THE MILLIONAIRE DENTIST PODCAST

EPISODE 2 TRANSCRIPTION

Announcer:

Hello everyone, welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory . On this podcast we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work. Now here's your host, Alan Berry.

Alan Berry:

So I know today's topic is kind of a secret and Brogan, while I throw it over to you and you can kind of tell the listeners what we're in for today.

Brogan Baxter:

Yeah, the dreaded achilles heel of dentistry as it's portrayed today, PPO plans and the dental insurance and how they're kind of wrecking everything at dental. So we're going to talk about that a little bit today. I can tell you just from what I've seen and what we do here at the firm, dental insurance is becoming bigger and bigger of an issue. A lot of dentists don't think there's a way out of it, and they think dental is going the road of medical. And I would say that's not necessarily the case, and we're going to chat a little bit about that today, aren't we Jason?

Jason Smith:

Yes, we are. And to tie into that too, I want to add that unfortunately, when you start a practice and maybe you bought a practice that was on hard times, you're trying to grow, maybe you had to sign up for some PPO plans. And dentists don't know how to get the hell out of the PPO plans because something that nobody ever talks about, because nobody knows how to fix it, Alan, is the fact that, if you're writing off 35% all the time, you'll never have low overhead. And frankly you'll have a shitty income and you'll have shitty savings. And if you don't know, or have a strategy, how to get out of those PPO plans, then you're in big trouble. And you're in big trouble from a transitioning of your practice, you're in big trouble because you'll probably never be able to afford an associate and you're in big trouble because you'll probably never build a retire.

Jason Smith:

And it becomes such a downhill snowball that is just growing and growing that you're in trouble. Then forget all that, we're sitting here talking about PPO plans. Well, if your cashflow at home is terrible, and then if you're having a bunch of $80,000 tax surprises every year because your accounting is crap, then you'll never be able to fix what actually has to be fixed in your practice. And that's what I just talked about because you will be so fiscally unsound that you'll never get to a point of being able the focus on those things.

Brogan Baxter:

And sorry, Alan, if I may, when you're a dentist and you're working and so much of the work relies on your hands and the physical labor you put into it, you can't be riding off two, three, four, five, $800,000 in dental insurance. When you do that, you have to have staff that comes with it. Staffing costs are one of the highest costs in dental. And so what ultimately comes from that, besides you're working your ass off, not to make a lot of money, you're also having to pay a lot more people to write off all the free dentistry. It's a maddening vicious cycle that dentists don't even know how to get out of.

Alan Berry:

Jason, do you have some other ideas about how dentists can get rid of their insurance? It sounds like it's a difficult thing. Is tough to do?

Jason Smith:

It's tough to do from a standpoint of the emotional part of it and looking at the numerical part of it too, so yes, it is tough to do. And I think a lot of people have the fear that it's going to frankly, be a practice killer if they get rid of it and they're going to lose all their patients. And there was a lot of parameters and figures that can be looked at that can prove when somebody is fiscally strong enough, or he or she to leave that PPO plan.

Brogan Baxter:

That's a good point because most dental practices out there can't just flip a switch overnight and say, "I'm done with this insurance plan." That would be devastating. There has to be a bigger strategy employed. And quite frankly, most of the time that takes a couple or three years to ultimately wean yourself and come up with some sort of strategy to lessen the impact. So then when you do decide to flip the switch, you have a good solid foundation.

Jason Smith:

It's kind of like bringing a new baby home. There are some things, frankly, that we've got to get in place first, and we've got to get their financial shit together before we can make a move is bold as getting rid of a massive PPO plan that might be dominating in their practice, Alan, for example, if it's a PPO plan that only makes up 8% of their patient base, if we get rid of that, that's wimpy that doesn't do crap form to really make a change. We've got to, for example, get rid of the one that they're writing off 35%.

Jason Smith:

To give a quick example. Unfortunately, we felt like it wasn't a great case for us for other factors, but we recently looked at a case where the production was $2 million and they were writing off $800,000 in dentistry, and didn't seem to have a problem with that. I'd rather get rid of the $800,000 in write-off and start from scratch and get to that pure, what we call that fee for service model. And that doctor really needs guidance on how that might happen, but it wasn't as high of a priority for them. So here again, when you're write $800,000 off of dentistry, you need four or five employees just write that off.

Alan Berry:

So is there a standard first step that you tell most clients or is everything clients meaning that what works for one doesn't work for another?

Brogan Baxter:

You always have to consider each person's situation. There are people out there listening right now that have a biggest 800 pound gorilla patient base plan that is killing them, they don't know how to get out of it. You take a different approach with somebody that's doing that versus one that says maybe it's 15% of their patient population. There are different avenues and different routes to go. And it really depends not only on the numbers, but it also depends on what the hell are these people's plans for retirement. Is there a bigger plan? What's the time constraints we have to deal with here? Are we trying to prep it to sell the practice or what?

