63: Metrics, Vendors, and Financials

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Hello, everyone, and welcome to another episode of DSO Secrets. I'm your fearless host, Emmett Scott. And today is a topic I have put off for a long time, not knowing the best way to address it. And it's around KPIs, metrics, financials, always getting questions on what are the KPIs that you track, what are the metrics you track? And I kind of started pondering recently on why I've been resistant on giving this. And recently on our Facebook site, lots of questions around different vendors out there. I've got to meet with almost all of them, set up a nice cadence of having weekly meetings with vendors, learning what the industry's developing. On the technology side, I always love those interactions, but I'm always left wanting, always left missing some key aspects. And I decide I'm going to sit down, I'm going to figure out why that is, why internally we've had to build so much and yet I'm so hopeful that the industry will design something out of the box that all of us can use. So I want to start off with a quick story. It's about a man and his wife. They just finished an anniversary dinner and they're walking home. And as they're walking home, she loses her wedding ring. And she realizes it shortly after. And so her husband sends her back home and he starts looking for the wedding ring. Well, along comes this man walking down the street, sees the husband on his hands and knees underneath this street lamp looking for this wedding ring. And he asked the man, of course, what he was doing. The man explains what's happened. His wife has lost her wedding ring. And just out of reaction, the man says, is this the place she lost it? And the husband surprisingly says, no, it was actually over there, but this is where the light is. Now. That's a silly story, except when it comes to KPI and metrics. And as I've visited with different solutions out there, one of the concerns that I think has kept me from being able to fully utilize an outsourced solution or give confidence around those is that oftentimes what they're providing is where the light is. What is the easiest thing to pull out of the practice management software? What is the easiest, easiest thing to create a nice GUI interface around so that, so that the pictures look well. And I'm not saying that everything on their dashboards is not helpful, it absolutely is. But I don't feel like it's core issues that really are going to drive the business to the next level, especially when we're talking about a dso. I could probably get convinced that on an individual practice level there's quite a few metrics there that are super helpful. But when you get into a little deeper look, an enterprise solution and just better revenue cycle management, I'll get into some of the ones just to give you some exposure of things that I'm looking for that don't exist in most of these systems. And the reason I think I've been hesitant is why give you something and tell you about it that doesn't exist? But I just came to the realization that if we don't educate ourselves on really running an enterprise level solution, then we'll never be asking for what we really need. So let me start with a really simple example. All of us know how much collections we've gotten in a given month or for a given month. So if I said how much did you collect here in January? You would be able to pull that in and you would say, oh yeah, we collected 100,000 in January. But if I said how much did you collect for January, meaning in January you produced X amount of dollars, how much of those X amount of dollars have you collected? And on a metric level, what we're talking about is tying the collections to the procedure date. Why is this so important? Well, as I'm looking over my year, let's say the last 12 months or last six months, obviously the most current month, my collections are not going to be at the highest percentage because there's just a day sales outstanding, a revenue cycle management timeline for which I'm sending out claims and receiving money. Unless I'm pure fee for service, there's always going to be that lag. But when I start looking, let's say three months out, four months out, five months out, I should start seeing a normalization of how much I've collected for those given months. When I look at November of last year, December of last year, I should be able to tell how much I've collected for the procedures I've done in November. Now, what if you don't have this data? Well, you might know on average how you're collecting, but you don't know where your soft points are. You don't know where your key issues are. So let's say one month you collected 95%, another month you collected 85%. Let's say this was going on for a while. You might look across and say, on average, I'm collecting 90%. But you're not able to hone in on some key areas where there's opportunities. I don't like not having that level of detail and there's lots of reasons why, which I won't get into because I'm going to stay with some of these metrics here for a bit. A metric I love is I love to understand my patients by different types. I like to understand how many first visits, how many recall or recare appointments came in, how many treatment appointments came in. I like to know that by the patient flow number, like how many visits actually came in. I also like to know that by the care per visit or production per visit broken out by what are we producing on first visits, recare and treatment. Why? Because I can start to see some clarity across these different components. What if I broke those out by ages and looked at our flow by different ages and different demographics? Maybe by insurance types? Understanding my customer and what types of customers are coming into my store, kind of using that mindset is very powerful. And knowing how much product I'm able to provide to those different customers. What if I looked at that data and I noticed that my production per visit was highest in women between 40 and 50? How would that change the way that I organized my practice? What services that I was providing, the way that we spoke to our patients and even looked at our scripting. Maybe the next place I opened a practice or acquired a practice. What if I had another practice