A Doctor’s Perspective on the Economy of Technology: Do the Numbers
Richard W. Van Gurp, DDS
A dentist who owns his or her dental practice wears three “hats”—clinician, manager, and entrepreneur. As clinicians, we strive for excellence in the technical arena as well as in patient care, one not necessarily being synonymous with the other. As managers, we need to organize, keep tabs on, and improve the efficiency and effectiveness of the day-to-day operations of our dental practice as a small business. (Yes, dentists operate a business, not just a dental “practice.”) And as entrepreneurs, we need to be forward-thinking and creative, always looking for ways to sustain and stimulate the growth of our practices now and into the future. Hopefully, by placing sufficient emphasis on all three areas, we can enjoy our dental careers in practices that are both personally rewarding and financially profitable.
Unfortunately, achieving acceptable profits in today’s competitive and uncertain business environment—particularly during economically challenging times—is not always an easy matter. This article details reasons why the implementation of technology can make sense especially during economic uncertainty.
Practice management expert Dr. Roger Levin has emphasized that the implementation of technology can be a strong stepping stone to improving one’s dental practice.1 I couldn’t agree more, but I didn’t always feel this way. Early in my dental career I resisted technology without fully analyzing and considering its benefits. Quite frankly, I was most concerned about the financial implications. For many years, the extent of my technology was an intraoral camera on a computer cart, which I dragged from treatment room to treatment room. Certainly technology is not a requirement to deliver excellent dentistry, but the times are “a-changin’,” making technology an ever-growing asset to the dental practice. I’m also finding that more and more patients are, in subtle ways, demanding it.
A Practice’s Image
During an initial examination appointment, it is not uncommon for me or a staff member to ask our new patient why they left their previous dentist. This question helps to determine that the patient’s expectations of my office are realistic and relative to my practice structure. More frequently these new patients are telling us that they didn’t feel their dentist was “keeping up with technology.” (Ironically, this is often regardless of the fact that the dentistry completed by the previous dentist may not only have been clinically acceptable, but excellent.) One can find virtually anything on the Internet, and for our patients, this includes a plethora of information about the latest dental technology, whether it’s CAD/CAM, lasers, digital radiography, or another kind of technological advancement. In the patient’s eyes, a dentist that employs these technologies appears to be more current in the services offered. I once had a woman call me after seeing an advertisement in a magazine for my office and our CAD/CAM system—while sitting in the reception area of another dentist’s office. She asked if she could really have the procedure she needed to receive completed in just one visit compared to two. I told her yes, and she became one of my patients.
Granted, I would agree that this is not the most important reason for considering technology. But as the “entrepreneur,” the dentist must be aware of what his customer-patients seek and what will attract those potential patients to his business versus the business next door. In my opinion, there are other and perhaps more relevant reasons to consider incorporating technology into a dental practice.
In times of economic uncertainty, it makes sense for business owners, including dentists, to look for ways to decrease overhead. (You’re wearing your manager’s hat now.) On the surface, the purchase of technology may be the last thing a doctor is thinking about. And likely this is because of the financial cost to the practice. But while one may initially be concerned with the overall expense, one should also be considering the return on that investment and other benefits. When the dentist may be asking himself, “What’s it going to cost me?” he should also be asking himself, “How will this benefit my patients and my business?”
When considering the purchase and implementation of technology, the dentist should essentially wear all three hats at once. He or she must evaluate the technology as the clinician (will it improve patient care? provide a new service? improve on an existing service?); as the manager (will the practice be able to afford the technology? will the technology provide a positive return on investment?); and as the entrepreneur (will this technology make my practice more attractive to potential new patients and help to ensure retention of existing patients?).
ROI that is Easy to See
For some technologies, the answers to these questions are easier to answer and quantify. For example, a standard Panorex machine is commonplace in most general dental practices and prior to analysis one might initially consider it optional equipment. When I first contemplated the purchase of a Panorex a number of years ago (and prior to digital radiography), I determined the following: First and foremost, I knew that the Panorex could radiographically show me areas that I was never going to see with periapical and bitewing radiographs alone. So as a diagnostic tool and with my clinical hat on, I determined that this would benefit my patients.
Second, at the time I was looking at a cost of approximately $20,000 and I realized that if I financed the equipment over 5 years, I would need to do six Panorexes per month to meet the monthly payment. Seeing approximately 15 new patients per month, I realized that not only could I meet the payment, but I would actually see a positive return on investment. Of course, this did not take into account my existing patients who would also need a Panorex. As the manager, it became a clear cut no-brainer.
Last, after putting on my entrepreneurial hat, I felt that my patients would accept this service as necessary. I didn’t go as far as to think that patients would come to my practice because I had a Panorex and the dentist next door did not, but I still felt it would be (as a close friend and colleague puts it) another “arrow in my quiver.”
Today, with digital radiography fast becoming the norm, one could analyze the feasibility of the purchase in a similar manner. In this case though, one would also have to take into account the cost of supplies no longer needed (film, developing fluids, etc) and the time savings in “developing” the radiographs, both of which are significant. In addition, I believe that one should account for the digital factor’s impact on patients. While I originally thought this was sales talk, patients really are impressed as the radiographic image appears moments after a radiograph is taken.
Technologies that Save Time and Sell Treatment Plans
But while some decisions may be clear cut, the benefits are not always easy to measure. While it would be difficult for one to financially quantify the return on investment on an intraoral camera, it is common knowledge that the incorporation of such a device into a dental practice has tremendous benefits. What I can verbally explain in a few minutes I can show patients in a matter of seconds with an intraoral camera, and I feel much more confident that the dental problems and treatment recommendations are understood by the patient.
