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Even the most successful dental group practices face complex financial challenges. There are rising operational costs and evolving market dynamics, which means long-term success depends on careful cost management strategies. Adopting effective cost control measures becomes crucial to maintain profitability and sustain growth.
This article offers actionable strategies for dental group practices to optimize costs while still maintaining high-quality patient care. These strategies include:
- Comprehensive budgeting and financial planning
- Strategic vendor management
- Streamline inventory management
- Staff training and productivity
- Adopting new technology
- Efficient revenue cycle management
- Regular financial performance analysis
Let’s take a look at the way each of these strategies can help DSOs and group practices more effectively manage costs.
Comprehensive Budgeting and Financial Planning
To start effectively managing costs, dental group practices should begin by setting clear financial goals. This process involves:
- Defining objectives
- Establishing measurable targets, including desired revenue and expense levels
- Creating a roadmap to achieving your goals
We recommend analyzing historical financial data as well as industry benchmarks to ensure that your defined targets are realistic. With a plan in place, track actual performance against projected targets in order to identify deviations and realign operations to bring your practice back on track.
Strategic Vendor Management:
Vendor management can be a huge area of cost control for your dental practice. For existing vendor partnerships, review and assess your current contracts to identify areas of renegotiation. Or, determine if an alternative supplier may be able to offer better pricing.
When partnering with new vendors, gather competitive bids from multiple suppliers to ensure you are getting the best prices and deals for dental supplies, laboratory services, and equipment purchases. Always make sure to compare all bids, stay up to date with market trends, and negotiate favorable contracts that can provide cost savings.
Streamline Inventory Management:
Implementing an inventory system can help you uncover inefficiencies and pinpoint financial waste. With an effective inventory system, you can set par levels to ensure you have sufficient supplies without excessive stockpiling. Additionally, an inventory system will allow you to analyze historical data and usage patterns so you can accurately prevent stockouts, avoid high-cost emergency orders, accurately forecast demand, and minimize wastage.
Staff Training and Productivity:
Sure, training is a cost, but it’s one we consider a crucial investment. Continuous education and training for your staff helps elevate the skill level of your providers and increases your staff’s efficiency. Allocating resources to build a well-trained staff will decrease errors and generate higher productivity in your practice.
In addition to continuing education, implementing performance-based incentives can be a powerful tool to motivate your staff to strive for excellence. Developing specific goals or milestones for individual providers or teams can further drive efficiency and ultimately lead to increased cost savings for your dental organization.
Adopting New Technology:
Investing in the right technology can have a substantial ROI for your organization. We suggest budgeting out the potential revenue increase of the investment and calculate the breakeven point. Investing in capital expenses can add tangible value to your practice. What’s more, implementing technology can help streamline workflows and improve accuracy in administrative tasks, such as scheduling, billing, and claims processing and increase productivity.
Personalized patient care should always be a priority, from the front desk to time spent with hygienists, or dentists. Dental technology offloads busy work from staff so they can spend more time focused on patients and results. Increased productivity leads to more patient care per day. This improved performance will be reflected in your practice’s profitability.
Efficient Revenue Cycle Management:
Revenue Cycle Management (RCM) is a hot topic in the dental industry. When done correctly, this financial process can help your practice keep tabs on every appointment, every service, and every outstanding claim to make sure all transactions make their way to accounts receivable in an efficient manner. Measure RCM’s success with outstanding insurance claims, patient balances and efficiencies of the teams dedicated to the process.
Missing a step in the RCM process can lead to increasing timelines and unpaid claims—and ultimately, a cash flow issue for the DSO. Implementing a revenue cycle management software is one way you can help streamline the claims process and minimize errors and rework that can lead to delayed payment and increase administrative costs. Optimizing teams and process is critical to long term stable environment within a DSO’s RCM process.
Regular Financial Performance Analysis:
Regularly reviewing your financial reports can help unveil revenue trends, identify cost variances, and assess the overall financial health of your practice. Your balance sheets, profit and loss statements, and cash flow statements are all tools to help you forecast future financial plans and goals. Budgets are critical to understand success within the definition of your organization.
Other financial tools you should be monitoring are your key performance indicators (KPIs). Tracking these key financial metrics, including revenue per hour and patient as well as others, can help identify areas of improvement and help you teach your staff and help them optimize focus towards revenue and cost management for your dental organization.
Conclusion:
Effective cost control is vital for the financial sustainability of dental group practices. By implementing comprehensive budgeting, streamlining inventory management, investing in staff training, embracing technology, optimizing revenue cycle management, and conducting regular financial analysis, dental practices can identify and address cost-saving opportunities while simultaneously improving the quality of patient care. The importance of effective control cannot be overstated, as it not only ensures the financial health of dental group practices, but also contributes to their long-term success and growth.
Written by Eric Pastan, Director, Skytale Group. Eric joined the Skytale team with vast, hands-on experience scaling businesses in the dental industry. Leveraging his years of experience building a Dental Services Organization from the ground up, Eric helps business owners strategize during crucial stages of growth to carry out their vision.
Eric created the largest DSO in New England, employing 350 dental professionals across 4 states. A former strategist and COO, he’s been intimately involved in every phase of business growth, with expertise in systemization, centralization, purchasing, hiring, M&A, and finance. Get in touch with Skytale Group HERE.
