The Group Dentistry Now Show: The Voice of the DSO Industry – Episode 18

Dave Monahan, CEO of Kleer, joins the show for a second time.  Dave addresses how in the midst of the COVID-19 crisis, which is having major impacts on group practices and patient bases, extraordinary approaches to surviving and ultimately reviving the dental marketplace are critical. DSOs and group practices should consider implementing a dental membership plan now as part of their recovery strategy because once the crisis lifts, patients will want to address their oral health in a budget-friendly way.

Our podcast series brings you dental support and emerging dental group practice analysis, conversation, trends, news and events. Listen to leaders in the DSO and emerging dental group space talk about their challenges, successes, and the future of group dentistry.

The Group Dentistry Now Show: The Voice of the DSO Industry has listeners across the North & South America, Australia, Europe, and Asia. If you like our show, tell a friend or a colleague.

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FULL TRANSCRIPT

Bill Neumann:

I’d like to welcome everyone to the Group Dentistry Now Show. I am Bill Neumann and you might remember this gentleman over here on the other side, Dave Monahan, he was on about this time last year talking about Kleer and the membership plans that they have for, not only solo practitioners, but now they have a relatively newer platform for multisite DSOs. Emerging groups, large groups. So Dave, welcome to the Group Dentistry Now Show.

Dave Monahan:

Thanks Bill. Yeah, thanks for having me on again. I appreciate it.

Bill Neumann:

Yeah. Yeah, no, thanks for being here. You’re in your new office?

Dave Monahan:

We are. Yeah. We moved about a month ago or so. So yeah, it’s been nice. We were going to a pretty small cramped area, people were all over each other. Now we actually have nice space. We have things like telephone booths where people aren’t talking over each other. We have a nice little kitchen. So yeah, it’s come a long way.

Bill Neumann:

Yeah, that’s great. Now I’d be remiss to say that right now you are one of the only ones in the office right now due to what’s going on with the coronavirus situation.

Dave Monahan:

Yeah, it’s true. It’s just me and VP of marketing, Becky are in here. Everybody else is working from home. Thankfully we have a business where you can run it from home, but obviously, yeah, there’s a lot disruption being caused.

Bill Neumann:

Right. And that being said, we wish all the DSOs and emerging groups and solo practitioners and everyone well during this unprecedented time. So we felt that a lot of people would have some time to sharpen their saw and really focus on some things that they might not have had the time to focus on. Membership plans being one and just really how to make their business better once this crisis is over. So I’ll do a little introduction, give you some background on Dave and then we can talk a little bit about Kleer and the membership plans that they offer.

Bill Neumann:

So Dave is the founder and CEO of Kleer. He has a passion for creating technology enabled businesses that improve people’s lives. He founded Kleer and championed its mission from the beginning. He designed a Kleer platform based on dentist and patient feedback. So that’s important. He created a brilliant and hardworking team. He mentioned Becky, who’s one of them that’s there right now in the office. Publicly advocates for dentist and patient rights and continuously pushes the company to innovate and be better. So again, thanks for being on today.

Dave Monahan:

Yeah, no thanks for having me.

Bill Neumann:

So I mentioned when we first got started that Dave was on the show last year. In fact, it was one of the first podcasts we ever did. So thanks for that. It was an experiment back then for sure. But so that being said, a lot of people know Kleer. If your readers of our website, you’ll see a lot of articles Kleer has created with us. And then also the podcast that Dave did earlier, again, this time last year. But we may have some new viewers and readers and listeners, so for the folks that don’t know Kleer, why don’t you give them a little bit of a rundown on what Kleer is. What membership plans are.

Dave Monahan:

Great. Yeah. Why don’t I start with what membership plans are just so that we’re all on the same page. So in a real simple way, membership plans are a way for dental practice to offer care directly to their patients without a middleman in the way, like an insurer. So a membership plan is basically designed and priced by the practice themselves. They get to decide what treatments included. The typical treatment plan will be your hygiene, your two cleans, your exams, your x-rays, and then typically discounts off of other services. They can get a lot more complicated than that. But in a simple sort of way that’s sort of the basic type of membership plan we see.

