Dental Industry Trends and Financial Tips

The Transcript

Art Wiederman, CPA: Hello everyone and welcome to another edition of The Art of Dental Finance and Management with Art Wiederman, CPA. Welcome to my podcast. For those of you who are first time listeners, my name is Art Wiederman. I'm a dental division director at the CPA firm of Eide Bailly. Our office is in Tustin, California and I am broadcasting from the World Broadcasting Center here in my office here in Laguna Beach, California. And it's a beautiful Monday evening at the end of June here. We're about halfway through the year, if you can believe that. And tonight, I have been holding in a bunch of stuff that I've wanted to talk to you about. Don't have a guest for you tonight.

So we talk about four different topics tonight. We're going to talk about the HHS Provider Relief Fund. And fortunately, it's time to get back on to that portal for many of you. So I'll kind of walk you through those rules. I want to talk about the Employee Retention Tax Credit, but a little bit of a different twist and maybe a bit of a warning for you. Then I want to talk about kind of what I see going on with activity with DSOs approaching my clients.

I'm seeing a lot more activity in our CPA practice, our dental CPA practice than I've seen in the past few years. And I want to just kind of give you some rules of the road about that, at least the way I look at it. And finally, I want to talk. I want to talk about PPOs and the economy a little bit and my opinion about some things you should be doing. So, you know, when I start doing podcasts like this, it's kind of fun for me. I don't have a script. I don't have an agenda. I have an agenda. But I don't have, you know, a list of things I'm reading. I'm not reading from a teleprompter. I'm just kind of talking from the heart.

And I've I have so much enjoyed the three and a half years I've spent with you, and we're going to keep doing this for a while longer or until they take my microphone away, one or the other. But before we get going, a couple of our normal announcements, the please go to our partners at Decisions in Dentistry magazine. And in fact, hopefully sometime in the next 3 to 6 months, we'll have some really cool announcements for you about some things that they're doing. But for right now, they have the best clinical content in dentistry, 140 continuing education classes that you can have at the click of a button at one very reasonable cost. Go to www.DecisionsinDentistry.com.

Be sure if you're looking for a dental CPA, if you are not getting what you need from your CPA. If you're getting a surprise. We just got past April 15th. You get the phone call on April 13th and oh my goodness, you owe $75,000. And we didn't plan for that. Give me a call at my office here in Tustin. 657.279.3243. I shouldn't say here in Tustin as be my offices in Tustin, but you'll get my computer wherever that happens to be that day.

And if you're looking for someone around the country, the Academy Dental CPAs has got your back. 25 CPA firms. We have a wonderful new firm that joined us from the great state of Alabama and met them in our last meeting in Napa. And they're the nicest, nicest folks I can imagine meeting www.ADCPA.org.

And for any of you who are going to be in Orlando, Florida at the National Academy of General Dentistry meeting, I will be at the meeting the 27th and the 28th. The 27th. I'm going to walk around the floor and I'm actually going to go I'm real excited. I'm going to get to go see my really good friend, Deborah Englehart Nash. And if you've never seen Deborah speak on management, first of all, she's one of the funniest human beings I've ever met and one of the most knowledgeable when it comes to managing a dental practice in her. She and her husband, Ross, put on amazing clinical courses in North Carolina. If you ever get a chance to go see them, you should do that also.

And then on the 28th, I'm going to be doing a three hour lecture on metrics. You know, know your practice by the numbers. We're going to talk about the metrics and we're going to talk about how to cut your overhead. When should you think about buying a cad cam and what do we look at in buying supplies? And, you know, what about our active patients? How many of them are coming in and there's software they can help you with all that stuff. So if you're in Orlando, the 27th or 28th. Drop me an email. Drop me a line. I'll be walking around. I'll be wearing a suit, which I haven't done a whole lot in the last two and a half years.

