The Group Dentistry Now Show: The Voice of the DSO Industry – Episode 130

Aldo Benedetto, Chief Operating Officer of Orthodontic Partners, Dan Smelter, Chief Revenue Officer of D4C Dental Brands & Kevin Gladstone, Director of National Account of Abella AR and OrthoFI join the GDN Show.

The panelists discuss:

• Growing, supporting and scaling orthodontic services
• Changes in the specialty marketplace
• Challenges – hiring, RCM, & integration
• 3rd party vs. in-house solutions
• Much more

To learn more about OrthoFi and Abella AR visit – https://orthofi.com/ or https://www.abellaar.com/
You can also contact Kevin Gladstone at kevin.gladstone@OrthoFI.com

To reach Dan Smelter of D4C Dental Brands email – dan.smelter@D4C.com

To reach Aldo Benedetto of Orthodontic Partners email – aldo.benedetto@orthdonticpartners.com

Learn much more by listening to this podcast.

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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 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:

Welcome everybody to the Group Dentistry Now Show. I’m Bill Neumann, I’ll be your host today. And as always, we appreciate you listening in, whether it’s on Spotify, Apple, or Google, we certainly appreciate it. Without dedicated audience like you, we wouldn’t have great guests like we have here today. So we have three guests here, two from two different DSOs, and then one that you may remember. He was actually just on a recent podcast not too long ago, but I’d like to introduce you to Dan Smelter. He is the chief revenue officer of D4C Dental Brands. Dan, welcome to the Group Dentistry Now Show.

Dan Smelter:

Thank you.

Bill Neumann:

And then we also have Aldo Benedetto. He is the chief operating officer of Orthodontic Partners. Aldo, thanks for being here.

Aldo Benedetto:

Thanks for having me, Bill.

Bill Neumann:

And Kevin, who you may have just seen and heard on a recent podcast, we have Kevin Gladstone, he’s the director of National Accounts for OrthoFi and Abella AR. Hey, Kevin, welcome back.

Kevin Gladstone:

It’s good to see you again, Bill.

Bill Neumann:

Yeah, it wasn’t long ago that you were just on with Dental City.

Kevin Gladstone:

That’s right. That was a good time and this will be too.

Bill Neumann:

So, Aldo, why don’t we give you a chance to tell everybody a little bit about your background, and then also if you wouldn’t mind talking a little bit about Orthodontic Partners.

Aldo Benedetto:

Yeah, happy to. So I’ve been in multi-site healthcare for going on 20 years. Started my career in Vision Care, spent a few years there. Then I moved into dental, was with a large DSO for about a decade, then moved into urgent care and about three years ago joined Orthodontic Partners. When I joined Orthodontic Partners, we had about three practices. It was just post-COVID and now we’re up to about 30 practices, close to 80 locations, 70 doctors and continuing to grow, so it’s been quite a ride over the last three years. Orthodontic Partners is an OSO or orthodontic service organization, so we’re ortho only, focused on the specialty. And really what we do at OP is partner with mid-career docs generally who are growth-minded and work together to help them grow the practice.

Bill Neumann:

Aldo, what states is orthodontic Partners? Where are you currently?

Aldo Benedetto:

We’ve got practices in the Northeast, Midwest, Upper Midwest, and I can’t remember… And the Southeast too is another area of concentration.

Bill Neumann:

That’s great. Thanks for that, Aldo. So, Dan, you’re up next. Would you mind giving the audience a little bit on your background and then talk a little bit about D4C Dental Brands?

Dan Smelter:

Yeah, I’ve been in dental about 20 years. Started on the payer side, United Concordia many years ago, then moved to Georgia and worked in private practice for a number of years. And since then I’ve been at three large DSOs, all multi-specialty, one in Georgia, one based out of California. And about four and a half years ago I ended up at D4C Dental Brands, dentistry for children. And we are a large 200 location plus pediatric practice with ortho and oral surgery add-ons. So most of our growth is by affiliation with existing pediatric single offices or small groups and if they have ortho, we like to expand that or add ortho to markets where it doesn’t currently exist. We’re in 10 states now and that’s mostly concentrated Texas, Georgia, Florida, but we have a way out in California, a bunch up in the Midwest as well.

Bill Neumann:

Thanks Dan. Kevin, for the people that either forgot or didn’t get a chance to hear the podcast that you were just recently on, can you give everybody a little bit of background on your bio first and then also talk about your role at OrthoFi?

Kevin Gladstone:

Sure. I am Kevin Gladstone, I have spent the last 18 years in dental, the first 17 plus years with Dentsply Sirona in different roles throughout the United States, but the majority of my time was spent supporting the DSO industry. And most recently I’ve now transitioned into the role of director of national accounts at OrthoFi. And OrthoFi is a software solution that drives patient acquisition, manages insurance and supports the patient AR process for any offices or DSOs or orthodontists doing specialty care for orthodontics specifically. So what we do is help practices convert more cases, we’ll do end-to-end insurance management, including verification of benefits and then support that patient through their financial journey within the DSO of the practice.

