Arrow 3 Year Plan

Office Observation Case Study Implementation




Hello Adrian,
As gone over, I went over with you that an overview of a plan for your office was needed moving forward. The objective was to remedy the income ceiling that you are experiencing, like the majority of most practices across the country.
Overview
The production of your facility has a capacity for an annual production exceeding 2.3 to 2.5M in revenue per year. Your office is set up with 6 operatories, so you have the facility for this growth.
I have been in literally thousands of offices and your planning of the flow lines are set up well enough for future growth and expansion.
You can accommodate 2 1/2 to 3 full time hygienist and 2 doctors in the spaces you currently have.
The accomplishment of expansion has to be envisioned so the staff understand how the practice can gradiently achieve the goal.
The immediate objective is to expand the growth from $500,000 to $1 million per year. A breakdown of “Departmental Income” is easily understood and brings about agreement. As a starting point any goal is achieved on gradients so I have arbitrarily chosen the first goal of 1 million as the first step in expansion.
Revenue Centers
Your practice has three potential revenue centers to improve and meet the overall objective. These centers are:
1. New Patients both private and insurance through Neighborhood ownership. 2. Braces Revenue. Majorly underutilized.
3. Hygiene Revenue. Majorly underutilized.


Overview of Production & New Patients
As you know the overall production of Arrow Dental Arts is in a long term condition of emergency. Emergency, business-wise, is defined as a level statistic, and level itself with cost of goods and inflation represents a decline in net revenue.
The statistics supplied give a benchmark upon which to analyze Arrow Dental Arts for future growth and expansion.
The analysis specifically removed or did not include medical-type patients as the strategy for the office is to reduce this type of patient care while increasing the fee for service patient care, both private non-insurance and insurance patients.
New Patient Graphs by Year
35 30 25 20 15 10 5
23
20
22
june july
33
aug
21
18 18
jan Feb mar
17
17
17
New Patients Monthly: Ins & Pvt 2015
apr
may
oct nov dec
10
11
sept
40 35 30 25 20 15 10
38
New Patient Monthly: Ins & Pvt 2014
27
26
jan
15
19 20 19 18
Feb mar apr may june july aug sept oct nov dec
25
28
24 23
35 30 25 20 15 10
5 0
29
12
Feb
25
New Patients Monthly: Ins & Pvt 2017
22
22
21
17 17
19
19
15
16
jan
mar
apr
may june july
aug
sept oct
nov dec
35 30 25 20 15 10
New Patients Monthly: Ins & Pvt 2016
29 26
21
23
Feb
21
mar apr
24
14
33
13
sept oct
17
17
15
jan
may
june july
aug
nov dec
The graphs shown above exclude patients all patients except private and insurance type patients. As the overall objective is directing the practice to a more ideal scene, the statistical numbers above were extracted from the excel sheets that show all new patient types.


New Patient Graphs 4 Years Running 5-Year Annual Revenue Graph
290
280
270
260
250
240
230
220
210
200 22014
282
Yearly NPs: Ins & Pvt 2014 through 2017
253
234
227
2015 2016 2017
595000
545000
495000
445000
395000
345000
295000
$572,669.16
$309,008.00
January 1, 2013
January 1, 2014
$471,200.17
January 1, 2015
$550,689.25
January 1, 2016
$561,437.87
January 1, 2017
Arrow Arts Income (Collections)
The Cause of any Income Ceiling
Business-wise, whenever statistics show a level graph, there is a combination of three factors that cause an income ceiling:
a) Insufficient new consumers (or new patients), in the case of Arrow Dental Arts, the new patient (private and insurance) are level.
b) The consumers being captured monthly are being lost, showing a poor retention of patients.
c) Additional services are not being sold or offered (in other words, additional services are either not offered or they are offered but not accepted by the consumer, i.e. orthodontics, periodontics, implants, oral surgery, pedodontics, etc).
The current situation with Arrow Dental Arts is all three of the above. The new patients are level for the last 3 years, the retention is unchanging as no hygiene days have been added, so the practice is losing over 95% of the patients it is acquiring. I am unsure of (c) above but the stats, being level, give an indication that the services being offered and/or sold are in the same range as they were 3 to 4 years ago. In summary, the sales ability and/or case acceptance of patient’s treatment plans are unchanging.
Your transaction fee per new consumer is the same today as it was 4 years ago, which is averaging about $1,000 per new patient per year. The national average is between $1,250 and $1,600 depending on the number of specialty services offered by the practice. Practices that are multi-specialty, have a higher annual transaction fee than general practitioners with limited services. Your office average transaction fee is below the national average due to your volume of dentical patients.