So anyway, so let's get started talking today. Let's get some information out to you. First of all, let's talk about the HHS Provider Relief. Now, for those of you guys that are forgotten, because we haven't really talked about it much lately, the HHS Provider Relief Fund was part of the CARES Act, 175 million I'm sorry, $175 billion of money. That was out of the $3.2 trillion that was there in March when the pandemic hit of 2020. And that went to health care providers, physicians, dentists, hospitals, critical care, nursing units, etc., and dentists, if you will. And so what happened was, was that when they started giving this money out in April, April 10th of 2020, they really didn't know what to do with you guys. They didn't know, well, how do we give dentists money? How much do they need? So in September ish of 2020, they basically went to every dentist or virtually every dentist in America, and they looked up their gross revenues from information that's available to them at the being that they're part of the government. And they gave you 2% of your revenue. So if you were doing $1,000,000 in the prior year, 2019, they gave you 20,000 that you're doing 5 million, maybe 100,000. It was free money and it was really cool. And then they said, well, you know, this money for you, you can apply for it. There's a phase two or phase three and a phase four. And if you had expenses because of COVID to prevent and provide for and protect against COVID or you had lost revenues, we got a bunch more money for you and a lot of you applied for that.

So here's what you need to know. Remember, so most of you filed on the HHS Portal between January 1st and March 31st of 2022, and that was from money that you had received early in 20 2020, basically, I'm sorry, late in 2020, from July one to December 31. So now those of you who received money between January one and June 30 of 2021, write that down, folks. If you got more than $10,000 between January one of 2021 and June 30 of 2021, more than $10,000, you have to go on to the HHS portal. Between July one of 2022. And this podcast, I believe, will be published July 6th of 2022 and September 30th. So you've got three months. July, August and September. If you need our help, let us know. If your accountant can do it, you can do it. It's not rocket science. We don't quite know what the next portal is going to look like because we can't get onto it until July 1st.

So there's a couple different situations you get to look at regarding this HHS money. First of all, if before December 31, 2020, you got that 2% and then maybe you applied for the phase three money, the 2% was phase two. You applied for the phase three. You got all that money in November and December of 2020, you got that money and then you filed your reporting and you had enough lost revenues. Maybe you got 20,000 in the first round and 110,000 the second round, and that's a total of 130. And you had lost revenues. And as I was talking to you guys all through this second quarter of 2020, you might have had 400,000 lost revenues or 200,000 lost revenues. You filed, you covered it. You're done. So if you didn't get any money after December 31 of 2020, you don't have to do anything else. You're done as long as you filed before March 31 of 2021, which you would have had to have done, or you they'd be asking you for the money back. Okay.

So let's say that you then got you know, you did your filing for the money that you received through December 31 of 2021, 2020. I'm sorry. And now you got money in February of 2021, you got $47,000. Well. Now you have to file. If you get more than $10,000 between January one and June 30 of 2021, you get to file. Now, the good news is that if you had carryover lost revenues, so maybe you got $20,000 and then in 2020, but you had 180,000 of lost revenue. The difference between your revenues for, say, the second quarter of 2020 and the second quarter of 2019, 180,000. And you got 20,000 to use 20,000 of that in the second reporting period. And now you get 160,000 that carries over. So that when you have to file for 2021, that money should be there. So when you go on to the portal, we believe that the money that you have in lost revenues that you didn't use for the second reporting period, which would have been ending March 31 of 2021, is when you would have had to file will carry over to this phase three reporting period. We believe that that will be there when you open up your portal. So you know, you need to make sure you file.

If you didn't get more than $10,000 between January one and June 30th of 2021, you don't have to do anything, folks. Be real. I'm going to be really clear with you if you don't file by September 30th. And again, the Department of Health and Human Services right now is telling us that there aren't going to be any extensions. No get out of jail free card. No. Oh, my goodness. My goldfish died. That none of that. If you don't file by September 30th, they're going to ask for that money back. And you don't want to give them that money back. And you're probably going to have to generate some additional information possibly for 2022 revenues. We have to see what this portal looks like. So very, very important that you do this reporting. I would start looking at it as soon as possible. You don't want to go look at this thing on the 28th of September and say, oh, no, I'm going on vacation tomorrow. And I didn't gather what I needed and I don't have time. And I'm going to have to give back $130,000. Please, please, please promise me that you're not going to do that because I will not be happy with you.