Alan Berry:

And for example, though, this doesn't sound uber exciting, you have got to have predictable cashflow in your practice and consistency before you can ever think about making a move on cutting PPO plans. And that's kind of the basis of where it has to start. It's no different than when you talk about, say LeBron James or somebody like that, who is one of the greatest basketball players in the world, and probably that's ever lived, nobody sees him shooting free throws and doing the basketball drills. And the same thing goes, if you use that analogy for a dentist is we're not cutting PPO plans until we get our shit together. And that's got to happen first, and what is out of place and out of in a given practice or with a given dentist, everybody comes out now, for example, with student loans are all over the place. You don't know what somebody got dealt, just coming out of school a loan. All those things are different and everybody is customized, specialized, and that's why there's no one strategy.

Brogan Baxter:

But let me clarify the term shit, because he was talking about getting your shit together. Well, what that means is you got to be making more, you got to have money in the bank, you got to be saving a bunch of money because I got news for you folks. If you're out there and you're listening to this, and if you imagine making 30, 40, 50% more saving two, three, four times what you have now have at least double or triple what you have in your bank account right now, making that decision to cut that plans a hell of a lot easier.

Alan Berry:

What could go wrong if the dentist just decides to cut PPO out without having what you just said all in alignment?

Brogan Baxter:

I've seen it. I get case study, seen it in the past. Somebody went, cut everything. What happened was that that practice went bankrupt five years later.

Alan Berry:

Oh, so serious stuff.

Brogan Baxter:

Serious stuff. Now that was also in a really, really terrible economy.

Alan Berry:

But, but even in a good economy.

Brogan Baxter:

Yeah absolutely. The dental insurance is making it more and more to the market share, and a lot of the dentists accept it as a necessity and it is absolutely not. I see it and live it every day, it's not the case.

Jason Smith:

And in that case for example, this is a quick and dirty one Alan, that dentists had no idea what percentile of his patients were true fee for service to begin with. So basically he went to a weekend seminar, et cetera, came back, cut it all. And there was, there was no study.

Brogan Baxter:

Absolutely. You got to have good numbers, got to start, everything starts with numbers. Folks, numbers add clarity to your decisions. If you understand the numbers behind the decision, you can make an educated decision. That's kind of what we're here for.

Alan Berry:

So tell me this, give me the positive side of this. If they follow along with your guys's analogy of how to properly get rid of PPO, what's the upside for these dentists?

Jason Smith:

Well, they don't have any insurance company boss them around and tell them the type of dentistry they should be doing because they put pressure on him all the time to do that. And they can do the type of dentistry that they feel like they should be able to do. Dentist are very, very torn when somebody walks in, that is a very good patient, that's been a patient for 10 years. And for dentistry, they give you $1 and the other person comes in that's been there for five years and you only get 70 cents from them because they're in a PPO plan. And many dentists are torn by that because they feel like it's not fair because those two patients are treated the exact same, the ones getting the 30% discount.

Alan Berry:

And I'm imagining the insurance companies realize that they have this leverage over the dentist.

Brogan Baxter:

The insurance company, just starting to flex their muscle, and they're starting to get a bit too greedy, and now there's court cases involved. So I think what's going to happen is ultimately greed's going to lead to the downfall of dental insurance plans. That being said, the upside is wonderful, more money, less work, less write-offs, less wear and tear on your hands, your fingers, higher value for your practice when you sell, more flexibility for vacations to bring on associates to transition the way you want.

Jason Smith:

Well, with what Brogan said, for example, if you're fee for... You mentioned more, has always been better in dentistry, more production, more production, more production, it's just not true. So you could be a office that maybe your fee for servicing your production is only $1.2 million. And if the rest of your financial picture was in good order, you should easily bill, make half a million dollars off of that, you'd have low overhead. And off of that, you should easily be able to save over $100,000 a year for retirement. And then you'll easily be a multimillionaire one day. So why the hell don't you go work on your golf game? And why do we need to sign up for a bunch crappy insurance plans? Or do we need to take a doctor who got caught up in all that and he's doing, or she's doing two and a half million dollars, and there's a bunch of junk in there, and we need to get back to the basics.

Jason Smith:

But you have to draw a line in the sand at some point, because the only way you're going to win in a big volume shop, like a practice with a bunch of PPO plans is if you have a bunch of young dentists right out of school, that you're not paying very much money to, that you can profit from. But to try to make the income you want to make from that, it's going to be very difficult.

Alan Berry:

Wow. That's a lot of great information. Sounds like to me the a PPO is a win-win for the insurance companies, not really the dentists.

Brogan Baxter:

Unfortunately, that is the case.

Alan Berry:

Okay. So lots of good information. Thank you, Jason, thank you, Brogan for your insights and thank you everyone for listening to the Millionaire Dentists Podcast. This is brought to you by Four Quadrants Advisory. And if you'd like to speak to an expert, please go on our website at fourquadrantadvisory.com and send us a note. Thanks again for joining us, we'll see you next time.

Announcer:

That's all the time we have today, thank you to our guests for their insight and for sharing some really great information. And thank you to you the listener for tuning in. The Millionaire Dentist Podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year, they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.