Bill Neumann:

Thanks, Kevin. The topic that we really wanted to cover today, and we can talk about a lot of different things, but we’re going to focus on orthodontic services in a DSO specifically, how do you grow that? How are you supporting and scaling that in a DSO setting? So I want to talk a little bit about just driving that type of growth, do you have any thoughts around that? And I don’t know if you want to start that off, Kevin, or maybe we start off with you.

Kevin Gladstone:

Yeah, maybe I’ll start. Just having been in the industry on the DSO side for a number of years, by the last 12, 13 years, when I started in the DSO segment, most of it was GP-driven. We didn’t see a whole lot of specialty services in that space. And as DSOs have evolved, as the industry has started to evolve with technology as well, we’ve seen specialty services and orthodontic services in particular be a more and more important part of DSOs business, whether it’s standalone groups like OSOs for example, or if DSOs are charging to add orthodontic services as clinics in a standalone environment or specialists within the GP model. It’s been interesting to see how that has kind of evolved and as we’ve seen it evolve, there’s challenges that are associated with it and that’s why I thought it might be worthwhile for the audience to hear from a couple of experts who’ve seen the trends change, have been leaders in that change and can offer insights into how other groups might want to think about supporting their practices.

Bill Neumann:

Dan, it’d be great to, as the chief revenue cycle officer at D4C and the fact that you’re pediatric and ortho, I’d love to hear your thoughts and your experience with the growth of orthodontics at D4C.

Dan Smelter:

Well, I think like most DSOs out there and OSOs, we’re all looking for same office growth. So when you’re running a pediatric or general business, you have a certain number of patients in that market that you can treat as a pediatric patient. And depending on population growth and decline, that’s eventually going to flatten out. And a lot of DSOs are private equity owned or looking to sell one day and are looking for growth, not just by adding more locations but also increasing revenue in the same office. So adding specialty, especially ortho on top of pediatric makes a ton of sense just because you have that direct referral. So you’re treating those patients every six months for hygiene and as they come to the age where braces might be necessary or phase one treatment with appliances, which is a big part of our business, then you have that internal referral and nothing works better than internal referrals as far as driving new growth.

And you can also take advantage of square footage you might have, whether you build the location and have extra room or in our case, a lot of times as you’re buying and affiliating with practices, you might have space to add ortho in or oral surgery as well, which is another specialty that we add on top of the pediatric business. So it just allows you to grow and have that referral source. And there is referrals back the other direction too. You have ortho patients that come in that need the dental work done. So the referrals can work both ways.

Bill Neumann:

Yeah. Some great points there, Dan. Thank you. Aldo, what’s your experience like there? I mean you’re specifically focused on orthodontics.

Aldo Benedetto:

Yeah, our view and experience has been that within existing practices, when you partner with the right doctors that have the right growth mindset, even the most sophisticated well-run practices, there’s something that can be done differently or a little better. And so OP, the foundation of our business and our partnership is we bring together the docs with business people and we look honestly at each practice and we measure everything we can and we share best practices and then we leverage those learnings across the platform. So we’ll bring on a practice, could be a very large multi-doc, multi-location practice doing really well, but all of the things we’ve learned over bringing on 30 other partners have really given way to these what we call playbooks. And so, “Hey, let’s implement our treatment coordinator playbook and here’s some of the things that we’ve learned along the way that really work. Let’s test them in your practice.”

If there’s an opportunity, if the practice is doing really well in a certain area, then it’s the opposite. We say, “Hey, docs, this is really cool. There’s something special in your practice, at least compared to the other OP practices, what can we glean, what can we take from that and how can we share that with the rest of the partnership to unlock some growth?” But experience has been that, again, there’s always something we can do a little different. And a lot of it are small things, the controllables and really just understanding that funnel from what do we do to make the phones ring? How are we doing when we, are we picking up the phones as often as we should? Which is sometimes an issue. When we pick up the phone, are we doing everything we need to get that patient excited about coming into the practice?

Are we performing our confirmation calls when they show up and one of our doctors recommends treatment? Are we doing, and this is where OrthoFi comes in, are we doing the things we need to, are we presenting the treatment in an affordable way, in a compelling way? And then are we doing the follow up work that comes along with patients who don’t convert on the spot? So our experience has been if you really get focus on each little piece of that funnel, measure as much as you can, set goals, targets for the, “Hey, we should be converting about this many or we should be picking up the phone 80, 90% of the time,” you can make a big difference and it can result in significant growth at the same practice level.