Your Active Database
The database list provided had 44 dentical names and another 74 patient names with no insurance or carrier signified. Their “carrier” or “class” was left blank...so I’m unsure as to what “type of patient” these are. They could be dentical, PPO or private?
Regardless, your list has about 635 names and addresses with private, PPO and insurance type patients. You have some duplicate addresses with several (2 or 3) people who live at the same addresse. About 8 to 12% of your list have duplicative addresses, i.e. husband and wife and/or children or siblings. Your 635 names is pretty close if you take off the dentical patients. It’s a good list that should be mailed to 4 times a year plus a birthday mailer...this will markedly improve your retention and loyalty of your patients.


Expansion/Growth Plan
An overall expansion plan to bring your practice to above the $1 million production level is outlined below.
The plan is a 3-pronged attack at addressing:
(definition of prong: each of the separate parts of an attack or operation.)
a) b) c)
New Patients: private and insurance based. Retention and adding of hygiene days.
Sales and case acceptance, focusing on a strategy of multi-services offered within the practice.
NEW PATIENTS Action #1
The analysis of new patients needed by the practice for revenue growth is based strictly on numbers and the math supporting it. The current math of the practice shows an average of 20 private and insurance patients per month for the last several years.
These 20 patients represent close to 65% of your annual revenue per the excel sheets provided. As an extrapolation, you private and insurance-based patients make up approximately $325,000 (65% of $561,000 collected in 2017) of your annual revenue, or close to $27,000/month.
This means your 20 new private and insurance patients per month are generating an average annual transaction value of $1,350 per patient/month. The national average is $1,266 which shows you’re slightlh above the national average if you use only your private and insurance patients. In other words, your “sales” or “case acceptance” is above average.
If your dentical is higher than 35% of your total income, then adjust the formula above.
Growth formula: New Patient Section
The number of new private and insurance patients needs to increase to an average of 15 additional new patients per month, meaning the total new private and insurance new patients needs to be around 35 per month. (See formula on next page)


The formula of expansion is based on real analytics and numbers that already exist within Arrow Dental Arts. As illustrated above, the private and insurance patiens yield an average monthly revenue of $1,350 per patient.
Currently Arrow Dental Arts acquires an average of 20 private & insurance patients, which generates approximately $27,000 per month ($1,350 per patient).
With 35 private and insurance patients, the monthly revenue will generate $1350 X 35, which equates to approximately $47,000/month, this will generate an annual revenue close to $465,000.
Dentical revenue should be maintained throughout, except it should be relegated to specific time slots during the week, i.e., Monday morning, Wednesday afternoon and Friday afternoon...or some such compartmentalization. Do not spread the dentical patients throughout the days and hours of the day of the week, as this creates an uncontolled schedule that will curtail income growth of your private and insurance patients.
The average current monthly dentical production is approximately $15,000 to $16,000 per month, or close to $200,000 in annual revenue. Note: you can confirm these numbers and adjust the formula accordingly...I think we’re close.
Annual Revenue = Pvt & Ins + Dentical
$465,000/yr
$665,000/yr
35% Dentical
65% Pvt & Ins
65% Pvt & Ins
@ 35 new pvt & ins patient/mo.
$200,000/yr
35%
Dentical
Keep dentical
at same level