where the primary patient type that had the best production or the most flow or one of those components was 12 year olds? How would that be different than the practice that has women between 40 and 50? So I want to know this level. Oftentimes when I ask people about their practices, one of the first questions I'll ask is what type of patients come in? And they always look at me like, hmm. And then they'll say something like this, well, I'm a general dentist, so you know, bread and butter, we see everything. And I understand why they say that. I understand why it's a correct Answer. But I hope you can understand if we're focused on the customer, we really want to hone in on. Why in January did we have this type of patient flow coming in versus February? It was this, was there something that changed as I start getting more specific on my customer care, on my patient care? Now we've developed to a point where we're actually creating our budgets around these different slicers. How many first visits do we expect? How many recall, how much treatment? Now as we've built out our DSO support, we know that if we have a lot of first visits coming in that what that's going to translate into for recall and for treatment. Because we've had those breakouts. I can start looking at ratios of retention for first visits, recall and treatment. I can also focus my team on if recalls aren't hitting the budget number that we thought. Were we wrong on our budget or is there something in our systems that we're not following up with recall appropriately or first visits or treatment? If we're not hitting our treatment opportunities, is there unscheduled treatment focus? If I don't have those measurements, I can't put that focus on, especially in a scalable way across my locations. So this is why we have now a budgeted calculation, a budgeted set of numbers and we load those up for the month and then they accrue each day that practice is open. So let's say for example, that we'll make our numbers easy. We wanted to see 200 patients in a given month of 20 days. Well, you just take 200 divided by 20 every day, 10 patients should come in, right? And so day one clicks along, I'll get a report says eight patients came in, the goal was 10. Next day 12 patients came in, the goal was 20. So okay, great. So now we're at 20 and 20. So each of those helps me see on a rolling basis what the first visit versus the recall versus the treatment, what was budgeted versus what's actually happening. Again, to know where the soft points are or where the opportunities are. Our clinical team has their own standard of care ratios. They're looking at same day treatment ratios or different procedure type ratios to make sure that it's in line with the standard of care as they perceive it. And so all of those things much more difficult to get out of an out of the box type solution. Now, I mentioned that we've done some work around first visits to recare trending. So in other industries they look at customer acquisition and customer retention with a lot more sophistication than we have done in this industry. And so it became fascinating to me to say, hey, if we have X number of first visits in a given month, what does that recall look like six months later? And if you stack this over time, can you actually see a trend of acquisition and retention versus attrition? And if you look at those first visits by different demographic types, are there different demographics that retain better than another demographic? So this kind of data to me helps to really scale your business, help you really understand what's going on at the patient level, at the customer level. So again, you can put your resources in that area. Now, this won't be too surprising, but when I first looked at the data, I thought it was fascinating. That was that in practices that saw pediatric patients that the 12 and under patient, this is just one example, had 10 times the retention rate of those in the older ages. Now, I thought a lot around that. Was it the practice design? Is it the services being offered? Why is there such great retention? And I think that the data really tells me that at the end of the day, a parent is most likely to bring a child into a practice than they are to bring themselves into it. Just knowing my own experience, my children see their clinicians in general. They'll see the doctor way more often than I will, because I want to ensure that all of that happens. Well, this is interesting. What is happening there now is, okay, so is that a customer type that we are able to scale? If so, what are the services that they're most interested in having? Because the lifetime value of that patient now is much different than I would have perceived, even if their reimbursement or services are less on a fee schedule. Here's the principle that I think to take from some of this conversation. These might not be metrics that you're interested in, but what I would challenge you to do before you go talk to any vendor, and this is true for really any software type or vendors in general, is to make sure that you're clear on what you need to lead better, what you need to solve the problem that's in front of you. And I get sometimes you're not super clear on that. And for me as well, talking to vendors sometimes helps me develop that clarity. But one of the traps that I've fallen into in the past is one believing that automating something with technology was going to solve problems. My problem and what automation does is it automates. So if the problem is there, it will automate and expose the problem even more, or you'll know that it's still a problem because the automation is never used, the technology is never used. I've fallen into the trap where I get excited about features and functions of GUI interfaces and the experience itself, my imagination around how this could be used in our practices or at the DSO level. But the reality is, unless I'm very clear on a couple key points, what is it that I really need, what problem am I trying to solve and how do I ensure that operationally this is going to flow? Let me give an example. I just met with a vendor, beautiful interface, great information, I love where they're going. I think, I think they're on the right track and they had calculators to be able to create your own