Bill Neumann:

Some great points. So this is a question I didn’t ask you and forgot to ask Dan. So are all of the partnered practices, are they all acquisitions or affiliations?

Aldo Benedetto:

Yes, all of our practices are partners who came in, practices were established, well run, growing as it was, and then kind of joined us to become part of the partnership. That’s our model. We are looking at expanding some of our brands or practices within their market so perhaps adding a location in an existing geography under one of our practice brands. But primarily it’s all acquisition.

Bill Neumann:

Acquisition. Dan, is that similar for D4C?

Dan Smelter:

Yeah, similar. We do some of those on the pediatric side, but most of them are acquisitions or affiliations as we call them with pediatric practices. Some have ortho and oral surgery, some do not. If they don’t, then we very likely will be adding those services in, especially once we have density within the pediatric offices in an area, we’ll look at adding that ortho on top of that. We aren’t typically looking for standalone ortho as an acquisition though.

Bill Neumann:

Okay. Yeah, that makes sense. Let’s talk about some changes in the ortho specialty marketplace maybe that you’ve seen in the past couple of years. And we know what’s going on. The economy’s definitely a lot different that it was even 12 months ago. But what are you seeing in as far as, maybe we’ll start with you Aldo, on the ortho side of things? Are practices, are they more apt to want to partner with a DSO than they were? And are you working with more practices going forward than, are there more in your funnel, I guess, than there were 12 months ago?

Aldo Benedetto:

Sure, yeah. I mean from what I could tell, yes. I think that there is more interest out there from doctors and the drivers of that are probably, that kind of traditional pathway is not really an option anymore of a doctor coming out of school at a residency, joining the practice and then buying in over time and taking over. Typically we see that the data’s out there, right? Docs are coming out with 500, $750,000 worth of debt. The demographics have shifted. It’s now 50% women who might have a different view on what they want their career to look like.

So yeah, then I think the third piece is that there’s been activity in the space and people are hearing about their friends and colleagues experience and going, “Hey, that sounds pretty good. I might be interested in that.” So I think some of the, just the view of what it would be like to join an OSO or a DSO is becoming a little more crystallized in people’s minds and they go, “Okay, yeah, I can see myself doing that.” Versus in the past it’s just a lot more unknown but still pretty early on in consolidation so ton of white space for it. But yes, I mean I think those are I think the trends that are pushing more and more docs to be open to having the conversation and considering that pathway.

Bill Neumann:

Dan, do you have any thoughts on this?

Dan Smelter:

Yeah, and I think that’s not just on the working for a DSO, which doesn’t have maybe the stigma it did 10 years ago, but also selling to a DSO on the acquisitions as well, willing to sell your business and oftentimes be part of the new, larger business. I mean, when you have a doctor who has an established brand and we’re acquiring them, you want that doctor to continue to participate and help grow the business and make sure things don’t fall apart. So having them come on board and stay part of the larger DSO as a whole, I think is becoming more commonplace as well on the acquisition side. We retain a lot of the doctors and a lot of them become owner doctors or leadership doctors in the organization as well after they sell their business.

Bill Neumann:

Dan, so there are a lot of DSOs out there now that are multi-specialty, right? So they’re maybe reaching out to pediatric and orthodontic practices to bring them into their DSO. Do you have any thoughts on working with maybe a multi-specialty versus working with somebody that’s a little bit more focused, whether it’s pediatric and ortho, an oral surgery like D4C or going to a larger DSO that has GP and specialty practices?

Dan Smelter:

I’ve never spoken to anybody at another DSO that wasn’t at least thinking about adding specialty in. Like I said, I think just the need for growth within existing markets and not just by adding more locations is important to all of us. So I would definitely say that D4C would explore other ideas in the future as well. We have some GPS and some markets where we do some adult work even albeit a small percentage of our business. But if you’re not looking at growing in multiple ways, it really becomes hard to have that same store, same location growth over time.

Aldo spoke to some of it from his perspective about looking for the training and looking for opportunities for more conversions and things like that on the ortho side. But in a pediatric, hygiene-based business, unless the population grows, you eventually kind of max out in a certain geography. And if anything, the more competition with more DSOs that are doing heavy marketing, you risk losing patient base as well. So the idea of a home for the patients to come to and you can keep them from a small young age up through orthodontic treatment, up until oral surgery when maybe third molars need to come out. We like to keep them as long as possible inside of that same family.

Bill Neumann:

That’s some great points, Dan, and if you have any additional thoughts on that, Aldo, as far as just what’s going on is, I was thinking more from the perspective of, “Hey, I have an orthodontic practice and I might be looking for a partnership.” Do I go with somebody that’s focused in ortho specifically or maybe I look somewhere else? I don’t know if you’ve ever gotten feedback on that from people looking to join the organization?