Dave Monahan:

And then what’s great about membership plan is it’s not just that the dental team can control the design and the pricing, but that a patient get easy access to care. So it’s very easy for a patient to sign up, get the access to the care they want, get discounts off of treatment that they’re going to need and just make that very feel very comfortable accepting care within a dental practice. And what Kleer is, we’ve created a platform and everything that goes along with a platform like support and tools and things like that, that a dental practice needs to make their membership plan successful and make it very easy to implement support and sell to their patients. And just at a high level, since we last got together, I’m not sure where we were then, but we now have thousands of dental practices on the platform, including about 150 groups. And we’ll go into some of that. But the net is, we’ve done really, really well with group practices over the last four or five months.

Bill Neumann:

Yeah. And it’s kind of interesting. So back to when we first spoke, I mean it was… Membership plans seemed relatively new and it seems like there’s been a huge growth in the past year, year and a half, with people, dental practices, whether they be solo practitioners or group practices becoming more and more interested in membership plans, I think becoming more comfortable with the concept. This is not something that’s been around forever. So I think it’s kind of interesting. So what do you think creating the demand for membership plans all of a sudden?

Dave Monahan:

It’s funny. It’s an interesting question. It’s sort of the all of a sudden thing because to your point, I think the need’s been in the market for a long time. When you think about, what’s driving membership plan adoption? I think there’s two forces driving it. One on dental practice side and the one on the patient’s side. So on the patient’s side, let’s start there. We did a lot of market research. What we saw was patients really value dental care, but their typical issues are that they either have over complicated and expensive coverage or they don’t have any coverage at all. And in both those situations, not a good sort of outcome for the patient. So they’re looking for something simple, easy, affordable, something they are sort of typically used to in the other parts of their lives, typical sort of subscription model. So we think that side, the patient side, has matured a lot given things like Netflix and Amazon and other subscription services where they understand subscriptions and they want to be part of subscriptions. They value subscriptions.

Dave Monahan:

On the dental practice side and the group side, no surprise, everybody on this podcast is, they’re dealing with a system that in our opinion is broken where you have these chores controlling pretty much everything in the market, right? Pricing, what treatment protocols, access, who gets access, who doesn’t get access, payment terms. And it’s never good when a market has one type of entity controlling it from those types of aspects. So we feel like that dam’s been building for a long time and it’s getting to a breaking point where dental practices just can’t take anymore declines and reimbursement rates.

Dave Monahan:

And so the net is with the patient pushing obviously, and needs of patients pushing and them getting more comfortable with subscriptions, the practices getting more and more difficult to run a successful practice given insurance and declining reimbursement rates and then you throw into that equation technology like ours, that can connect the two in a seamless way using the cloud and make it where those two entities can do business together in a very seamless way. You put all three of those things together and what you end up with is, like you said, this explosion. I mentioned we’re working with thousands of dental practices. Last year we grew about 500% year over year. It’s been sort of insanely rapid growth.

Bill Neumann:

Yeah, that’s great. So I’m going to throw, throw a question out at you, based on what you’re saying there with your growth. I know last year when we talked a little bit, the platform wasn’t necessarily, and maybe it was before we talked, but it wasn’t geared specifically to multisite or there were some things that were lacking. So can you tell me a little bit… First off, I love the interface. You talked about Netflix and people want something super easy. And so when you think about anything online, it needs to be nice and clean and easy to maneuver from a patient perspective for sure. So tell me a little bit about what changed. You had this huge growth. 500% is incredible. A lot of that is groups, right? So that being said, what’s different from this year to last year from the standpoint of multi-site emerging groups DSOs.

Dave Monahan:

It’s funny, we had a lot of the basic components that a group needed in our sort of initial platform. Including things that are really important when you create a successful membership plan, like localization to a individual practice. So a group, let’s say they have 10 or 15 or 20 locations or more, each one of those practices has a unique set of circumstances that they’re dealing with. Demographics of their patients, the economy that they’re a part of, the treatment protocols that the dentist who’s running the practice likes to use. And so one big part that we had in our platform that groups need to be successful is localization. So each practice can do their own thing. What we didn’t have let’s say six, seven months ago was the ability to roll all that up into a view where you can see the whole group at once. You can see all the practices within the group.