RETENTION Action #2
Retention, specifically addition of hygiene days by adding 2 days per week of hygiene is the 2nd action step required to scale, or raise your overall revenue ceiling.
The hygiene revenue center is utterly predictable as the metrics are well known and the daily production of adding two hygiene days.
The national metrics on hygiene production for a fee for service and PPO practice averages $1,500 per day.
Adding 2 days of hygiene per week, or 8 days per month, will generate approximately 100 days per year of hygiene X $1,500 per day, or approximately $150,000 in annual revenue.
This is a relatively easy implementation target as Arrow Dental Arts already has enough patients per month (cleanings and RPCs) to accommodate an immediate 1 to 2 days a week of hygiene. With training, on the case study program...the hygienist can easily go to 2 days per week, and the goal over the next 18 to 24 months should be a minimum of 2-day per week, but ideally a full time 4 day per week hygienist.
Hygiene Growth
Arrow Dental Arts averages 20 non-dentical patients per month (PPO and Fee for service). With an average of 8 patients per day, the practice has approximately
2 1/2 days full days of hygiene per month. With dentical, there’s another 20 patients, or another 2 1/2 days...making an immediate 5 days per month of hygiene.
So, right now the practice has 1.25 days per week of hygiene...I would immediately hire a hygienist for 2 full days...and on her “down time” put her onto reactivation of database patients...(part of her training at Viva). She’ll easily get to 2 days per week.
If you factor in the growth of new patients at 35, your hygiene growth will go to 4 days a week in less than 14 to 16 months.


SALES AND MULTI-SERVICES OFFERED WITHIN THE PRACTICE Action #3
Sales and use of muli-services offered by the practice is an overall new patient strategy to increase the volume of new patients coming into the practice.
Specifics: Every practice and business has a geofence where upon all consumers are located. It doesn’t matter if it’s a dental office or a local pizza place, donut shop, or nail salon...they all have a specific 1 to 3 mile geofence where their consumers come from.
Arrow Dental Arts, in Rancho Cucamonga, has a geofence of approximately 15,000 to 30,000 addresses (1 and 2 mile radius from office address. The demographics average 3 people per household with an income range of $50,000 (low end) to $99,000 (high end). The borders of Arrow’s geofence:
North to South: 4th street to 19th street East to West: Euclid to Etiwanda
Diagram 1 on the opposite page shows Arrow’s actual geofence. The blue icons represent the addresses of Arrow’s 635 active patient base (addresses you sent me).
Diagram 2 illustrates the boundaries of your geofence showing the map icon of Arrow’s addresss in relation to the outlined geofence.
Arrow’s geofence has a radius of about 2 miles.
There are two additional diagrams that follow diagrams 1 and 2, which have been named:
1. Geofence Plan #1 2. Geofence Plan #2
Geofence Plan #1: This is a 1 mile radius from Arrow’s address and within this geofence is represented approximately 15,000 home addresses.
Geofence Plan #2: This is a 2 mile radius from Arrow’s address and within this geofence is represented approximately 30,000 home addresses.


Diagram #1: Arrow’s Actual Patient Addresses
Diagram #2: Arrow’s Geofence: Approx. 2 Miles


Geofence Plan #1: 15,000 Addresses: Radius = 1 Mile
Geofence Plan #2: 30,000 Addresses: Radius = 2 Miles


Neighborhood Ownership What to Offer & How to Own it
You have two options to choose from, either Geofence Plan 1 or Geofence Plan 2, depending on your budget. Arrow’s actual geofence is 2 miles as seen in the diagram where I mapped your patient’s addresses onto your area map surrounding your office.
To capture neighborhood ownership:
a) You must hit (mail) to each address within your geofence a minimum of 3 times per year. Any less of a repitition lowers response rate. Response rate improves with repitition.
b) Heavily BRAND your direct mail piece. Do not CHANGE the colors, logo or format. A repeated LOOK is what makes consumers remember who you are.
c) Offers to FEATURE: Feature only TWO offers:
i. Cleaning, Exam & X-rays ii. Braces
d) The monthly volume needs to be a minimum of 5,000/month, ideally closer to 10,000/month. This equates to 60,000 to 120,000 mailings per year, or translated into monthly equates to 5,000 to 10,000 per month.
The neighborhood ownership campaign should run for a minimum of 2 to 3 years, or don’t bother starting it. This is a strategy, not a “what happened next month” type campaign.
The response rate on will be roughly two-tenths of 1%, or about 20 patients for every 10,000 mailers. This response rate is based on decades of long term metrics which you can find from the DMA (direct mail association of america) and validated by over 20 years experience in doing direct mail. The response rate brings the cost or your patient acquisition to about $250 per patient.