Aldo Benedetto:

Yeah, we certainly have. I mean, I think our pipeline is so robust and we’ve been able to grow as much as we have because we’ve stayed and are committed to staying ortho only, that’s attractive to doctors in the profession. They want to know that they’re going to get the support that’s tailored to ortho, that they’re partnering with business people who know the space extraordinarily well and can help them grow. And the other thing is, I just don’t think we would’ve been able to, our first partner after Jamie Reynolds and Jeff Kozlowski came together with our CEO to start the business was David Sarver, right?

So it was a very well known orthodontist. I don’t think someone like David Sarver or some of the other partners who’ve joined since Maz Moshiri, Stuart Frost, a number of other really well known orthodontists would’ve joined a multi-specialty. I think that they went into, I don’t want to speak for them, but they went into a profession and I think it’s important to them, the legacy of the profession, what happens with it in the long-term is important to them. And I think that’s why they’ve chosen to join an ortho only group like ours.

Bill Neumann:

Yeah, that’s great. So let’s talk a little bit about, because I know you both, Aldo and actually all three of you really touched on this, is this organic growth. And I think it’s become more and more important as I think there was an acquisition frenzy the past two or three years where the DSO industry consolidated really quickly. And it was, I think from probably right after maybe the middle of 2020 when things opened back up after COVID to 2022 where there were just a lot of acquisitions going on. Now, I think we’ve kind of had this shift. There’s been a lot more talk about organic growth. We’ve acquired a lot, so how do we grow? And it did. We spent a lot of money. So I’d love to talk about that and maybe Kevin, because I think that’s why we brought everybody here, the treatment acceptance, that’s so critical. Maybe talk about a little bit about the role of OrthoFi and then I’d love to hear from Aldo and Dan about the reason that you partnered with OrthoFi.

Kevin Gladstone:

Yeah, maybe I’ll start with your first comment there about the growth that took place really starting in 2020 has started to level off to a certain extent over the last six months or so, as the cost of capital has changed and different forces on the industry have made people refocus on organic growth. And what I’ll say to that too is sometimes during an acquisition frenzy the support services aren’t necessarily in place long- term yet to sustain the acquisitions in the way that they need to be sustained and supported. And that’s really where OrthoFi would come in for these types of DSOs that really see the opportunity in ortho and need a third-party that specializes not only in revenue growth, but then the support services on the backend to help manage the finances. And what we focus on is making sure that care is affordable to patients at the practice level and then it’s consistent and scalable across the entire DSO.

So we want to make sure that the treatment plan coordinators are presenting fees in a very streamlined way. We want to make sure the patients are aware of their benefits for orthodontics. We want to make sure that the practices confidently deliver the treatment plan so that they’re most likely to get a yes and a patient conversion. And then from there, we want to streamline the insurance management and patient AR process so that the practices can focus on delivering patient care. Because that’s ultimately everyone’s goal is to get better patient care and get more access to care.

Bill Neumann:

Dan, I’d love to get your thoughts around treatment acceptance and your partnership with OrthoFi.

Dan Smelter:

Yeah, I mean, won’t focus as much on the treatment acceptance. I’m going to talk a little bit more about collections in these tougher economic times. Maintaining your collections is obviously key to running your business and having the funding to do additional growth with lending being a lot more expensive these days. And that was really the main reason we looked at OrthoFi about four years ago when we first started talking with them. I had a centralized revenue cycle team for ortho and for most of the pediatric business. And a lot of small groups will ask me my thoughts about a centralized or decentralized revenue cycle team. And I’m including billing, patient collections, insurance collections and AR, insurance posting, claims management, denial management, the full realm of revenue cycle. And with ortho our biggest challenge was the lack of good data in some of our legacy systems.

We had a little bit of everything out there, OrthoTrac and Dolphin and Cloud 9, you name it, and really didn’t have the data to analyze collections to understand what our trends were and to make improvements on that process. And OrthoFi, when we started talking with them and looking at their product and we had one affiliation that was already using it, realized that we could work with them and grow the product with them to really support a DSO and maintaining the team internally is expensive. And if you don’t have a call center set up to do outbound calls with dialers and all the sophistication, you’re just not going to be successful in collecting some ortho. A big part of it happens at the office level, but if you’re not on top of statements and then doing outbound follow up, text campaigns and call campaigns, it really becomes difficult to manage a larger scale operation.

And we just didn’t want to build that out on our own. It’s expensive, it’s time-consuming, and we decided to partner with OrthoFi mainly because of that. Our goal was to reduce bad debt and we’ve been successful in lowering our bad debt as an organization. The conversion side and higher down payments and some of the other tools all led to gains for the company as well. But it essentially replaced the majority of my team by doing the verification, by doing the claims follow up. And most importantly, because over 80% of our money comes from the patient in ortho doing those call campaigns, letters, text messaging, which has been implemented now at OrthoFi to keep collections high. And then I have very high quality data to be able to look back and say, “How are we performing for the contracts from Q1 2021 and Q1 2022” and our collection’s on pace.

