THE EDITOR'S CORNER
In the past, when there were more children and fewer orthodontists, it was possible to increase gross income while increasing fees minimally, if at all. Orthodontists preferred to increase their productivity through the use of expanded duty auxiliary personnel and other efficiencies.
It had the disadvantage of increasing costs because it required more personnel, more chairs, more supplies, more office space to treat more patients.
The combination of increasing costs and continuing inflation has to catch up with you eventually if you do not respond with fee increases adequate to balance them. The day of reckoning speeds up when the number of available patients declines and the applicability of the orthodontist's productivity declines or disappears. This is what has happened in orthodontics and this is the crux of the economic problem to which we have to respond.
There are four areas of response for orthodontists--increase the number of patients, increase fees, decrease costs, nullify the effect of inflation.
The effect of inflation can be nullified in large measure either by receiving the fee in advance or by tying the fee to the inflation rate. To receive the fee in advance is a rarity, but can be made the mode by instituting a bank plan arrangement for all fees. Failing that, the fee can be arranged so that the remainder will be adjusted annually for the inflation rate. This is imperfect because it occurs after the fact, and especially imperfect in a rising inflation, but it is better than doing nothing and can be improved if the first year fee were to include an adjustment for the estimated inflation in the coming year.
Increasing fees is a must if the orthodontist is to have a chance to keep up with the other factors --declining number of patients, increased costs, and inflation. How much to increase fees can be determined by constructing an economic model of your practice according to the method shown in the two articles--Orthodontic Economic Indicators and Blueprint for Economic Survival in Orthodontics--which appeared in the April and May issues of JCO. The decision about fee increases must be tempered by the amount of patient resistance to present fees. However, if an analysis of your practice indicates that a certain amount of fee increase is indicated as a survival factor, because it has become your only balancing factor, you don't have much choice except to do it and to consider alternate locations to obtain a proper balance of number of patients and size of fees.
Increasing the number of patient starts is the most potent way to increase gross income and, hopefully, net income, but this is becoming more difficult as the child population decreases and the number of orthodontists increases. It means paying more attention to practice building, competing harder for referrals, seeking more adult patients, efficiently compressing your time in one location in order to open a satellite office in another location, and treating more patients with third party insurance benefits.
Third party programs are a growing influence over patient supply in orthodontics. They are a potential source of additional orthodontic patients by virtue of encouraging increased utilization and at the same time they are a potential hazard to orthodontics by reason of their need to control the program with regard to costs, performance and quality. That control is not compatible with the needs of the profession to maintain fees at levels which will provide an adequate standard of living and to itself control the professional aspects of the program.
Controlling costs is a difficult area because costs keep rising and controlling costs too much can be counterproductive. However, since salaries are usually the area of highest cost in a practice, we should consider what Robert Schulhof describes in an article in this issue as Productivity Sharing. One might think of productivity sharing as applicable chiefly in a climate of increasing numbers of patients. However, in a situation of decreasing numbers of patients it may also have an application. Essentially, it is a method of motivating employees to greater effort with the incentive of a share in the profits. Whereas we have been thinking of increasing the productivity of the orthodontist by adding the hands of expanded duty auxiliary personnel, we now must think of increasing the productivity of each employee and being able to reduce the number of employees, while maintaining efficiency and increasing the salaries of those who remain.
The problem that a system of productivity sharing may have in orthodontics is the reticence on the part of most or all of us to open our books to employees and to reveal the gross income of our practice and our own salary. Without such information, the system of productivity sharing could still be a formula that you can use to determine periodic bonuses. It would not give the employee a feeling of proprietary interest, but could still be an effective incentive mechanism.