Dave Monahan:

Even though they might be doing something different from a membership plan perspective of designing and pricing, you can see their results. How many members of the added? What type of deposits have been generated through the plan? Which plans are being purchased? Like the whole nine yards, right? And so what we did was, about six months ago, we built a whole, what we call group portal, on top of our platform that enables a group to see how things are going across every practice within the group. And then actually what we’re doing right now, we’re constantly innovating. I think what we’re working on right now is something called master groups, where we actually have groups who want to roll things up, let’s say in the Northeast territory, in the Southeast territory, the Central territory. So you can actually have these roll ups, you can see not just the group in total, you can start to see pieces of the group.

Dave Monahan:

So we’ve actually been taking directions since we started opening up the platform to groups, taking direction from them on what types of features they’d like to see moving forward. And we’re constantly innovating and adding new things like that.

Bill Neumann:

Oh, that’s great. Yeah, that makes a lot of sense. So that leads right into next question. So let’s talk about results. I’m sure you have a lot of data that you’ve compiled. So let’s talk a little bit about what you’ve seen.

Dave Monahan:

Yeah, so it’s pretty incredible. So what we do actually for any practice and group that’s on our platform, we will roll up their practice management system data. So we’ll go into a practice management system, download all the data, and what we ended up doing is doing an analysis of their patients and we group them into three groups. We group them into the insured patients, the uninsured patients with no coverage, and then the uninsured patients with Kleer membership plans. And so you can compare the three groups and see how they’re doing. And what is amazing… So we did a sort of random sampling across the practices on our platform. And the sampling includes insurance-based single location, insurance-based multi-location, it includes groups and DSOs. It includes fee-for-service practices. It’s the whole nine yards. It’s like every type of practice you can think of is in this sort of roll up that we did, in this analysis we did.

Dave Monahan:

And one thing we saw that was incredibly consistent I from practice to practice is, and this is sort of net outcome of it all and I’ll go into some details in a second, was that they increased production by two X. So their Kleer membership plan patients are doing twice the amount of production as their uninsured and non-Kleer patients. And what you see is, and this was a little bit of a surprise to us, so a lot of times when a practice will implement a membership plan, they’ll be a little worried that they’re giving discounts, right? Especially on hygiene. So on hygiene to giving a discount and then on the other treatment they’re giving a discount and they get nervous that their hygiene revenue is going to decline. And they might believe that production and treatment will increase but the net is, they’re worried about hygiene.

Dave Monahan:

What we actually saw on the platform was an average increase in hygiene of about 70% per patient. And then like I said, the increase on the total production was over two X. And so we dug into it a little bit and we tried to understand what was going on and it makes sense when you take a step back. And it’s actually really simple why these results are occurring is when somebody buys a membership plan, they’re committing to their hygiene, right? So they’re paying a practice, let’s say $300, on average it’s $345 on our platform for their two hygiene visits.

Dave Monahan:

So if they are paying for those, either upfront or on a monthly basis, what do they do? They come in, right? And they have that hygiene completed. So one is you’re guaranteed that hygiene revenue. But the second thing is, about 75% of all treatment starts with a hygiene visit, right? So by getting them into the chair, what we learned is that they come in to do their hygiene visits two to three times more than an uninsured, uncovered patient. By coming in, just treatment becomes a natural outcome of just coming in and get your hygiene done. So it’s amazingly consistent. The results are sort of through the roof, the practices rode with it. And it’s a real basic concept at the end of the day.

Bill Neumann:

Yeah, that’s pretty surprising. But I mean, I guess when you think about it, like you said, just take a step back and they’re paying X amount per month and even though it might be discounted, they feel committed to seeing that hygienist twice a year and that hygienist is there diagnosing and coming in and doing preventive work. So it’s going to carry over not just from hygiene, but also into the restorative as well.

Dave Monahan:

Absolutely. That’s exactly what happens. The studies we’ve seen is like I said, about 75% of all treatment starts with a hygiene visit. Which makes sense, right? You can’t do treatment without seeing the person, so you get them in the chair then typically treatment comes from. And by the way, the other thing that was amazing to us is, I don’t know if you’ve ever seen these books like The Membership Economy and things like that, but they basically say Amazon and Netflix and all these other groups, they’ve proven that you end up doubling… Anybody who becomes a member of your service, does twice the amount of business with you than a non member. And that’s sort of just a standard number that’s used across the all industries. And that’s exactly the number we’re seeing. It was crazy. We couldn’t believe it when we went through the analysis and saw the exact same number they had been talking about.