I mean, what can I tell you? You want to make sure that you get to keep all of this money that you got and that hopefully you use to mitigate all the problems that you had. So that's the HHS provider relief fund folks. Very, very important. And our team at Eide Bailly is all over this stuff. Tyler Bernier and Ashley Brant Duda are our two gurus of HHS and have been for two years now living this. It's not a dream, folks. It's a nightmare living all of this. I mean, it's for the dentists. It's pretty simple. But for medical practices, hospitals, it is so complex you don't even have one knowing. I'm not going to tell you. Okay. So that's HHS.

So the next thing I want to talk to you about is the ERTC, the gift that keeps on giving. We have done well over 100, maybe we're approaching 125. I don't know. I can remember we keep adding new ones every day, well over $4 million in credits that just my group in Tustin has gotten for probably approaching 125 dental practices. Some of them our clients, some of them are wonderful podcast listeners like yourself. If you think that you had either a 50% reduction in revenues for the second quarter of 2020 compared to 2019, or you had a greater than 20% reduction in revenues for either the fourth quarter of 2020 versus the fourth quarter of 2019 under the lookback rule or any of the first three quarters, not the fourth the three quarters of 2021. So for the first quarter of 2021 versus the first quarter of 2019, if you had a greater than 20% reduction in revenue net of patient refunds and you have to include all of your income, including any HHS money you got in calculating that, then the credit is it's stupid. It's I've gotten six figure credits for dentists on a regular basis. But so if you want to do that you know email me awiederman@EideBailly.com or call 657.279.3243. And we can get you go in send you an assessment form.

But that's not what I really want to talk about. What I want to talk about is the fact that I'm starting to get more and more phone calls and emails from people who are from dentists all over the country who are getting contacted by companies out there. And we're not mentioning any names by companies who are selling ERTC services and who are saying, oh, you know what, you don't have to worry about having that drop in revenues, which is how we've qualified virtually everybody. We can qualify you no problem under the full or partial suspension rules. Now, I'm not going to go deep, deep in the weeds tonight, but I'm just going to give you just some information. So when the government shut down that I'm sure the government did not shut down, when the government recommended when the American Dental Association and the Centers for Disease Control recommended that dentists close their offices on or about March 16th, March 17th of 2020. It was not a federal government order to do so. It was a recommendation. And being that had you not done that, your dental offices would have turned into massive superspreader locations. And it would have been disastrous because on March 16th we didn't have a COVID 19 in a COVID 19 vaccine. We didn't have any tools to fight this. So you guys really didn't have much of a choice but to shut down.

Now, many states and localities and government agencies did issue orders that you needed to shut down for everything except emergency services or shut down completely in California. In Southern California. We didn't have any of those orders that I ever saw in Northern California. We did. The city of San Francisco had nine different orders to shut down. But what I want you to be wary about and the message I'm going to send you today is this there are companies out there who are basically contacting all kinds of business owners, including dentists, and are saying, well, you know, because of the fact that you guys couldn't get PPE and because of the fact that you had to social distance and because of the fact that your business went down, you qualify for the ERTC for every quarter of 2020 and every quarter of 2021, obviously, except for the fourth, because that's not on the table. And we are seeing that and we are hearing that now. I am not going to get into the weeds here because there is a lot of room for interpretation of these rules. There's 20 pages of rules about government shutdown. If you are having trouble sleeping, folks, it's IRS notice 2021 dash 20 pages 24 to 44 are the government shutdown orders.

Now globally big picture there are rules that state that if you were forced to shut down by a government order for the period of the shutdown, you are able to take the credit. There are also rules that talk about that if your main supplier was shut down by a government order, very important by government order. So let's say, for example, you're eligible, let's say for example, and I do not believe this happened, but I'm pretty sure it did. So let's say, for example, that you get your dental supplies from Henry Shein and or Patterson and they are the two big player companies in the country. That's a fact. And they both came out and said, by the way, dentists of America, we have been shut down by the federal government. We can no longer manufacture. We can no longer sell these products. You look at companies like Dentsply and Sirona and all these other companies, they were shut down. You could not get dental supplies. You could not get impression materials. You could not get gloves. You could not get gowns. Now we know how difficult it was, but you found ways to get them. There was no government mandated shutdowns of your suppliers. But you did. When you reopened growth, as you did social distance, you did. Maybe you saw patients in every other treatment room. Maybe you limited on your own patients.