We can also look with OrthoFi, we do underwriting on our patient, so we’re credit scoring the patient and we can look at that mix and see if we have a lower credit score base in one office versus another to better predict our bad debt by location as well. And we have 20% differences between our top locations versus our bottom, not because the office is performing better or worse, but simply because of the patient base and their average credit scores in that market. So we’re light years of head of where we were when we first started implementing, which is now over three years ago when we first started implementing OrthoFi.

Bill Neumann:

Aldo, do you have anything you’d like to add?

Aldo Benedetto:

Not really on the collection side, but I will talk to measuring, conversion, case acceptance, that sort of thing. I would say that we are a very data-driven organization. As I mentioned before, we try to measure everything every step along the way. And I think where OrthoFi has unlocked a lot of value for us and given us the ability to really drive our organic growth is around conversion. OrthoFi has a metric called Treatment Recommended Conversion or TRC. That’s really the measure that we use to determine how good of a job we’re doing at converting patients. Typically in the profession folks will track case acceptance, which is generally just going to be start over new patient exams. The issue with that metric is that if new patient exams go down, your conversion goes up, but you might not actually be converting more people, more of your opportunities.

With TRC, we’re simply measuring once one of our doctors has recommended treatment, so said little Johnny’s ready for treatment, what percentage of the time are those patients starting? And it gives us really good information about how are we doing on this… So day of that exam when the patient was recommended treatment, we call that TRC zero or same day conversion. We can measure that. Then we can measure between then and a 45 day period what percentage of patients are then converting either from home or from our outbound pending efforts. And then we can also track that over time.

So it just gives us a really rich set of data on each individual TC and each doctor. And we can even look at the combinations of doctors and TCs to see how well are they truly converting. And that provides opportunities for coaching, “Hey, this TC is struggling with same day conversion. Let’s take a look at the other TCs in that practice to see if it’s perhaps a practice level issue or challenge or if the other TC in the practice is converting at a high rate, what can we do to get them sharing that information or what are some of the best practices that TC two is leveraging that the other one isn’t.”

So, yeah, without that information, without that clean data and true measuring stick of what’s going on in the consult room, I frankly don’t know how we would we’d measure that and how we would lift through making the most of out of our own bats. And I think you hit on this before, if you look at some of the benchmarking data available for the profession, starts, growth was through the roof and in ’21 coming out of COVID, there’s a lot of pent up demand and Zoom effect and all that stuff really drove a lot of growth. Then last year and into this year, it’s been more muted at the market level, but we’ve been able to continue to grow our starts on a comparative basis first prior years because we’ve been able to stay focused on those things we can control, including our ability to convert.

Bill Neumann:

Let’s talk about some operational challenges. I mean, we’ve talked about the growth in the industry, but the market’s changed in the past year, year and a half, but it still seems like hiring is a huge challenge, whether it’s finding new talent or retention or a combination of the two. I’d love to get your thoughts on that, Aldo, what you’re experiencing and how you’re trying to overcome that challenge?

Aldo Benedetto:

Yeah, I mean, hiring is always difficult in multi-site healthcare businesses. I mean, depending on the position, there’s always a decent amount of churn. It does seem like it certainly got harder over the last couple of years. It feels like it’s leveled out a bit, and that could be that just it’s generally becoming easier for everybody, or it could be because we’ve made significant investments in a human resource team and recruiting team that help our practices with that stuff. So it’s hard for me to tell, but I mean it definitely got more difficult coming out of COVID with a lot of job hopping and people wanting more money or being willing to make changes that they maybe weren’t in the past.

But yeah, it’s always a challenge. I think it’ll always continue to be a challenge. We can help our practices is that we can continue to invest in things that work in other industries, building out interview guides and profiles for the roles based on where we’ve had really successful folks in our organization. And that sort of thing takes some of the pressure off of the practices and gives them a better shot at getting really good people who are going to thrive in their environment.

Bill Neumann:

Dan, I know this isn’t your wheelhouse, but any thoughts around hiring?

Dan Smelter:

We’ve had the same challenges. I have a large team in revenue cycle and have all the same challenges that everyone else has and we had big challenges with doctors last year. All of that seems to be improving a little bit going through Q1 of this year. As far as ortho specifically, that’s one area where with OrthoFi as a partner, I don’t really have to worry about that because as we scale up, I’m not adding any labor at this point in time. I maintain a small team of people related to ortho, working on things like write-offs and pro rating contracts, but that team will hardly grow as we continue to grow and double in size. I might have to add one more person. Most of the additional work is coming on the OrthoFi side with the claims follow up and the verification that all scale with us. So that’s a nice thing when you have a vendor to not have to worry about the labor force on my end.

