The current annual inflation rate from August 2021 to August 2022 was 8.3% — a slight improvement over the previous 8.5% rate. And unlike other economic influences, inflation acts like a “tax” on consumers and businesses. What’s the connection to the dental industry? Customers find their dollars don’t stretch as far, and they may need to adjust their priorities, leading to putting dental care lower on that list. Dental offices may find their profits shrinking because of increased business costs.
Multiple Impacts of Inflation
Your patients and your practice are feeling the pinch as inflation continues and overall prices keep rising. Perhaps you’re spending more than expected on personal protective environment (PPE). Even though supply chain woes have subsided, prices remain high.
As a dental practice owner, you can take proactive steps to prevent rising inflation from eating into your practice’s profits.
- Raise your fees. A 2021 ADA Health Policy Institute survey found that just over 27% of dentists had increased fees to maintain their practices’ financial stability whereas other practices opted to absorb extra costs for equipment and supplies including PPE.
Your financial advisors can help determine what kind of fee increases you can implement. Insurance companies generally design payment schedules according to zip code. But if you’re part of a PPO or insurance network, you’re generally locked into your fee schedule for two years at a time. Also, insured patients have a maximum allowable fee that cannot increase unless the insurance company also increases the practice profile.
- Conduct a salary review of every member of your staff. Compare with local competitors to see if it’s competitive. It costs quite a bit to hire and train staff. To reduce staff attrition and retain your employees, review benefits like your 401(k) plan, flexible health savings plans (FHSP), child accounts, and other nontaxable options you can offer staff without their tax liability increasing.
Some experts have predicted that staffing costs could grow up to 10% as salary expectations have increased. To offset this higher expense may require you to increase production by the same percentage.
- Increase production. Many strategies exist to increase your practice’s production, from increasing the price of home care products to proactively reaching out to inactive patients and much more. If you don’t already have a policy for no-shows, consider adding one. Doing so increases the average per patient production and the practice speed.
Think about it: if you create a new schedule informed by procedural time studies, you can increase the speed of your dental assistance and increase the number of patients by 10% to 20% your practice can see.
- Purchase thoughtfully and with deliberation. Another way to offset inflation? Think about your overhead. Consider every purchase carefully, especially if it’s not something you need immediately. Instead of borrowing to make a larger purchase (and paying higher interest rates), wait until you can pay for the purchase in full. Another possibility? Swapping in less expensive products for one in equal quality.
- Renegotiate with your dental supply and dental lab reps. You may see cost savings by talking to the dental supply and dental lab companies who may be willing to offer discounts if have a large amount of your business.
- Renegotiate Your Contracted Insurance Fees. While interest rates are climbing, if you’ve got a higher-interest loan, talk to a professional to lock in lower rates now and generate significant cost savings over the life of your loan. If you haven’t already locked in a fixed-rate loan, do so now before rates increase even further.
- Talk to your CPA. Ask your financial advisor to review and compare this year’s profit and loss statement to last year’s. As we wrap up 2022 and you plan ahead for next year, it’s a good time to make adjustments.
In this current economic environment, offsetting inflation and increasing your profit margins requires a little creative thinking. Work with your teams to strategize how to increase production by 10-12% or more and decrease overhead between 4% and 6%.
Need help creating a plan to protect your practice? Talk to one of the experts at MDent, where we offer a range of professional services for new and existing dental practices so you can focus on providing the best dental service for your patients.