Bill Neumann:

That’s amazing. Yeah, that is amazing. You would think that from industry to industry it might vary. And people are accustomed to it now, right? Everything seems to be a subscription or a membership plan.

Dave Monahan:

Absolutely. Yeah. People, they like it and they feel that they’re getting a deal. Right? And they’re becoming closer to whatever entity they’re buying a membership plan from they feel closer to that entity.

Bill Neumann:

So let’s talk a little bit more specifically about the DSOs. So these results that they’re getting, the data that you’ve been able to kind of pull out of Kleer and kind of measure against people not using membership plans and people that are insured versus uninsured. How are DSOs using that data? Like what are they doing with that information?

Dave Monahan:

So one thing is, the first sort of wave of this analysis that we do for practices just to show them that the membership plan is either having or not having results, right? And getting ROI. So this initial phase of the analysis for our DSO is, “Hey, it’s working.” Right? Or it’s not. We’ll be the first ones to tell a DSO that it’s not working. And I will tell them that if it’s not working, pull it right? There’s no reason to have it if it’s not working. But we’re going to show you the data and you can decide.

Dave Monahan:

So typically what we see is the first phase is, yes, this is working great. Let’s recommit to this and this is something we’re going to do for the long haul. And then once they see that, they typically then expand who they’re offering the membership plan to and they might go out to the dormant patients or as new patients come in or they might offer it as a way to get new patients into the door. So typically what we see is once they understand the ROI of it and return on it, they’ll just committing even deeper to the membership plan as a core strategy of how they execute their group.

Bill Neumann:

Okay. That makes sense. So we mentioned a little bit earlier that you’ve really upped the game when it comes to providing solutions for DSOs and group practices and you’re continually innovating there. So what does a group practice need to consider? Let’s say they don’t have a membership plan or maybe they have one and it’s not necessarily working well. They’re not utilizing it to the best of the DSO or the group’s ability. So what do they need to consider when they implement the plan? What needs to be considered before they do that.

Dave Monahan:

Yeah. So there’s a few things we’ve learned about what makes a membership plan successful and what makes them not successful? And I mentioned one of these earlier, but I want to say it again because it’s really important. The first thing we typically see in a group that’s either executed a plan isn’t doing very well or is under performing is that it’s not localized. So actually, we’re working with a group that had 75 offices across four states and they had the same membership plan across all the offices. And so the pricing was the same, the treatment was the same, everything. And a couple things happen in that scenario. One is the dentists aren’t bought off on it. So one person in one geography versus another in another geography with the same protocol, one will commit to it and one won’t. Sometimes both will commit, but it’s like, I have no say in this, therefore, I’m just not committed to it.

Dave Monahan:

The other part is they’re leaving money on the table in multiple situations. So if you’re pricing it thinking you can get an average across lots of different zip codes and geo areas, it’s going to feel too expensive for some of the locations. Going to feel too cheap probably for others. And it’s like you want to maximize the pricing or gauge the pricing based on the local geography and the economics of geography. So the net is, that’s a major one is if you can’t localize, you typically aren’t going to have success. So that’s a big one.

Dave Monahan:

On the pricing side, something we’ve learned is, and it goes a little bit with that localization, but it’s another separate sort of stream is, you got to optimize the pricing for both the patient and the practice or the group. It can’t be a one-way street. It can’t be too cheap. It can’t be too expensive. And we’ve actually developed something we call smart pricing, which is an algorithm that finds the right price based on what we’ve seen results across all of the practices on our platform using the specific fee schedule of the practice that we’re implementing. And you’d be surprised about the pricing, sort of where it comes out. It’s typically higher than what the practice would expect it to be. But when you’re trying to do is again find that sort of balance where the patient sees value but the practice drives profitability from the membership plan.

Bill Neumann:

So you’re analyzing geographically and then also by the fee schedule and a specific geography, and then based on that algorithm you can say this is what the membership plan should be.