Bill Neumann:

Yeah, it’s nice to hear that OrthoFi scalable will really platform grows with you. Why don’t we stick to that topic while we’re at it. What are some of the challenges with revenue cycle management now? Have you seen any impact of the change in the economy over the past 12 months?

Dan Smelter:

Yeah, we’re closely tracking that in partnership with OrthoFi, looking at their whole portfolio and how it’s performing compared to ours. The whole industry has seen delinquency rise. Credit cards are getting maxed out. I don’t know that we’ve seen the full effect of that yet. On our side, we’re booking a little more bad debt into our reserve just because we think we will still see some impact down the road. Contracts that were signed a year ago, the stimulus money is no longer there, credit card debt is high, and if we dip into recession or not, if we just stay stagnant, inflation has led to less out-of-pocket money for a lot of patients as well. So we’re tracking it every month. We look at it by office, by credit tier, all of that every month.

And really my job is to stay on top of that and make sure we’re booking enough into our bad debt reserves and working with OrthoFi whenever we see a dip in collections to figure out what’s going on. But only time will tell where the contracts that are getting signed today where they end up. I mean our average contract length I believe is about 22 months across our entire portfolio. So that’s a long time before whether you’ve collected all your money or not. So you can’t wait till the end of the contract predict what your bad debt’s going to be. You have to look at delinquency rates and things earlier on to see what’s coming in the future.

Bill Neumann:

Kevin, what are you seeing across the spectrum of your customers?

Kevin Gladstone:

I think one of the things that we’ve seen a trend over the last probably quarter or two is kind of a flatlining in growth. And what that would suggest or should suggest to practices is they might want to consider looking at ways to make treatment more affordable. And that does not mean lowering price. When a patient looks at affordability, they’re not necessarily looking at the full cost of treatment. They’re looking at what can I afford on a monthly basis within my budget that will allow me to maintain close to my same standard of living. So what OrthoFi enables practices to do and patients to do is to get the treatment they need in an affordable way while still maintaining enough cash flow to support the business. And I think that’s what the insights that we can help drive is, you don’t necessarily need to be very rigid in how much you’re collecting in a down payment.

In fact, the more flexible you are the better, with guardrails based on whether or not the patient is creditworthy for different types of down payments and those are the insights we offer to practices, we do that automatically so practice team members don’t have to do that diagnosis on their own from a patient’s pocket book. And then that allows us to give Dan, his team, or Aldo and his team the insights to better run their business. And I think that’s just in general what we’re seeing in the marketplace and how OrthoFi supports what we’re seeing in the marketplace.

Bill Neumann:

Aldo, any other operational challenges that you’re seeing out there?

Aldo Benedetto:

Driving growth and supporting multiple practices in a multi-site, multi-state business is always challenging. From my perspective, it’s really no different than it’s ever been. We’re in the same boat as Dan and his team are in terms of collections, we’re monitoring it, just making sure that we’ve got visibility into what’s going on in our practices, that our practice teams maintain great relationships with the patients and the parents and are trying to stay up-to-date on payments and all that sort of thing. Just making sure that their accounts are up-to-date. It’s all the same typical things. Sometimes you have turnover and that creates a challenge. And so you have to figure out how to deal with that. Sometimes the phones stop ringing in a certain practice or in a market and you have to diagnose and we simply go back to the things that we can control.

So are we getting out and doing our dental deliveries? How are our digital marketing campaigns performing? Are we answering the phones? It’s really just going through that checklist and making sure the controllables are under control. It sounds straightforward and simple, but it’s hard and it requires tirelessly doing that. But when it comes to specific operational challenges, I guess the only other area that’s always challenging and we’re continuing to learn from with each one, what we do is integrating practices. So we’re always trying to get a little better with every single one. How did that last integration go? What are the things we learned? What can we do differently? Could we move this implementation up? Should we move this back? Should we have made the announcement to the team sooner or later? All those things are on the table for a refinement every single time we do one.

And each practice that we bring on has its own history, its own culture, its own set of people and personalities. And so you have to figure out a way to try to tailor your process to them and make sure everybody’s up to speed in communicating. So I think that’s one. And I guess the only other thing I’d hit on is just growing. Growing is always, it’s fun, but it can be challenging as you scale and you want to make sure that everybody understands as Chip, our CEO says, “The why behind the what” and who we are and why we do things and how we show up every day.

And so that goes back to, I guess to hiring, right? You’ve got to hire great people and make sure that they understand the systems and are up to speed and really have the same cultural fit that has helped us get to the point of where we are now. So integrations, scaling up and then the day-to-day are kind of the three main things that we’re focused on, and I would imagine anybody in a similar business is dealing with the same stuff.