So there's rules that get pretty specific that you can read. But I will tell you this, if you have a company that contacts you or you go to a lecture and they tell you, Oh, doctors, we have an absolute proven solution that you'll qualify for the ERTC for all quarters of 2020. And the wages started, I believe it's March 13th of 2020 through the end of December, and you can qualify for that entire period if you meet the rules and the first three quarters of 2021. I had a dentist call me and he said, Art, I've heard of you. I know you and I have a big practice. I do 5 million a year with my partners and associates. And I've been told that I can get a $600,000 ERTC and does that sound right. And I ran all the numbers for 2020, 2021. And I said, you don't meet the 50%, the 20% test. And I said, well, what are they telling you? Well, they just said that under the other rule, the shutdown rule, that we qualify. I said, Well, did they tell you why? No, no, no. But they said it's, you know, 30% of the credit and we don't have to pay them until we get the money. And I go, Oh, well, that's great. So that's $180,000 fee, which is great work if you can get it. And my recommendation was don't do it because I need documentation.

So I said to them, I said I wouldn't do it. But what you might want to do is go back to the company and tell them to show you specifically in the law, specifically in the guidance from the IRS, where exactly you're entitled to get this $600,000 tax credit. And what was funny about it is when they called the company back, they just didn't have that information is, oh, well, we've done hundreds of these and we're very confident in our method. This is what happened. Now, a couple of things to think about. Again, no names. And there are very, very many reputable companies that are providing this service. So one thing that you do need to know, folks, is that if you go down this road, the IRS rules state that they have five years from the date, I believe it is, from when you file an amended payroll return. Because remember, when you get your ERTC, you have you have to file an amended payroll return. So let's say that you claim it in the first quarter of 2021. That payroll return is due April 30th of 2021. Maybe you file for the WERTC in March of 2022 or July of 2022? They've got five years to audit you.

Now, remember this, folks. Let's say you take that $600,000 credit, you have to add back $600,000 to your income for that year because you can't take a credit and a deduction for the same wages. They're all based on wages. So here's your worst nightmare five years from now, the company that you hired to do this because ERTC is long gone is also long gone. So there's nobody to represent you and the statute of limitations to amend your tax return. Remember, you took a $600,000 deduction for you. I'm sorry. You added back $600,000 to the income and you paid taxes on that. So now four years into this IRS audit, you and says now you didn't qualify. Number one, you need to pay back the $600,000 with interest and penalties and you're going to say, oh, oh, what am I going to do? And you say, But the good news is I can go back and amend my income tax return and take off the addition of the 600,000. Well, if it's after three years from the due date of your tax return, including extensions, the statute will run. And you are I can't say bad words on this, but the term is so well, you will not be able to amend your returns.

So my whole message here for you in this section of my podcast today tonight is that if someone tells you that you qualify under the shutdown rules as a dentist for all of the quarters of 2020 and all of the quarters of 2021, I would be highly suspicious and I would investigate and I would get my advisers maybe, you know, who know what's going on. But we are seeing this more and more because think about it, folks. A dental practice, the you know, many of the dental practices that we work with have revenues of between 500,005 million. Okay. And I would say that most of our clients have somewhere between five and 30 employees, depending on the size of the practice. But imagine if you're a dental practice in 2021 getting 70%. A credit up to 10,000 per quarter and you have 400 employees. The numbers go into the millions. So if you have a $2 million I.R.S., the fee could be 30%. Is what we're seeing out there, that's $600,000 fee and that's a lot of money. And that's why there's people out there doing that. So all I'm saying is, please, please, please be careful. If it sounds too good to be true, it may very well be.

But again, there are rules having to do with full or partial suspension of trade or business operations. There are rules that have to do that. If these government orders, either of you or of your suppliers, cause a more than minimal disruption in your business, which there seem to be defining about 10%, then you could be eligible. But if you're back in 2021 and you're up 20%, which we're seeing a lot of that, I'd just be really careful. Okay, so that's my word for the ERC.

