doctor to be able to diagnose treatment and have that translate into treatment on the dental side. That patient lost the ability to be evaluated and potentially catch oral cancer, or periodontal screening, or cracked teeth that don’t have symptoms yet. You lost probably closer to $600 to $800 from that one cleaning appointment cancellation.

Lester De Alwis: Exactly. So basically being busy doesn’t always mean being successful, right? So, exactly.

Dr. Gerilyn Alfe: The offices that are super busy like that, they sometimes welcome those cancellations because it’s the only time they have a chance to catch up and catch their breath. And so I would always say that the numbers tell a story, but they never tell the whole story, and we never make decisions based solely on the numbers. But that being said, there are numbers that you have to be 100 percent aware of. But you also have to take the pulse and the temperature of how are you and your team doing? Are you constantly just stressed out? At the end of the day, you’re worn out. You can’t remember having conversations with your patients because, yeah, we are in a relationship business. And when you start to lose that ability to connect with your patients and check in with your team throughout the day, then you’re just a hamster on a wheel. And that’s not what any of us went to dental school for.

Lester De Alwis: Exactly, exactly. And now, how should dentists use these numbers when setting goals at the beginning of the year, especially at this time of the year?

Dr. Gerilyn Alfe: Yeah, that’s a great question. So when I’m working with my clients on setting goals for the coming year, we always start out with how much growth do you want to see in this year compared to last year? And then we have to figure out, is that a realistic number? Because then we have to calculate how many hours will the office be open next year to see patients? How many hours is each provider available to be able to drive production? And then we have to figure out, with the amount that you want it to grow, and if you’re going to work X number of hours, then that translates into what is the hourly goal for each producer. Because if my doctor says, I want 30 percent growth next year, but I also want to take off two additional months, I have to say, well, that’s great. So you’re committing to producing $2,000 an hour, then that’s your goal.

Dr. Gerilyn Alfe: Yeah. And then, you know, so we start out lofty, but we have to bring it back down to earth because we want to make sure that it’s an attainable goal. We don’t want it so far out of reach that it’s impossible because that gets defeating. But we also want it so that it makes everybody just work a little bit harder. Because if you’re hitting your goal regularly, it’s not high enough. You need to raise your goal a bit. You should be within about 95 percent of whatever your goal is on a regular basis. That’s the right number because that motivates us to hustle a little bit more. And the other thing that you need to consider is what is your new patient flow and where are they coming from? Because that is a big driver for a lot of practices.

Lester De Alwis: Exactly. Like you said, numbers do tell a story, but if your numbers are not realistic, mm-hmm, it doesn’t make any sense, right? So what mistakes do you see dentists make when they track numbers but do not act on them?

Dr. Gerilyn Alfe: Okay, so I’m going to throw my husband under the bus here. So my husband has high blood pressure, and he checks his blood pressure, I don’t know, three, four, or five times a day. And as you can imagine, it fluctuates throughout the day, as it does for all of us. And he stresses when it’s higher, and he’s happy when it’s lower, but he hasn’t really assigned any causative factors to why it’s higher at certain times or why it’s lower at certain times. And I see a lot of other friends of mine who have the same issue. And the problem is that they may know what their numbers are, but if you’re not changing your lifestyle, then it’s that definition of insanity, right, where you keep doing the same thing and you’re hoping for a different result. And it’s the same way with doctors.

Dr. Gerilyn Alfe: Now, if any of you are tracking your numbers on a regular basis, first of all, I want to congratulate and acknowledge you, because a great number of doctors rarely check their numbers. Mm-hmm. They’re mostly checking their QuickBooks to make sure they have enough money in the bank and that they can clear payroll and pay themselves. And that’s not a good place to be either. But if you are checking your numbers on a regular basis, great. And my question to you after that is, what are you doing about it? Because I don’t think knowledge is power. I think what you do with your knowledge is power. And because dentists in general tend to be very risk-averse and go down the rabbit hole of every possible scenario that could happen from a decision that they make, they get analysis paralysis. And what I tell my clients all the time is deciding to stay stuck is making a decision.

Dr. Gerilyn Alfe: If you decide not to decide on something, you’re making a decision. You’re deciding to stay stuck. I mean, it comes from the Latin, to cut, and you have to make a decision and then follow up, come up with a plan, get your team on board, and then start tracking it to see, is this the right way for me to be going? And if you’re not doing that, and if you don’t know what your year-over-year growth, or hopefully not, but decline, is, it’s not just knowing what the numbers are. It’s then figuring out what’s the causative factor. I mean, we are dentists. We are diagnosticians. We do this for our patients every single day, but we don’t do it for our own practice in general. So know what your numbers are and then work with your team to figure out why are the numbers showing up the way they are. Because there’s always a reason for the numbers. They don’t stand alone.

Lester De Alwis: Exactly, exactly. Now, for dentists who want to reduce insurance dependence this year, how can metrics guide smarter and more confident decisions?

