Operational Cost & Treatment Charges in Dentistry Part –II Set Yourself Up For Success In The New Year

Heartfelt gratitude for making the previous article “Operational cost and treatment charges in dentistry” a big hit!(1) I received wonderful feedback from all parts of the world. I am feeling honored to have it accepted by many reputed mentors across the globe!

I hope now you thoroughly understand the difference between overhead, operational cost and doctor’s net profit! Many doctors whom I have personally explained this concepts are now very much convinced to practice accordingly. As this is the sequel of Part-I publication, I request you to read the 1st part again for the better understanding of the current article. This is just a logical attempt and not a full proof evidence based article. I hope it helps and make some sense to you! 

During some personal conversations with friends and colleagues, I was asked some questions frequently. So through this article, let me attempt to simplify it for you.

1. Did you feel the calculations explained in the first article “Operational Cost and Treatment Charges in Dentistry” were on higher side?
2. Do you face resistance from your patients to charge what you desire? 
3. Do you worry about decrease in patient flow due to hike in clinic’s service charges? 
4. Do you want to increase patient’s acceptance for expensive treatment plans?
5. How to deal with competitive and predatory pricing in India where it is justified by the judiciary too?

Let’s troubleshoot all your doubts and try to find some solutions.

Shocking truth about being a Dentalpreneure:

In old economy, “Dentalpreneur” was considered a dirty word and it was believed that the entrepreneurial dentist wasn’t focused on the health of the patients. In those days, dental businesses ran on the sheer fact that there were more patients than dentists and those patients were not demanding too. But the bigger problem was that they never really learned how to run a business. There were surplus patients so dentists could hide the flaws in their dental management practices, systems, values and processes and even their dental marketing strategies. But in this Google era, there is a shift in the medicine and its turning out to be value based services. Now not only skills are important but a dentist has to add some "wow factor" to ensure the continuous flow of the patients.

Dentalpreneurs are not compromising with the ethics and patient centric approach but they are just visionary. They lead a team; seek to deliver wow customer service, and multiple moments of connection. They run their own race, create value, and they build a profitable and successful business. They want to create a dental practice that outlasts them and becomes their legacy. So if technically that’s what an entrepreneur is, what’s so bad about it???

Are we really facing saturation in India?

India is the largest democracy and the second most populated country in the world. If you compare the prices of any dental treatment with other parts of the world, you will realize that India is one of the best place to get the affordable dental treatments. But we all are also aware of the fact that India is a mass producer of dentists. 310 Dental Colleges in India are producing approx. 30000 new dentists who join the battle every year.(2) It is predicted that by 2020, nearly about 1,00,000 dentists will be unemployed. This definitely increases our blood pressure!

Indian market is very price sensitive. I do agree that, the situation of young dentists in India is not that good! In the cities, there are limited job opportunities, very few patients & they face cut throat competition. The urban areas are saturated and the rural areas do not even get the primary healthcare. If we compare our earning with the dentists of the developed countries like USA, the scenario is quite surprising. In the USA, dentists are the highest earning professionals & dental treatments are the costliest.

But if you look at the data, we are living in a nation having the population of 1.32 billion and out of that 450 million people lives in tire-1 and tire-2 cities. Also if you consider dental / medical tourism in India, it is roughly around 3 billion dollars and increasing with the rate of 15-18%. India is projected to be the world's most populous country by 2022, surpassing China.(3)

WHO recommends, dentist to population ratio of 1:7500. In India, it used to be around 1:3,00,000 in the 1960’s, and stands at 1:10,000 today.(4) If we dissect it even more, it is around 1:5000 in the urban areas and roughly around 1:1,25,000 in the rural parts of India. It means a pool of opportunities and there is still enough for everyone.

In India, poor awareness about oral health and lack of dental insurances are the core problems. Both are the biggest reasons that differentiate between the earning of Indian & US dentists. In India less than 20% of population is conscious about the oral health while in US more than 80% of population pay attention to it. Thus, demand to supply ratio is heavily affected.