Dave Monahan:

Exactly. And this is me speaking out of school, but our CTO has a PhD in machine learning and he developed this algorithm to balance that sort of value and there’s other things in it. He has these constants in it and it’s a pretty long equation and it sort of pops out this number. But the net is he used this machine learning algorithms to look at all the practices on our platform and who was being successful and who wasn’t and what was a common denominator on pricing for the ones that were being successful. And then he built this algorithm to optimize that pricing based on anybody’s situation given the data that we have in our platform. So yeah, it’s basically something called game theory where it’s, how do you balance the needs of two sides and have optimal outcome?

Bill Neumann:

Really? Super interesting, yeah. Little scary but interesting.

Dave Monahan:

And what it does is it spits out what we expect to be the optimal price. And then we have practices that will adjust it up or down. But the net is, it will tell you where we think it is and should be. So, localization, getting the pricing done properly. Just not having… Automating things, putting it online, not having paper-based systems. Right? And one is a patients expect that because they have it everywhere else in their lives. They expect anywhere they go, that they’re it’s going to be online, sign up ane when I walk out, I have something on my phone that shows that I bought something and I have a record of it and I can go back to it when I want. Things like that. So automation online.

Dave Monahan:

The other part is, this automation piece and also having an online, it’s being able to measure your performance and also set metrics and goals and then be able to track those goals. We typically see, coming back to the question, we typically see there are no goals within a group and nobody’s rolling up the numbers and nobody understands who’s selling these things and who’s not? And is it being successful? Is it not? So all kinds of things. I mean there’s other things like that, but those are probably the big three or four items I’d say we typically see that keep membership clients pretty successful.

Bill Neumann:

That’s great. I mean that really answers the other question here that I have about… Well maybe we can go outside of what the platform does, but how is Kleer catering to the DSO market? I know you spend time at the different meetings that are going on or up until recently have been going on and we hope they come back very, very soon. But you have people that are dedicated to the group practice DSO space. Anything else you wanted to mention?

Dave Monahan:

Yeah. So besides the ability to do the localization and the cloud based portal and I guess there’s a couple of other things that sort of come to mind. One is we typically see a practice, this is practices across the platform. A typical practice will make a change to their membership plan maybe once every six months or so. And it might be a pricing tweak or a treatment tweak or adding a new care plan, things like that. And obviously that gets amplified when you’re a group. So let’s say you have 10 or 15 or 20 practices, there’s going to be changes that need to be made at some point in your membership plan. So one of the features we developed is what we call Kleer version control, which is you can make a change to your membership plan at any time. Any change you want to make, you can make. And what happens is legally you can’t go back to the patients that already bought your membership plan and make that change on them. You can’t increase the pricing on somebody who already bought it or change the terms.

Dave Monahan:

So what our platform does is actually it creates a new version of your membership plan and anybody who was on the previous version stays on it up until the renewal date. And then they move over to the new version. And anybody who’s buying here on out after the new version of release gets the new version. So it handles all of that totally seamlessly. You don’t need to do anything. You just make the change and then it just propagates into the system. And like I said, it manages everything. So that’s something we developed to make the group practices experience better.

Dave Monahan:

The other one is patients are constantly changing things on their own as well. So they might want to change their credit card or they might come in and then they get diagnosed with something like periodontal disease and they need to change their care plan from the standard plan to CURO plan and things like that. So the platform also handles all of that and sort of changes as needed when a patient makes a change. So it’s those little things that actually mean a lot because you just don’t want your teams all tied up in those types of sort of manual activities and trying to get things done.

Bill Neumann:

Absolutely. So this ties in with the next question that I have. So some of these groups, solos, emerging groups, DSOs, big, small, whatever, some of them have homegrown plans, right? That they built internally that a lot of times aren’t performing up to expectations. So in a case like that, what would you recommend?

Dave Monahan:

Yeah. It’s typically hard to do it on your own. We’ve seen, the membership plans break down at about 50 members. You can get them sort of managed okay from a paper based perspective up to about 50. And when it starts cross 50 we see it’s almost impossible to manage it, understand who’s got what, what benefits they bought, what benefits have they used, where the payments are, when they come up for renewal and all that stuff. So I have nothing against manual plans. I actually tell practices, “Hey, if you want to get started just start it sometimes with manual and just start understanding the value of a membership plan.” Because our best customers are the ones who did it manually and then realize it got out of control and then move over to a platform.

