Can Dental Lab Fees Lower Overhead and Increase Profits?

Thu, Dec 19, 2013
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toothThis guest blog post was written by Larry M. Guzzardo, author and expert in practice management solutions.

Are you frustrated by the balancing act between achieving your best restorative result and making a fair profit on procedures? Do you feel you have to compromise on esthetics because you can’t afford the lab that knows how to provide the very best quality? Tired of “eating” the cost when you go ahead and do it anyway or when the lab fee turns out to be higher than you expected? Every dentist I know is exhausted by the strain this creates between them and their lab technician.

Create options and flexibility

If you are doing prosthetic dentistry and participate with insurance plans that force you to discount your fee, the options are few beyond looking for a lower priced lab. But then you’re caught in the “you get what you pay for” syndrome. However there is still a way to decrease overhead expenses and increase profits all while utilizing your choice of the best technicians. Consider billing patients a separate fee for their laboratory expense. Now get up off the floor! This is not as unusual as it may seem. There is no other area of medicine that pays the lab service for their patients or includes this amount in their fee. Explore the possibility that your hands will no longer be tied. Options are now available to you and your patient that could not be presented in the past.

” . . . You now have the flexibility to do what you want without risking a clinical compromise or financial loss.”

Immediately increase operating profits and lower overhead expenses 10%-14%

This concept may be new to all of us in dentistry; however we have to recognize this is a standard practice in almost every other industry, particularly medicine, for years. To mention a few, lawyers have always done it. Mechanics, banks, contractors, and hotels do it. Now even the airlines do it too. Not to mention delivery services who add on a surcharge when fuel prices go up. All of them have discovered the increased flexibility and profitability achieved from charging one fee for their initial service and a separate fee for anything extra. They never have to lower their quality of service or put their reputation at risk. I say it’s time we catch up. How much longer can you continue absorbing additional costs without it affecting your bottom line?

Every dentist I know understands how important it is to maintain a healthy working relationship with their laboratory technician. They realize the vital role the technician plays in the final result so they also expect to pay a premium for the very best.

An excellent technician makes you look like an artist and an average one makes you look just like everybody else. Let me show you how this can be done and still show a profit.

Because this is so widely done in other industries we need to learn how to feel good about it too so we can eliminate this significant overhead expense. And give ourselves the flexibility to choose a laboratory technician that can provide the best result for your patient at the same time.

Why not just select a fee that includes every expense and allows for a fair profit margin? First of all, your fees would be constantly changing depending on the lab you selected or procedure you needed and second, psychologically, it is easier (as all retailers have found) for the patient to comprehend when the total is divided in two. Charging separately for the lab will make your fee for the procedure sound competitive with other dentists in town.

Presenting this fee to the patient is easy:

“Ms. Patient, to complete your treatment as I have described, the fee will be (x) and the approximate laboratory fee to achieve the result we are looking for is (x).”

Get familiar with the fees charged by your laboratory so you can estimate the fee slightly higher than you expect, so when the case is completed, the final fee will likely be lower for the patient.

Bookkeeping and accounting is even easier. Lab charges are posted to your accounts payable system as you do right now and, instead of billing the patient for their lab fee through your practice management software, their lab invoice is generated through your accounting software as well. When patient lab payments are collected, this amount is credited against the amount posted. When this occurs (+$250.00 posted and -$250.00 collected) the result equals zero. Eliminating this expense completely from your practice and immediately increasing your operating profit!

I realize this may be a difficult concept for some because not only does the doctor have to embrace the idea, so does the rest of the staff. Take your time by starting with a small case so the excitement for the idea can build and before you know it, you’ve created a routine. Clients I’ve worked with who have implemented this concept have not only become better at managing the business side of their practice, they’ll tell you that having the freedom to work with the lab of their choice, they enjoy dentistry more than ever.

Larry M. Guzzardo who has co-authored two books, “Powerful Practice” and “Getting Things Done” conducts in-office practice management consultations exclusively for dentists to enhance trust, create organization, increase profits, and to develop patient relationships that last. Larry has presented numerous workshops including, “Winning Patient Acceptance,” “Business Communication Systems,” and “The Leadership Challenge.” Larry can be reached at 800-782-5770, www.larrymguzzardo.com and by email at Larry@larrymguzzardo.com

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Topics: dental advisor, dental technology, dental financial planning, Financial Planning