I see following solutions to improve the scope of dentistry...

1. Just imagine what can happen if we turn this 20% into 80% of oral health related awareness in Indians! Increase the demand by ethical marketing and educating the internet driven population. Dental Council of India, Indian Dental Association and other regional associations can contribute to mass education via radio health talks, articles in the news papers and also via other social platforms.
2. The rural areas are actually the new opportunity to survive in the present era. Dentists should consider relocation and redistribution according to the demand and demographics. After graduation, when the young dentists do not have much liabilities and responsibilities, they should practice few years in the rural areas to gain enough experience.
3. Also I see potential scope for insurance companies to start a new venture in India.
4. The business aspects of dentistry should not be overlooked. Consider your practice as a small scale business and improve the dental management skills. Make your policies clear.
5. Even joint ventures should be encouraged. Various specialists can club together to start a practice with much advance facilities and with minimum individual investment.

I believe saturation is in our minds which don’t allow us to see the future possibilities. I know that the change will not happen immediately but it's definitely possible if we understand the problems and work on solutions. Unite to raise the bar in dentistry! Act today for better tomorrow...

When you have exhausted all possibilities, Remember this: You haven’t!

`Thomas Edison

Convince yourself first!

You must be thinking that opportunities are less and if we do not offer cheap treatments, our patients will definitely get it done from our neighbors. It doesn't mean that you do loss and still treat the patients. With so many clinics around, you must be finding it very competitive to increase the prices! But I am also sure that you don’t want to fail big in long term!

After reading the article on operational cost, you must have done some calculations for your own practice. It is simple math and not a rocket science. Still if you found the calculations on the higher side means that you still couldn’t understand the concept of the operational cost and its influence on the treatment charges! You do not have to charge according to the examples I gave in the article. In fact every single clinic, even in the same locality, will have different overheads and operational costs! The article supports all class of practitioners in any part of the world.

Let’s understand the example.

Person A - from metro city - invested 80 Lakh INR for the clinic’s space and

Person B - stays in tire 3 cities or in the peripheral parts of India - invested 40 lakhs INR for similar carpet area of the clinic.

They both have invested for different sets of armaments and furniture. Still all the practices in India do not have Rotary Files, Endomotor, RVGs, Apex locator, DC X-ray Machine, Physiodispenser, Implant kits, Microscope etc.

Even if every clinician in the world calculates their operational cost according to their investments and expenditures, localities, quality of materials they use and their loan installments; it is highly unlikely to match with others. Not only doctors from different localities but even two neighbors of same locality may differ in their investments! In such cases, what is the probability of having the exact similar overhead costs and if it is negligible, how can we charge the matching to our neighbors?????

The operational cost (production cost) is the sum of overheads, consumables and you still needs to add your skill charges. It is your own spending per hour (hidden cost) even without doing any patients! No one in the world can do a business below the actual production cost as it doesn’t include your profit margins. If it is costing you 2500 rupees to perform the single RCT (without adding your skill charges) and still if you do it in 1800/- INR, you are doing loss!!! And with this kind of charity practice, I don’t think your business and family will survive in long turn!

After finding the overhead of your clinic, you just have to add the material charges and your net profit to tailor the price list of various treatments you offer in your practice. So the calculations and their interpretations are personalized.

Facing resistance to charge what you desire!

I am sure calculating the overheads and operational costs must have been an eye opener for you! You must have felt the motivation to increase your service charges but worried about the fall in the patient conversion ratio due to sudden price hike.

Let’s take one example.

Suppose you used to charge 2000/- INR for a Root Canal Treatment and according to your counting, you must charge 4000/- INR! So you need to increase 2000 rupees but you are worried that your patients might say no to you and chose another dentist who is offering cheaper services.