Let's talk a little bit now about. DSOs and DSOs are dental service organizations for maybe some of you who are newer into dentistry. We call this group practices and there are many dental DSOs, large, large, large ones that can mention any names that own hundreds and hundreds of dental offices either across the country or in certain regions of the country. And some of them grow their number of offices by buying offices. Some do it by opening offices. They all have a different business model. So what I am starting to see and what I'm starting to hear, at least here in California and in other parts of the country, too, is that large and small DSOs? Group practices are approaching dentists all over the country, private single doctor offices, and they are looking to buy your office.

Now we've had guests on before, and we will have guests on before the end of the year to talk about exactly what that looks like. And we'll spend the hour giving you all the good, the bad and the ugly. But here's what I want to tell you from a global standpoint, is that selling your dental practice to a dealer, so there is a place for it in certain circumstances. Now, having said that, I am one who believes 150% in the preservation of the private practice of dentistry. But if you are a doctor who doesn't want to manage anymore, and maybe you're getting towards the end of your career and you want to work another two or three years in certain circumstances, depending on the type of practice you have, it may be an option for you. Okay.

But for many of you, for most of you, I want you to think about the following. I want you to think about in general terms. What's going to happen is, is there going to give you a valuation of your business based on what's called EBITDA earnings before income taxes, depreciation and amortization? Okay. EBIDTA. And it's basically the amount of money that your practice earns minus what a reasonable salary would be to you. That's the excess earnings, and they're going to capitalize that. Anywhere between four and eight, nine, ten times. And it's going to be a big number. And they're not going to give you the whole thing up front because they're going to give you equity in another entity that down the road, when they package a bunch of practices up, they're going to go ahead and sell that bunch of practices and hopefully you're going to get a nice big payday. Now it's we're starting to see some of that, but it's still early in the game.

But the other thing you have to remember, doctors, is this. You may not. That is very possible. You may not continue to earn the amount of money that you were earning when you own your own practice. You'll get paid a percentage of your production. It's you know, you're probably going to have total control over your clinical dentistry, but it depends on the organization you sell to. If you sell to a very large organization, then maybe you won't have the control. Maybe they will tell you, we would like you to buy from this dental supply company. We'd like you to use these kinds of impression material. We'd like you to use, you know. Whatever it is, these gloves, because they're about saving money and making money and growing the bottom line, because the more they can grow your bottom line, the more the next sale is going to be. So I think that you need to be thinking seriously if you are younger, because I'm getting doctors in their thirties and forties and early fifties who have ten, 20, 25 years left who are saying, gee, they maybe I, I want to do this and I want you to think about, you know, number one, you're very happy right now running your own business, calling your own shots.

You have a nice little family of six, eight, ten people in your office. You love seeing your patients. And yeah, you got to manage and yeah, you got to do HR and yeah, you got to market all this stuff. But I want you to think seriously as to whether long term this is the best result for you and for your family and whether you're going to be happy getting up and going to work every single day. Now, many of these organizations have lots and lots of smart people who are going to help make more money. And in many cases, it could work out financially. But the mix here is giving up your autonomy to an unknown group. Maybe you've talked to some other doctors who have done it and maybe they're very happy and it may very well be. Are you going to be able to walk into your office and practice dentistry the way you dreamed of when you were in dental school? And if the answer is yes and it checks all the boxes, maybe it's something you'll look at.

I don't ever want to say no. You should absolutely never do this, because there are always situations where it makes sense for you to do this. I mean, you know, maybe you're having real trouble with profitability and maybe you are having some issues in, you know, managing people. And you're just really every night you come home and you're stressed and you want some help. Maybe this is the right thing for you. Again, everybody is different every day. So deal is different. And at the end of the day, as I always have said in the three and a half years that I've done this podcast. My life is a math problem.

