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Understanding Overhead and What It Means to Your Practice

Course Number: 701

10 Strategies for Reducing Overhead

The following recommendations may be of help to any practice that is serious about reducing overhead. With full implementation of these strategies the practice can be expected to reduce overhead by 5–7%.

  1. Bid out to top expenses annually. Managers working in large businesses are often forced to get three bids on their major expenses in each department. There are two purposes to bidding. First, is to get a sense of current market conditions rather than having an expense that has inflated over time without any attention. The second is to be able to either select a lower bid for the expense or to renegotiate with the current provider to bring them back to a more normalized market rate. You do not have to leave the company you work with. You simply want to get a sense of what the expense would be from other companies and be able to have a conversation with the company you currently work with about reducing costs.

  2. Join a buying group. Buying groups for dental products and services are springing up all over. By having numerous dentists in the buying group, the group can then negotiate lower prices for certain products or services. This is known as volume-based pricing. The prices will typically be lower as it is an opportunity for the product company to sell more of the product (or service) to a larger number of dentists.

  3. Reduce or eliminate subscriptions. Many companies today offer subscription services, which are beneficial in many ways. However, sometimes you either are no longer using the subscription, or have even changed products or services and did not remember to turn off the current subscription. It is very common for practices to continue paying for subscriptions monthly, quarterly or annually without even realizing it. Subscriptions will become more commonplace in the business world and dental practices, but you want to be diligent about not paying for services or products that you no longer need.

  4. Select less expensive products or services. Dentists are committed to quality, but sometimes they also commit to the most expensive products when others are equally as good. Periodically talk to colleagues and get a sense of what they are using for different clinical treatment or administrative services and determine if perhaps there are less expensive options that provide the same level of quality or efficiency for the practice. All too often dentists become committed to one specific product or service without evaluating other options or price points.

  5. Ask for the “meeting special.” At dental meetings, there are usually discounts on many products and services. These are commonly known as the “meeting special.” However, many companies will be happy to give you the same discount year-round, whether you attend a tradeshow with exhibits or not. Just ask for the meeting special and determine if it will be provided or if you should wait for another meeting. In addition, if you do not actually attend a meeting, but contact the company during the meeting time they will almost always offer you a discounted meeting special.

  6. Wait a little longer before purchasing the newest technology. Most technologies become less expensive over time. The first generation or breakthrough technology will usually be the most expensive for two reasons. First, because it was the first company to bring the product or technology to market. Second, because as competitors arise, they often can create the technology at a lower expense, or the presence of competition alone brings down the price point. So, don’t feel like you must have the newest technology immediately. Waiting a little longer can often result in 20%, 30%, or even 50% reductions in cost.

  7. Bid out your practice insurance. In this case, we are not talking about dental insurance reimbursements. Every year your business insurance costs will tend to rise; however, some of them you may not even need any more. Others, like cyber insurance can rise by quite a bit each year. Start the process with your insurance broker and bid out your insurance early. Ask your broker to get at least three bids so that you can get a sense of what multiple companies are charging. In many cases you can reduce your overall cost of insurance by 6% to 10%.

  8. Properly manage patient dental insurance. Insurance is often mismanaged by dental practices. Unfortunately, the number of codes that are incorrect and result in lower reimbursement each year is significant. Additionally, many practices do not submit their fee increases to the dental insurance companies on the chance that they may raise your profile. While this is not a direct expense reduction, it does result in a direct production increase, the net result of which is an improved overhead percentage.

  9. Raise your fees annually. Again, this is not a direct reduction in cost or expense, but it will lower the overhead percentage. Every year, costs will increase. In some years, the increase will be minor and other years it will be significant. As an example, in a poor economy or even a recession, dental inflation can be as high as 6 to 8 percent. This needs to be offset by increasing fees. Most fees are not known to patients, so the practice does not have to worry about patients comparing fees to the last time they had a specific service.

  10. Bulk purchasing. One way to reduce costs is to make a commitment to a company that you will purchase a specific amount of a product or service. Many companies offer bulk purchasing discounts to lock in a sizable order. This is a great opportunity if, and only if, you feel certain you would use the full benefit of the product or service.

The 10 recommendations above are actions that can be taken to have an immediate impact on lowering practice overhead.