Friends, I am not asking you to raise 2000/- INR immediately but you can raise 500/- INR every quarter to reach the goal in a year. Makes sense, isn’t it? Once you reach the goal price, considering inflation, you just have to raise it by 10% every year to maintain the steady income. India is the price sensitive market and one has to add some value to attract patients. Go slow and steady but be smart to win the race!

In the market we have range of cars from NANO to BMW and they all have their own class of buyers. Have you even thought why still Nano is not seen frequently on the Indian roads being the cheapest car? In fact Nano plant is about to stop the production very soon!!! Now, on the other side Maruti-Suzuki sells more cars and offer different varieties of cars to serve different class of people.

Similarly, keep 2 options for all the treatments you offer in your office. Let’s say I offer 2 kinds of RCTs, one will cost you 2500/- and other will cost you 4000/- INR. Explain the difference like you are using rotary files or some different materials for the 4000/- rupee treatment. Just divert them and let them decide! Do not confuse them with multiple options too. Now only two things can happen –

i) Your patient will go for the higher option if they understand the value – Good for you! It will motivate you and next time you will feel less resistance to charge the ideal! Once you are able to convert almost 80% of your patients according to your ideal charge slab, remove the lower cost option from your practice.

ii) Patient is still okay with the cheaper option– doesn’t make any difference as anyways you used to charge that much amount but at least now you have raised the charges by 500/- INR and gradually it will increase in a year.

Saying "NO" is the new opportunity:

I prefer not to give discount to all my patients because it gives a message that you are negotiable.

If I have to, I give maximum 10% discount on the total bill or 30% on my profit margins. Unlike medical speciality, dentists do not have the OT charges, anesthesia charges, sterilization charges, visiting / recall charges, bed charges etc. Your treatment price includes all of those expenses. If you give 10% discount on the total price; it makes around 34% of loss in your profit. Now imagine if you give 30% discount on total treatment charges, I think you are putting money from your own pocket! Still if you prefer to give discounts, you should keep the prices accordingly to compensate for your loss.

Do some math and make your policies very clear. If you give discount, full payment has to be received in advance before starting the procedure.

Even consultations should not be done for free. You use sterilization pouches, some instruments, your operatory and electricity to consult the patients. Moreover, you are giving your valuable time to patients which should be respected and paid accordingly. It is the doctor who has actually cultivated this habit of bargaining (discount or free) in patients. Next time they will expect more from you and now they do not value you either!

E.g. 1) iPhone is still the dream phone for many even after being the most expensive phone in the Indian market.

2) Reliance Jio is still not your primary operator.

I hope you understand what I am trying to convey. A person giving 2 hours of his valuable time to perform RCT and charging 4000 is earning equally to the person charging 2000/- INR for the similar work in two patients. Still he is at loss by 2 hours as he has to do one more patient and here you can actually attend 2nd patient which can make you earn more. Thus increasing your charges may reduce your patient flow but ultimately it will help you earn similar or more by putting less efforts.

learn to say “No” politely to the window shoppers. It’s a small word but very helpful in long run. Those who actually need the treatment never ask the price first!

Corporate culture, competitive and predatory pricing in India

Let’s say,

The predators are the corporate dental chains or any group of individual who is trying to gain work by practicing low-priced

and

their competitors are those who would like to charge decent and practice to some satisfactory level.

I feel, for any start up, keeping less charges in a price sensitive market is just a short term strategy. With such tactics, no one can run a business for a long period of time unless they are filthy rich and they don’t care about their money. After the weaker competitors are driven out, the surviving business usually raise price above competitive levels. That’s actually their ultimate aim. Predators that are not financially stable or not strong may suffer even greater loss of revenue or reduced profits.

For predators to succeed, they need to have sufficient strength (financial reserves, guaranteed backing or other source of offsetting revenue) to endure the initial lean period. Their strategy may fail, if we, the competitors unite and are stronger than expected, or are driven out but replaced by others. In either case, this forces the predators to prolong or abandon the price reductions. In the long term, predators cannot harm you as even their ultimate aim is to make some profit.