Flanking of Direct Mail Neighborhood Ownership
The direct mail needs to be flanked by several important actions:
1. Locate a couple of billboards in Rancho Cucamonga and find out the cost to rent one for a year contract.
2. Your internal Care to Share must be put in place with exact dialogue and a specific single person in charge of daily distribution. (This will lower the overall cost of acquisition).
If the billboards do not exist, or are too expensive, then skip these. However, if they are reasonable, the billboard will feature ONE service: that service is BRACES with photos of 4 to 5 adolesents and teenagers...large images with smiles showing they have BRACES....the ad will feature a “call to action” such as “Braces: $100 a month” or something close.
Braces is a STRATEGY to capture neighborhood families. Every mother is going to get their sons and daughters braces in todays market...period!! Capturing adolescents and teens for braces will:
a) pay for all your marketing costs as the fees are higher and margins are high, so you only need a few to pay for all your marketing costs!
b) When you capture adolescents and teens, you capture the mom, the dad and the other family members as well as relatives that live in the area via word of mouth.
3. Database Mailers: hitting your 635 active patient list once a quarter plus a birthday mailer. This will build retention and KEEP the patients you acquire while also supporting your hygiene department so patients come back for recall visits.
The campaign you should run should be an “inspirational campaign” which uses no offers or “gift cards” .... ths campaign is a retention based database camaign.


Summary & Conclusion
To reiterate, the objective is to remove the income ceiling on your practice. It is currently collecting around $500,000 per year and the objective is to bring the practice strategically to an annual revenue of approximately $1 million.
This is a 3 year strategy you are embarking upon.
As covered, the actions to bring about the objective:
1)
Capture of additional new patients that are private & insurance, while maintaining your current dentical revenue (compartmenting the dentical into daily slots, not all days or hours of the week).
The object is to obtain an addition 15 new patients per month, that are private & insurance type patients. This is your neighborhood ownership direct mail campaign, as described.
Whether you use Viva’s product or you go somewhere else, is not my concern.
Do what you want. Do not however fail to use repeated BRANDING that is STRONG and FEATURE cleanings and braces (image driven) heavily...use repetition and the minimum quantity mailings per month...
My recommendation is to use the 2 mile geofence, hit it hard and do 3 mailings a year to the entire 30,000 addresses, which means your monthly mailings will be approximately 7,500 per month.
2) Immediately establish and hire a hygienist 2 days per week. Get her trained on the retention metrics and basics at Viva so she can build your hygiene department to 4 days a week over the next 18-24 months.
3) Change utterly your thought process and remove that you are “saving and budgeting” as this has already cost you hundreds of thousands. The largest loss of income is not what you are saving...it’s the income never made...that you can’t see!


Summary of Income Objective
The income objective of $1 million will be acheived through use of new patient acquisition from neighborhood ownership.
Neighbhorhood Ownership Campaign Revenue
This campaign will give you an additional 15 to 20 new patients per month.
Each of these new patients has an average annual transaction value of $1,350, which equates to roughly an increase of $245,000 per year (with 15 newly added patients).
With 20 newly added patients, this equates to $325,000 per year.
Hygiene Department Revenue
The hygiene department revenue equates to $150,000 per year by adding 2-days per week of hygiene over the next 18-24 months. Within the next 3 years, this department should easily be at 4 days per week of hygiene...which equates to approximately $300,000 per year in annual revenue.
Current Earnings Revenue, Neibhorhood Campaign Revenue, Hygiene Dept Revenue
The combination of current, neighborhood and hygiene revenue is illustrated below:
$550,000
$245,000
$150,000
$945,000
Current Annual Revenue
20 pvt & ins patients + dentical
Neighborhood Campaign Revenue
Hygiene Revenue