Dr. Gerilyn Alfe: Yeah, so in addition to knowing what your gross production is, your adjustment percentage, your net production, your collections, your gross and net collections, you also want to be able to check what is your active patient base number. Because if you have fewer than a thousand active patients, I don’t recommend this as the time. You’re still in a growth phase. It’s not the right time for you to start making major changes that will impact your practice, even when handled in the best way possible. Mm-hmm. You want to know how many new patients you have coming in per month, where they’re coming in from. You want to ensure that your team is on board with this, and you have to go through specific steps. You also want to check not just what is your gross production adjustment percentage and net production for the office as a whole.

Dr. Gerilyn Alfe: I would recommend you break down all of your patients into their insurance categories and see which insurance companies are forcing the greatest percentage write-offs for you. Because the average is somewhere between 30 to 40 percent, but some of them are even worse. And can I name names of specific companies on this? Yes, you can. Everyone knows, if you’re watching, you know which one I’m talking about. It’s a Greek letter. And there are some offices where the insurance forced write-off is up to 50 percent. Now, it also depends on what plan you are in network with and what your actual fees are. So the percentage could be much higher than that. But on average, the doctors are losing a significant amount. So you want to figure out within each insurance patient base, which one is forcing me to make the biggest cut off the top?

Dr. Gerilyn Alfe: Mm-hmm. Now, the other considerations you have to make are, what is my area like? If you work in a town where there is, let’s say, a huge factory or a huge distribution plant or something like that, and everyone that works for that particular company is on one type of plan and they all come to your practice, even if that’s the worst write-off, that’s not necessarily the first one that you want to start with. You want to start with one that has fewer patients, and it’s a little bit easier because it’s going to be a training period for you and your team. As you start to extricate yourself from these plans, you have to set your start date. You have to figure out when you’re going to have those conversations with patients face to face. I recommend that you don’t plan to drop for at least six to nine months.

Dr. Gerilyn Alfe: You need to start laying the groundwork. And why do we say six months? Because on average, that’s when a patient is coming in for hygiene, so you can have face-to-face conversations. Don’t just send out some form letter. That is the worst way to handle it. Mm-hmm. And allow your patients to ask you lots of questions, which means your team has to be quite adept at, and trained on, and comfortable with answering those questions in a way that highlights the benefits to the patient as to why you’ve made this decision. And you’ve got to make sure you’ve got great customer service, boost up your marketing. You know, Echo is great at that to help a practice position itself. But you have to start doing everything now to plan that realistically you won’t be out of at least one plan most likely until the end of this year.

Dr. Gerilyn Alfe: You have to set a realistic goal for yourself. And when doctors get frustrated when I tell them that, I say, how long did it take you to get where you are? You’ve been on this hamster wheel for 10, 20 years, and you think I’m going to just wave a magic wand and within like 30 days we’re going to be able to transform your practice? It takes a long time to turn the ship around. You’ve got to be patient and trust the process because when you follow it the right way, you minimize the impact to your practice. My practices that have dropped insurance dependence and are either 100 percent insurance independent, and I have a few that are fee for service, mm-hmm, and some of them started out with membership in, I’m not exaggerating, 20 to 30 different plans and companies.

Dr. Gerilyn Alfe: No, it took a long time for them to get to this point. However, they have lost fewer than 7 percent of patients with each particular plan. So when doctors are worried about losing patients, they think, oh my God, my patients are going to leave. Well, if you don’t handle it right, they probably will. And if you haven’t been providing great customer service and great dentistry, then yeah, they’re just looking for a reason to leave you, and this is the perfect reason for them. However, when you handle it the right way, what every single team has told me is, you know what, Dr. Alfe, the first patients that bailed were the ones that we were happy to see the back of. Because many times those are the patients that are driven only by what their insurance is going to cover. Mm. They nickel and dime you for every single thing that needs to be done.

Dr. Gerilyn Alfe: They don’t want to hear about any other discretionary or comprehensive work. And that is someone that you’re too nice to fire. So they make their own decision to leave. And so when you think about if you’ve got a practice with about 1,600, 1,800 active patients, if you’re only losing 5 to 7 percent of patients within one insurance group, it is not going to impact your practice in a bad way because you’re also now freeing up time to have new patients who are fee-for-service patients come in who will appreciate the extra care and time and technology and expertise that you have.

Lester De Alwis: Exactly. I mean, none of this is going to be overnight success. You’ve got to plan everything step by step. Mm-hmm. And so many pieces of advice, so many advisors, and so many good nuggets shared by you, Dr. Alfe. So anyone listening in, if they want to get in touch with you, or they want to have a discussion with you, or even have a chat with you, mm-hmm, about their practice, what is the best way that they can contact you?

Dr Gerilyn Alfe: Yeah. So the best way usually is you can email me at jerilyn, G-E-R-I-L-Y n@getaheadcc.com, or you can send me a text at 3 1 2 4 7 9 4 4 2 7, and you can find more information on my website, which is getaheadcc.com 

Lester De Alwis: Exactly. You can find all that information on our, uh, web, on the website when this episode is going live on the, uh, on the, uh, release notes of this episodes. Uh, and Dr. Alfe, thank you for joining us today and breaking down the numbers. Dentists truly need to understand.

Dr. Gerilyn Alfe: My pleasure, Lester. Thank you for having me.