So there's two parts to deciding if you're going to sell to a DSO or a large group practice. Number one is financial. We have to figure out, number one, how much money are you going to get today? Number two, how much money are you leaving on the table? Most of these groups will give you 60 to 80%. And again, I don't want to get. Now, if you are running a DSO, don't send me an email and say, Art, you're lying. We give 90%. I mean, this is what I'm saying, 60 to 80%. So if they value your practice at $2 million, you might get one point to 1.4 million. You're going to get equity in a we I call it the mothership where you're going to own equity. And down the road, if there's another exit event or some sort of an equity event, you would get another amount of money. Okay. And then you're going to get paid a percentage of your production and you have to take a look at that number compared to what you're making now. And you have to look at all the things that get paid through your business. You have to look at the, as we call them, business all expenses. Folks are clients who had business expenses. They actually had an account that was called business combination of business and personal.

So that might be your trips to Home Depot or Costco or Target or Amazon purchases. I can't I my record is five pages of Amazon purchases on a general ledger. I mean, so, so those are things that you're not going to be able to do anymore. The trips, the trips to Hawaii, the sea trips to the Cayman Islands, I mean, all those things you may not be able to do, your car. And again, it depends on the deal, but these are all things that you need to factor in that your practice is paying for and that now you're going to have to pay for out of 30 or 35% of production. Does that work for you? Does the math work? What about a retirement plan? You know what? If you're funding a defined benefit plan and you're on your way to retirement, can you continue to do that? These are all the things, folks, that you need to be looking at and thinking about.

And if you're not working with a dental CPA and I'm sorry, this is an advertisement. That's my podcast and do what I want. If you're not working with a dental CPA who has run into this and you're approached by this, you need to hire one, at least for the conversation. You know, we're very conversant in it at Eide Bailly, we work with over a thousand dentists in our firm. In addition to that, you have 24 other firms in the Academy of Dental CPAs work with over 10,000 dentists. All these amazing men and women know how to, you know, look at these. I know here at Eide Bailly, Scott Haberman in Fort Collins, Colorado, does a lot of work with DSOs. So it's a matter of you got to get the advice, you got to run the numbers and have a total picture. Because, folks, once you do this, you can't undo this anymore. It's really, really a big life decision. And you know, you do not look at the man behind the curtain if you watched The Wizard of Oz. I haven't watched that movie in a long time, but I do remember that line and it was one of the we used to watch it annually every year, which I guess is every year. Annually. Do not look at the man behind the curtain, so don't look at the all the facts behind this purchase.

And of course, they're going to paint the best picture of this. And, you know, you get to control your own clinical dentistry and you get to do what you want. But once you sign on the dotted line, folks, you got to read the paperwork. And there's going to be a voluminous. Remember I told you I don't do over two syllables voluminous documents. You must read them. You must have your advisers read them. If there is an employment manual, you will become an employee. You must read that and see what the rules of the knife fight are. As my good friend and mentor, Dr. Phil Potter has always taught me. What are the rules of the knife fight? So promise me that you're going to spend some money on we CPAs and attorneys so that you go into this with an open mind and remember one more thing. Do not, I repeat, do not ever, ever, ever let anyone pressure you that you need to do this? Well, we already have three other practices identified in the city of ABC, California. And, you know, if you don't do this now, you'll not get another chance.

Please, please remember that in any business negotiation, you have to look at what your leverage is and your leverage as doctors as you don't have to sell your practice. It may be the right thing for you to do at the time of life that you are at, but do not feel inclined that you are forced to do this. I would hope that none of you are in that situation. So that's the message I want to say is, look at, you know, when you peel the onion back, what does it look like on the surface? It looks like a really pretty onion. But when you peel it back, is it the right thing for you to do and talk to as many people as you can find who have done this? I mean, you know, it's just it's just something that you need to do.

So. So the last thing I want to talk to you about today. Is a little bit about the economy and people this is Art rambling on about things that he's passionate about. And again, I want to thank you all for being such a wonderful, wonderful audience over three and a half years. I get. I mean, I was I was I was just humbled to see the convention California Dental Association Convention, where I lectured and we had a booth and so many doctors came. Oh, Art, I listen to your podcasts every week, and it's really good information. And by the way, before I go into my last topic, I want to let you know that we're going to have we're going to have some in an interview coming up shortly with a national company that's really going to be able to help you find dental team members. And I'm really excited about that. I'll leave that as a. I think in TV they call that a teaser. So we've got that we're going to be talking to. I've got some other great interviews coming up I've got for the first time in three and a half years.