ratios. There was just a lot of smart things that they've thought through. When I asked them about onboarding and off boarding of employees, they said what most people say, which is, yep, you just go into our system and you give them their rights, etc. Now having over 500 employees and turnover and everything else that's unmanageable. We'd have to just dedicate a person just onboarding and offboarding people to ensure someone didn't walk out the door, was working for someone else and had access to all of our systems. So, you know, solving these things needs to be on my checklist. It might not be on yours, but needs to be on my systems checklist. So as I'm talking to vendors, I'm not overly excited about all of the features and functions when operationally it will never work. Now, while we're talking about metrics and BI reporting here, let me just put another plug in for working towards executive level financials, working towards accrual financials. I know it's a lot of effort and I know a lot of there's not a lot of support to help get there. But again, I've been somewhat quiet on this, knowing that those resources didn't fully exist. But now I think that the strategy should be we should start demanding the resources and then they'll appear. So here's my problem with cash based financials and if you've listened to some of the other podcasts and especially the ones Ken's done, you probably know this. But if I take the expenses for a given month, let's say again January and I and I put on top of that collections from various months, I just want you to think through math for, for a minute here with me. If I take revenue from various months coming in, that's collections. So I have some of November, some of December and some of January. I call that my revenue, that's collections and I subtract it from expenses of January, maybe some is prepaid of February, etc. But, but even if January is perfectly clean, only January expenses, what does net income equal? And the reality is I don't know, but it doesn't tell me much. If anything it doesn't, it definitely doesn't tell me whether January was good or bad. I mean in reference to one another. It's, it's money that came in and expenses that went out. But I don't know how to drive whether we had a good January or a bad January off of those financials because that revenues from little parts from all these various months. Maybe if the net income was really high, it just means that December and November were excellent, but January was actually terrible. But everyone had time to help with collections coming in. Or maybe if it was, if it's bad, maybe November and December were trending upwards but were poor and January, I crushed it. We just haven't collected that money yet. So people will say, well Emmett, over time it all kind of works out in the end. But I don't have that time. I need to know for a given month what's going on and how the story is going to end. So we've got to keep pushing our metrics, we've got to Keep pushing our CPAs, we got to keep pushing our financial support, our practice management software, etc. To give us clarity on what it is that we produced for that month, how much we believe we're going to collect of that and peg that so that we have a clear net revenue number for January. Now I can subtract that off of January's expenses and know whether January was a good or bad month. I haven't collected that yet, but, but I know how the story's going to end and when you know how the story is going to end. You can start doing cash flow analysis. You can start looking at how long ARS come in and you can know what months are going to be, good months and bad months, cash flow wise, based on those projections. You're also able to look at your expenses as a percent of, of revenue and know that they are solid for that given month and see if there's opportunities and your marketing and your doctor pay and supplies and any of these other staffing, any of these other variable expenses, where is the biggest opportunity. But if I just have collections and my doctor pay percentage is all over the place because first of all that's not as Standardized as it should be. And I'm seeing that more and more too, that people have customized their doctor pays so much that it's really hard to tell whether that was a good or bad month or if doctor pay was over underpaid one. One little bonus tip. If you haven't standardized your doctor pay calculations, I would make that a priority. I understand why you you don't have it standardized. I understand that recruiting is difficult. You kind of customized for each doc coming in. But I bet that that day of the month or two days, if you're doing it twice in a month, where you have to calculate doctor pay is probably the worst day of your life right now. On a consistent basis. Standardizing that and putting that energy into other things will help you to scale your business and have a better culture. So hopefully this gave you maybe just one or two thoughts. Your biggest takeaway probably should be to sit down and say what really matters to me? What data do I want to track and know? And if I know that data, I can run this business effectively. I can run these practices effectively. Start to build that out and as different components come up, issues come up. Ask yourself, what data would I need to be able to have led through this issue? I'll tell you. Another one that I use is if I'm in a meeting and I notice there's a lot of opinions around what's going on for a practice or for a certain situation, I ask myself what data, if we had, it would kill this whole conversation and we could all go and just solve the problem. If people are sitting around saying, I think it's because of this, I think it's because of this, I think it's because of this. What data would just tell us what the answer was and how do we go solve that? Another concept to use. But as you build that out, then you'll know which vendors will be most helpful to you to help you grow your business. I hope this sparks some ideas for you. I hope you'll bring them over to our Facebook site at DSO Secrets, ask more questions, dig deeper, and then we can continue to give feedback to one another to take this industry to the next level. So until next time, keep smiling.

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