Dave Monahan:

So on the manual side one is just all the paper based stuff is difficult and it gets very difficult as you move forward. And especially at renewal time. So a patient’s coming up for renewal, who is managing that renewal? Typically somebody’s trying to call the patient. Typically patient doesn’t renew until they come into the office. So there’s some gap there. And so there’s a lot administrative work trying to get ahold of them and then typically you get gaps in your payments, either on the month, or in your subscription payments.

Dave Monahan:

The other part is just not knowing what’s going on. Again, coming back to that performance and metrics. It’s really important to be able to set goals and measure how you’re doing. And the manual plans just can’t do it right? Because you got somebody calling, somebody who’s putting a spreadsheet together and it’s really a bad experience for the team. And then one last one is just compliance and just being able to make sure your plan is compliant. Things like receipts and being able to give somebody a plan document and managing their payments in a PCI compliant way. There’s a whole list of things like that. But the net is you need to be compliant. Typically manual plans are not.

Bill Neumann:

Right. And that becomes more critical as you scale up and have multiple regions that you might want to measure and collect data. And then of course, compliance should be important to everyone, whether you’re a solo or you have 900 locations, but certainly it becomes more critical as you get to a larger scale. All right. So last question for you. So what do you think the future holds for membership plans? What does the future look like? What do things look like now? Do you see more adoption? Do you see it becoming more common place? Is it already more common place? It certainly is more than a year ago, but tell me a little bit about the future.

Dave Monahan:

Yeah, I think probably a two things come to mind. The first is what you were talking about with adoption. I don’t know if you’ve ever read The Innovator’s Dilemma, Christian Claytonsen, but basically what he says is markets have sort of multiple phases to them. The first is the early adopters. And then basically the general sort of market adopts something. So we’re past the early adopters and we’re moving into general market right now and we’re seeing that in how many practices we’re adding on a weekly and monthly basis. So I think one is, the membership plan is just going to be a standard item that are offered by every dental practice. There’s just no reason not to do it. Everything’s there to make it very easy for dental practice to implement membership plans. We’re actually on our way there. We’ll be there I think probably within the next year or two where it’s just a standard thing.

Dave Monahan:

The other thing though is, what we’re working on right now is, the membership plans are evolving into other services and becoming more sophisticated. So not just now about your hygiene visits, right? Why not have a plan around let’s say aligners or around whitening or around whatever, right? Whatever type of treatment you can think of within a dental practice. A lot of them can be put into a subscription model. And so what we’re experimenting with right now is different versions of those things and trying to understand, what does a dental practice like to offer? And then what does a patient like to purchase? And so the net is, I think outside of sort of these things become a standard. I think again, they’re going to get more sophisticated, they’re going to offer more services. They’re going to morph away from quote unquote a membership plan and be more about just services that dental care or dental practice offers to their patients.

Bill Neumann:

Right. Well that’s exciting. Yeah, it makes a lot of sense as the patients become more comfortable and more used to membership plans inside the dental practice and, and outside you mentioned Netflix and whole host of other subscription plans that exist. Amazon. Yeah. So, and then I think as the DSOs become more comfortable and looking for ways to generate loyalty and then also additional revenue, it makes a lot of sense to look outside of just hygiene, beyond hygiene and restorative to some other things. So. Well good. Listen, I really appreciate you coming on the show today with what’s going on in the world and I hope that we as an industry can take some time while we have time to kind of figure out how to be better business people going forward. And wish everybody the best. So thanks again Dave.

Dave Monahan:

Oh yeah, no thanks for having me. I feel the same way. Yeah, thanks everybody for joining us and I hope everybody’s doing well. And my only feedback there is I know the crisis will lift at some point. I think we just got to sort of whatever soldier our way through it and hopefully everything will be good on the other side.

Bill Neumann:

Yes, you got it. Everybody stay well, and thanks for listening and watching Dave and myself on the Group Dentistry Now Show