Don't Rest on Your Laurels
Orthodontists are riding the crest of a beautiful wave. The chief results of the 1995 JCO Orthodontic Practice Study will be presented in a three-part series beginning in this issue. They indicate that the average orthodontist is doing well. Referrals up, case starts up, fees up, gross income up, net income up, overhead (breaking a pattern of increases in recent years) down.
All this has been fueled by an increase in the birthrate that started around 1987. Those children are just reaching an appropriate age for orthodontic treatment. The annual birthrate reached 4 million in 1990 and has been holding around that rate since then. With the projection that this birthrate will continue until the end of the century, orthodontists ought to enjoy a steady stream of child patients for the next 10 years at least. The operative word is "steady". The average number of case starts may increase in the near term and then level off as the birthrate remains high.
While the number of child patients in the average practice has increased, the number of adult patients and the percentage of adults have receded greatly. It would be wise, as the number of potential child patients levels off, for orthodontists not to neglect potential adult patients.
The general economy has an influence on orthodontic economics. It has been favorable lately, with inflation held in check for a period of years. Another favorable factor is that the number of practicing orthodontists appears to be leveling off, and we may even be approaching zero orthodontist population growth.
The future bodes well for the specialty, but don't rest on your laurels. Complacency has been the downfall of a great many successful enterprises. The railroad industry in the United States is the prime example offered by Theodore Leavitt in his landmark paper, "Marketing Myopia". Inattention to the marketplace can be the downfall of an orthodontist as well. Although internal marketing is essential to practice success, there are a number of external factors that must also be given attention. It does not take much of a combination of events inside and out side a practice to have a critical effect on its future, no matter how well it succeeded in the past. A few examples:
You are located in a town in which there are five orthodontists. Then another one moves in. There may not be an immediate 20-50% dilution of referrals, but there could be a slow erosion. All orthodontists should be aware that they are in competition with others, and strive to so distinguish their practices from the rest that they are much less vulnerable to competition, old or new. There is the example of a practice that became so fashionable--that had the area so well sewn up--that children would say they went there even when they were in the practice of another orthodontist. The demographics of your area change, and you don't notice. The children may have grown up and moved away without being replaced, or there may have been an influx of less affluent people. The old system of keeping a map of the area with pins to indicate the homes of your patients is still a good one. If the majority of the pins begin to cluster some distance from your office, they may be telling you something. Your case starts stay level or decline. This may be the single most serious problem in the economic equation. If case starts times fees equals gross income, a decline or leveling of case starts puts pressure on fee increases to maintain income. The most immediately effective measures include better solicitation of general dentists for referrals and efforts to increase the case acceptance rate. It would probably pay to hire a practice management consultant as soon as you realize that you have a problem with case starts. You don't feel you can raise your fees. Not raising fees may be due to inattention on the part of some orthodontists, but it can also result from a lack of confidence when case starts decrease. This is a double blow that can have a dramatic effect on gross income. Perhaps a quarterly or semiannual fee increase would be more comfortable in such a situation, since each increase would be less noticeable. Your expenses go up. This might happen because you have employees of long duration whose salaries have been increasing annually, to 30% or more of gross income. Such raises obviously cannot go on forever. One solution could be some form of profit-sharing plan. Whatever the reason for increased expenses, remember that another equation of orthodontic economics is case starts times fees minus expenses equals net income. Your case load includes a large number of patients who are paid up but still require additional treatment. A concerted effort needs to be made to make some final disposition of this group as soon as possible. Some will need a change of treatment plan. Some will need a noncompliance appliance. Some will need a lot more motivation. Some will need to be terminated because they will not complete treatment in the foreseeable future. In any case, this group is a drag on the practice. One or more events such as these can conspire to produce a decline where decline did not exist before. Despite the likelihood that there will be a favorable climate for orthodontic practices for years to come, continued success in that climate is not automatic. Continue to pay attention to management and practice building. Don't rest on your laurels.