Is an intraoral camera profitable? Can a dental practice afford it? Again, it is difficult to put raw numbers to this technology. But currently I am in a situation in which my first intraoral camera, which was located in a hygiene room, has been officially “laid to rest” and I am considering my options with regard to a new camera. So presently, in the course of a typical work day, I do periodic exams in two hygiene rooms, one with and one without an intraoral camera. The difference is like night and day.
In the hygiene room without the intraoral camera, periodic exams seem to have been reduced to slow motion because of the additional verbiage required to explain dental problems and treatment recommendations. And patient acceptance of treatment has declined as well. No doubt I will be as expeditious as possible in getting a new camera up and running in that room.
Investments with Major Returns
The technology that undoubtedly has had the greatest positive impact on my practice has been CAD/CAM, specifically in my case the CEREC® system manufactured by Sirona Dental Systems (Charlotte, NC). In late 2002, I purchased CEREC and, at the end of my first year using the technology, I discussed my experiences with some colleagues at a conference. I was astounded to hear of the number of dentists who had had an off year. Dental exhibitors at the conference had a similar experience with sales. In contrast, my practice was up 19% and the only change I had made that year was the purchase and marketing of CEREC. That day was a powerful lesson in the benefits of technology.
The fact that CAD/CAM can fabricate single-unit restorations chairside in the course of one appointment benefits both the patient and the dental practice. It is important to take into consideration that patients today may not necessarily decline treatment because of financial constraints but also because of time constraints. We live in a time-conscious society and our patients have less and less time to spend in a dental office. CEREC allows us to provide an excellent service but in a more efficient manner, a service that is particularly attractive to the time-conscious patient.
For the dental practice as a business, CAD/CAM also has benefits. Because the restorations can be fabricated in one visit, this eliminates the need for a second appointment for insertion, as is the case for a laboratory-fabricated restoration. This opens up a considerable amount of appointment time for the dentist to insert either more productive procedures, or if desired, spend less time in the dental office while maintaining profitability.
But again, with a price tag of more than $100,000, is this particular technology an economical and wise purchase, particularly during more difficult economic times? While CAD/CAM likely requires the most in terms of financial commitment compared to other technologies, it also likely tops the list regarding return on investment. Since purchasing CAD/CAM, I have yet to see a month where the ROI was not positive. In fact, since the third month of incorporating CEREC into my practice, the ROI has been nothing less than significant.
Since I purchased the technology a little over 5 years ago, I have tracked the number of porcelain CAD/CAM restorations I have completed each month. In addition, I also estimated the laboratory bill as if those same CEREC restorations were fabricated by an outside laboratory. I then compare the estimated laboratory bill with my monthly payment for CEREC to determine profitability.
In other words, if I do 25 all-porcelain restorations in a specific month and I estimate that my laboratory bill for each restoration is $200, then the estimated laboratory bill for that particular month is $5,000. If my monthly payment for my CEREC was $2,000, I saved $3,000 that month. The bottom line is if your laboratory bill for restorations you could have completed with CEREC is greater than your monthly payment on the CEREC loan, you’re throwing money away.
My annual laboratory bill as a percentage of overhead decreased from 13.7% in 2002 to 5.8% a year later in 2003 to a low of 1.7% in 2005. Subsequent to 2005, I have seen my laboratory bill incrementally increase (laboratory overhead was at 2.8% in 2007). Why? Because we’ve grown and, thankfully, we continue to grow. While CAD/CAM has served to significantly reduce my overhead, it has also served to ramp up my practice. From the standpoint of technology, CEREC has done the most in attracting new patients to my practice. And while CAD/CAM reduces dependency on an outside laboratory, it certainly does not eliminate it. I work with an outstanding dental laboratory and they play an integral role in the success of my practice.
Technology that Improves Office Efficiency
There are also administrative technologies that can improve the efficiency of your practice and potentially reduce overhead. In our office, we use EagleSoft practice management software by Patterson Dental (St. Paul, MN). At a staff meeting, our administrative staff reported they felt they were virtually maxed out. I believed it. They work extremely hard and go the extra mile to make sure the business end of our practice is running like a finely oiled machine. We knew that if they continued to be maxed out, service and some duties would eventually inevitably suffer. Considering the lessons we’d learned in the clinical arena, we looked to technology in the business arena. After some investigating, we concluded that the administrative staff spends an inordinate amount of time confirming appointments.
Fortunately, through Patterson EagleSoft, we now use an automated service to confirm appointments. The status of the confirmation is automatically placed in the patient’s computer file. The result is that for a monthly fee less than 1 day of a staff member’s wages, a significant amount of time is freed up for the administrative staff to conduct other duties that must be done in person.
Technology is worth considering to not only maintain, but to possibly increase, profitability—even during economically challenging times. The key to evaluating technology is to do so from an entrepreneurial, managerial, and clinical standpoint. Evaluating technology solely by virtue of the financial cost is short-sighted, especially in situations when the benefits of that technology are able to be quantified.
While the financial benefits of some technologies may not be quantifiable, there still may be benefits indeed. Not only can technology lower overhead, it can also ramp up a practice—improving production by adding valuable services—services that patients need and want.
In purchasing technology, the most important consideration is how it will benefit your patients. Does it enhance the doctor’s diagnostic capability? In a time-conscious society, does technology provide an excellent service but in a more efficient manner? I for one am convinced that the more ways we consider what benefits we can provide our patients, the more successful our practices will be. This is true in any business, including dentistry.
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References1. Levin RP. Technology in dentistry. Compend Cont Educ Dent. 2001:22(6 Suppl):27-29.
|About the Author|
Richard W. Van Gurp, DDS