Healthy competition, Patience and Unity in the competitors are the keys to fight against the predators.

Relience Jio is the best example. Everyone took the Jio connection because it was giving free calls but if I am not wrong, it was never anyone’s primary operator. There were many issues like call drop, poor sound quality, poor net connection and you could not even complain because it was free. By doing so, they infiltrated the market but if you notice, recently Jio announced decrease in the validity and increase in their cost of 3 months plan (definitely to gain more profit, isn't it?). This is what every predator does! Meanwhile other operators (Airtel & Idea) got united to fight back and that is what the competitors should do.

Be it corporate or even a group of practitioners, none of the doctors would like to do unethical practice and they also don't want to work in really poor settings. So in such unhealthy practice, the resident doctors will face the burn out very soon. Also to make the treatment cheaper; predators compromise with the

• Materials, instruments, technologies
• They don’t even upgrade with time so ultimately they are unable to provide the treatments according to the latest standards
• Their aim is to earn minimum profits from large number of patients, so they even don't give enough time & attention to one patient.
• Most of the time, the associated doctors are fresh graduates who lack enough experience too.
• To achieve their monthly targets, they sometimes do unethical practice too.

It gives us (the competitors) the cutting edge to shine even better in front of our patients. There are many such examples even in dentistry who penetrated the market initially but facing the tough time at the present. I have seen many patients visiting to the corporate chains of clinics because of the low charges but ultimately they had poor experiences and wise ones actually returned to my practice. So it is also a good opportunity to gain some loyal patients and they even do free dental marketing for us!

Conclusion:

Why should we feel embarrassed about making money, as it’s an important factor for enhancing self-worth. Only when we are secure, we can give back our 100% to our profession. No, I have not forgotten that I am in one of the Nobel profession but does that mean that I should mix nobility with financial returns? Something to ponder upon...

Wise practitioner already made the changes in their practice and others will soon face the heat! The business cannot earn profit if it does not understand the finances well. No one in the world can provide some service cheaper than their operational cost. No two clinics have the similar overhead and so none of them can have the same treatment charges too. Reduce the overheads and make some profit to survive in the market.

I wish my article make sense to you and I am inviting you all to be the part of this change. Don’t just read, try it today! Give me your feedback, too. I will be glad to know if my article changed your conventional way of thinking and take you to the path of success! Remember, together we can raise the bar in dentistry!

References:

1)     Ankit Desai. Operational cost and treatment charges in dentistry. Dental Practice; Vol. 15, No. 2 July-Aug. 2017

2)     Shobha Tandon. Challenges to the oral health workforce in India. Journal of Dental Education; Vol. 68, No. 7 Supplement, July 2004.

3)     Demographics of India. From Wikipedia, the free encyclopedia. www.google.com [Last access on 2017 November 2]

4)     National Oral Health Policy: Prepared by core committee, appointed by the Ministry of Health and Family Welfare, 1995.

Picture Courtesy - Goggle Images

About the author:

Dr. Ankit J. Desai MDS

Periodontist & Oral Implantologist

·        Graduated from Bharati Vidyapeeth University, Pune in 2010

·        Master degree in Periodontology from Bapuji Dental College & Hospital, Davangere in 2014

·        Fellow of International Congress of Oral Implantologist (USA) 2013-14

·        Recipient of the "Highly Commended Periodontist Award" by Famdent 2016 & "Brig. (Dr.) J. K. Gupta Award" from Indian Society of Periodontology 2013

·        Visiting Faculty at Ahmedabad Dental College & Hospital

·        Private Practice: Special attention- Periodontal plastic surgery and Implant dentistry at Desai Dental Clinic, Makkai Pool, Surat, Gujarat, India

Contact: www.desaidentalspecialist.com / [email protected]