Bill Neumann:

Couple last questions before we start to wrap things up here. What metrics are important to you? You touched on a couple important things already, but I’d love to get metrics from you and then maybe Dan more on the revenue cycle side of things, what metrics your team looks at. So why don’t we start with you Aldo, and then Dan. I’d love to hear on the RCM side.

Aldo Benedetto:

Yeah, we track just about everything we can. We can, but key things, obviously the P&L metrics, or production, starts, revenue, all the costs that go into running each practice, and ultimately EBITDA is the yardstick. But on the operational side, so I mentioned we measure inbound connect rate on our phone calls. So of all the phone calls that come in, what percentage of the time are we answering those calls and able to help that caller with their needs? And we measure kept percentage, which is something that’s captured in OrthoFi. So what percentage of the time when we have a new patient or an exam on the books that people actually keep it. We measure all of our marketing investments, we’ve got analytics around that. So on the campaign side, how much are we spending, how many books did we get of those clicks, how many people called?

And then we matched that information back to the data in OrthoFi to see did they actually create a new patient appointment, show up for that appointment and ultimately start treatment. So we can then get to an ROI on those investments. We measure clinical efficiency. So Jeff Kozlowski, one of our founding docs is the clinical efficiency guru, and we’ve got a whole dashboard around what’s the estimated treatment time, what’s the actual treatment time, what’s the number of visits? Let’s look at it by modality, let’s look at it by practice, which is really great information. It’s clinical in nature, but it’s also telling from a marketing and customer service standpoint, we’re telling patients, “Hey, we expect you out of braces in 18 months” and it’s on average six or eight months longer than that, that’s not a great patient experience.

It also has an impact on the administrative side of the business of the practice where you have people on braces for longer. That means more phone calls, more things to deal with for the team. So we track all of that. There’s a lot more than that, but those are the big things, starts, production, kept rate, TRC, which we talked about, our clinical efficiency metrics, all of this stuff up and down, the P&L, new patient calls, marketing analytics, pretty much everything that, like I said, that I can get data on we track. Dan, how about you?

Dan Smelter:

Yeah, everything Aldo said, plus on the operational side, one other thing that we didn’t really touch on that much that’s discounting. We did a big pricing restructure across the whole company looking at where our pricing should be in each market and looked at our discounting rates too, which we were able to do with OrthoFi data and realized that we had some markets that were discounting very heavily, others not so much. And we tried to raise our total contract, net contract value across the organization. In some cases that actually meant lowering our price, but also going out and really reinforcing training about how much to discount and squeezing that discount down to a lower percentage. So the sticker shock wasn’t as high with our initial price, but we had fewer discounts on the backend. So that’s been very successful and I think Kevin made a good point.

Right now we’re not trying to lower pricing because of the economic conditions. We’re trying to be flexible and write contracts, if that makes sense. So we track that very closely, how much we’re discounting, how much our contract value is by type of treatment. So we have very granular types of treatment based on severity and length of treatment and all of that. So I participate along with our operations team in managing all of that. And also pricing within our payer contracts, rate negotiations and payer contracts all under my umbrella. And a lot of people don’t realize you have more flexibility with pricing with your contracted insurance carriers. On the ortho side than a lot of the other specialties mostly because the insurance company, the patient’s going to max out and the insurance company isn’t going any more out of pocket you raise the allowance sum, it’s really just getting passed on to the patient.

So you do oftentimes have the flexibility to raise that allowance up with some of your contracts by talking to your payers. Outside of that, on the revenue cycle side, I think I touched on it, we’re really closely monitoring collections and we’re doing that by contract vintage month. So my January, 2020 contracts, what have I collected so far? If I’ve collected 94% and I’ve already written off 6%, then I’m done. I have 6% bad debt. But if I have 94% and I still have 3% of the AR outstanding, what’s the status of that AR? Is it 90 days delinquent? Has it been a reworked treatment plan and payment plan? So we’re breaking down the remaining AR of every given contract month and seeing what status it’s in so we know whether or not more collections are expected to come in for those months.

Generally day-to-day, I track one day delinquency and 90 day delinquency. OrthoFi does it a little bit differently, but one day is very important because that’s telling me just on a running basis, how many cards are failing each day and how many people are missing that one payment. Oftentimes it’s recovered just because a card expired or something like that and following up very quickly is very important for cash flow. So 90 day delinquency is when you start getting into that time period where you’re worried about having to have the conversations about debanding or transferring out and far less likelihood of recovering after that time period. So those are all those things I look at from the rev cycle perspective.

