Opportunity Cost and Working at the Top of your License

Author:

Rob Allred 
MBA
Chief Operating Officer at Synergize Dental

A general study of economics is likely to address the concepts of Absolute Advantage, Comparative Advantage, and Opportunity Cost.  Absolute advantage is achieved when one producer is able to produce a competitive product or service using fewer resources.  Opportunity cost is what must be given up to obtain something desired.  Comparative advantage considers the opportunity cost when assessing the practicality of providing a product or service.

To assess a student’s understanding of these concepts, a commonly poised study question goes something like this.  If a lawyer can type 100 words per minute, and her secretary can only type 50 words per minute, who should do the bulk of the typing?

The lawyer has the absolute advantage.  She can type more words per minute than the secretary.  If typing was the only service being considered, the attorney should do the typing.  Her opportunity cost, however, is what she could be doing instead of typing.  We quantify her opportunity cost by considering how much she can bill per hour.  Depending on specialty, experience, and reputation, let’s say she bills $300 per hour.  The attorney’s opportunity cost is greater than that of the secretary.  If the attorney is billing anything over $100 per hour, the higher opportunity cost makes it clear that the firm has a comparative advantage in having the secretary do the typing, while focusing the attorney’s efforts on higher return billing efforts.

I simplify this concept by encouraging doctors and staff to simply “work at the top of their licenses”.

All resources are limited.  Every time we choose to spend a dollar or one minute of time, we choose to forego other options.  “The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume something else; in short, opportunity cost is the value of the next best alternative.” (reference)

It may require a refresher course and a little practice, but most dentists could probably scale and debride.  They could prep an operatory, sanitize equipment, and enter notes.  They’re probably even capable of learning to take a patient payment or reschedule the patient for follow up treatment.  But dentists generally don’t.  Why?  Is it because they’re just snobs or too lazy?  No, it’s because the dentist is the only one in the office who can diagnose, treatment plan, and provide restorative care.  In doing this, the dentist is practicing at the top of his/her license.  He/she may expand the scope of that license by providing implants, root canals, and additional restorative or cosmetic procedures.

Most dentists recognize that it doesn’t make sense for them to clean teeth.  But how many of them stay after work to pay bills, process payroll, and run reports?  They may even get good enough to develop an absolute advantage in their office.  But at what opportunity cost?

After accurately assessing the opportunity cost, the office will realize the dentist does not have a comparative advantage.

Top producing offices not only assure that the dentist is working at the top of his/her license, but will assure that the hygienists, assistants, and other staff members are working at the top of their licenses.  Is your office paying a hygienist to do things an assistant could do?  Are your front desk or office manger personnel working at the top of their licenses?  How many of them are spending time managing bills, running payroll, or shopping eBay for supply bargains while the patient you and your back office team just provided phenomenal service to walks out the door without making a payment or scheduling the treatment plan you just recommended?

What are the best alternatives for your front office?  What if their time was laser-focused on implementing the most effective scheduling systems or explaining and collecting patient payments at time of service or even in advance?  What if they had the training and time to better communicate your professional recommendations in a manner that better educated patients and increased your treatment plan acceptance rate?  Not a pushy attempt to sell a patient something he doesn’t need but operating from the standpoint that your proposal already eliminated that variable by diagnosing and recommending only those treatments that are in the patients’ best long-term interest.  A designated treatment planner should be taught how to assure the patient understands the health benefits of the diagnose, is educated on options to overcome payment or other obstacles.  The patient leaves the office excited about the treatment plan they have just embraced.

Is there opportunity for you and your staff to better operate at the top of your licenses?  Are you missing out on something better by clinging to something lesser?

One way to start improving is by outsourcing business services and freeing up yourself and your staff to maximize their ability to serve your patients and your business.  Consider a qualified systems coach to help implement trainings and systems to assure sustainable growth, improve patient experience, raise employee satisfaction, and increase owners’ return on investment.

What choices will you make this year?  And at what opportunity cost?

The poet Robert Frost must have understood something of economics when he penned his widely popular poem, The Road Not Taken.

“Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could…

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.”

Are you wanting to lead your practice to improved cultural and financial performance?  If so, call SynergizeDental.  We’re capable, experienced, and ready to guide you and your staff in achieving your goals by working and the top of your license!

About SynergizeDental

Our team at SynergizeDental is dedicated to helping independent dental practices thrive in a competitive environment. We know independent dentists can unlock their growth potential as they invest in themselves. They deserve the peace of mind that comes from trusted business support, proven practice management systems, and a team of experts dedicated to their success. 

If you have any questions, please reach out to our team to schedule a free consultation. We also provide free Dental Intel Growth Reports to show exactly where you can save thousands of dollars instantly.