Bill Neumann:

Thanks, Dan. Yeah, so as we start to wrap this up, last question here and then I’ll make sure that we get everybody’s information out to the audience so they can reach out to you if they have any questions. I just always call this the crystal ball time. So get out your crystal ball and tell us a little bit if you can predict the future, what you think the ortho market’s going to look like in the next couple of years? And it’s always fun to look back on these things later and see who got it right. But Kevin, why don’t we let you start off with what your prediction is of the future, future being whatever you want it to be.

Kevin Gladstone:

All right. Well, I mean I think that obviously specialty services are going to continue to be a large part of the DSO market. I mean, I think that Dan and Aldo hit it on the head where there’s opportunity to add specialty services into an existing practice. DSOs will look to continue to do that, and I think technology will be a huge driver of that. You’ve certainly seen 3D scanners be a huge driver of ortho services, particularly for clear aligners. I think you’ll continue to see that. I think what you’ll also see is that now that DSOs are starting to digest practices a little bit and starting to see what have we acquired and affiliated with over the last couple years, they’re going to start to look for ways to more efficiently manage the business.

And how do they help their teams more efficiently deliver the care, whether that through things like dental monitoring or other teledentistry services or how do they start to look at introducing specialty of services through the GP actually as the entry point for orthodontic care. But ultimately, I think the orthodontist is still going to be a huge part of the care cycle for orthodontics, both as a mentor in maybe the easier cases, the adult ortho cases in some instances. And then as leaders just in the industry and the profession as the DSO space continues to look at specialty care as an opportunity for growth. So that’s what I see coming over the next kind of three to four years maybe is just the orthodontist being still a huge driver, but with the access to the patient coming through the GP.

Bill Neumann:

Dan?

Dan Smelter:

I think we just continue to see consolidation in the market and brands exploring multi-specialty dentistry, whether that’s a big GP group buying an ortho group so we can have that internal referral base or just adding those lines of service and getting to be a more competitive market. We’ll continue to see more and more competition and as DSOs get more sophisticated, that’s going to be one of the tougher things to deal with because we’re going to be in each other’s backyards and whether or not you merge or buy one another, it is going to happen one way or the other. We already see it every day with the competition side of things. I think more merger and acquisition, not necessarily in the next year or two, but long term I think that continues to be a big part of DSO growth.

Aldo Benedetto:

I see it a little differently. I think that we’ll continue to see growth in the OSO segment of the market. I think we’ll see… So right now I think about 8% of the overall market. I think we’ll see that number increase substantially as more and more orthodontists start to explore that opportunity and think about the future of their practice and their legacy and what happens with it over time. I think it’s really kind of scratching an itch right now and there’s a lot of excitement around it. And I think as more and more docs talk to some of their colleagues who are doing it, feeling really good about their decision and enjoying working with their partners, I think that’s just going to create more and more excitement about the space. I don’t disagree that we’re going to continue to see consolidation and multi-specialty DSOs expanding their reach or adding on specialty if they can.

I just think there are different types of docs and I think that the ones who want to stay invested in their practice and feel really strongly about protecting their Pacific Legacy and their profession are probably going to lean more towards the OSOs. Not saying that if they go the other direction that they’re making a bad decision or doing something that doesn’t take into account those things. Everybody’s got to make the right decision for themselves. But I just think that the OSO template or platform is a really attractive one for docs, at least from what I’ve heard and seen.

Dan Smelter:

That’s the same thing on our pediatric side, that they want to belong to a pediatric group, and I think that continues for a number of years. I’m speaking more 10 years out when maybe 15 years out. But short-term, I agree with that, Aldo, we see that with our pediatric doctors too, wanting to maintain that specialty focus.

Bill Neumann:

If the audience wants to get in touch with anybody on the podcast, how do they do that? Dan, how would somebody reach out to you? What’s your email address?

Dan Smelter:

Dan.smelter@d4c.com, that’s D, the number four c.com.

Bill Neumann:

And Aldo, how about you?

Aldo Benedetto:

It’s Aldo.Benedetto, which is B-E-N-E-D-E-T-T-O at orthodonticpartners.com.

Bill Neumann:

And Kevin, how do they find out more about OrthoFi and then also get in touch with you?

Kevin Gladstone:

The practices or DSOs looking to get in touch with making reach me at Kevin.gladstone@orthofi.com, and I would say particularly those that are interested in revenue growth and helping or support in managing insurance and patient AR, those are the ones that we can really support. So please reach out to me.

Bill Neumann:

Sounds good. And we will make sure that we actually put those email addresses in the show notes so you don’t have to memorize any of that while you’re listening to this. Thanks Aldo. Thank you Dan and Kevin for being on the Group Dentistry Now Show. That was almost a full hour of conversation there, so we had a great discussion and we appreciate your thoughts and wisdom on what’s going on in the ortho space. And thanks everybody for listening in. And until next time, this is the Group Dentistry Now Show.

Speaker 1:

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