One of my good friends is a dental contractor. We're going to talk about what is what is building out or expanding an office look like. What are all the things that you need to know. I've also got my very good friend Jennifer Tyson is going to be coming up as an interview. And, you know, I said Jennifer is the I don't remember her exact title. But I've known Jennifer for 20 years, and she is just one of the most wonderful human beings that I know. And I said so. So, Jennifer, what do you want to talk about? She says, I want to talk about maintaining the private fee for service practice of dentistry. So that's what I'm going to do, going to talk about that. And so I got a lot of good interviews, a lot more coming up that I'm very excited about as we go. So please keep listening. Please tell all your friends about the podcast. They can subscribe on Apple or Spotify or all the places that my two kids would be able to tell you about that I don't know about on the on the web to download podcasts.

So the last thing I want to talk about before we bid adieu tonight, other than the fact that I think I don't know if I mentioned this before, I got as close to a hole in one as I've ever gotten, nine inches away on a 200 yard hole. And I'm really working hard on my golf game. So every time I hit a bad shot, I go, okay, one year from now it'll be better, it'll be better, it'll be better. And I'm also working on my fly fishing. I went in early June. I went and spent three days with my dear, dear friend, Dr. Bob Frazier. If you ever get a chance to hear Dr. Bob Frazier speak on emotional intelligence and he does applied strategic planning. Bob Frazier is a gift to the dental profession. I put him in the same category as Peter Dawson, Gordon Christianson, people like that. John Joyce. I mean, Dr. Frazier is just an amazing mentor of human beings and one of the smartest guys I've ever known. So he does a fly fishing trip. We did it at a place called Bermejo Ranch in New Mexico, and I caught a whole bunch of fish. And second day, they were jumping up, you know, four or five times before they came in the net. We did have several elders, long distance releases. And the definition of a long distance release for those of you who are not fly fisherman are basically the fish chose to, you know, visit the hook into the hook, if you will, but decided that they didn't really want to make it from the hook to the net. So they got off the hook. So we had some of those, as is typical. So anyway, so it got a lot of stuff, a lot of fun stuff going on.

Again, I hope that any of you come to the AGD meeting in July. Love to see you, but I want to talk about the economy in the papers and I'm preparing for these lectures that I'm doing it. It's really great. I love to prepare for lectures because I learned a lot of stuff when you put a lecture together for those of you who do that. And so we know that right now we have an economy where we have high inflation. The inflation rate, we believe, is going to, from what everybody says, is going to come down a bit before the end of 2022. But we are looking at annualized inflation of somewhere in the neighborhood of about 8%, which is unheard of in the last, I don't know, 20, 30 years. We have interest rates have gone up. And what the government has done is the government is trying to cool the economy down. And how are they doing that if they raise the federal funds interest rate, which is the rate that banks borrow between each other? If they raise the federal funds interest rate, which again, they've done it, but remember, two or three times they're going to do it. Maybe another one or two times is now at, I believe, 1.75%. So as they raise interest rates, remember when the good old days, like 6 to 9 months ago, that you could go get a home mortgage for 2.5 or 3%? Home mortgages are now in the neighborhood of 6%. Car loans are up, all the mortgages are up, all the interest rates are up. So the idea of what they did was they thought by raising interest rates, you were going to make money more expensive. So people are less likely to go out and buy houses and less likely to go buy cars and less likely to run up credit card bills because credit card interest rates are now going to run up to, I don't know, 25, 30% the ridiculous. So the idea is we need to cool the economy down, drop the demand down. So when we drop demand down, prices come down. Because when demand is high, we have supply chain issues. We have a war in Ukraine. We have all these things going on that are forcing prices to go up.

You know, cars can't get computer chips, so they're having trouble making cars. I mean, it's a domino effect. So now let's apply this to your dental practice. Right. Prices are going up. Interest rates are going up. People are your costs are going up. I guarantee you that if you go to sign a new lease, they're going to raise your rents even though it's commercial property, they're going to raise your rates. Employees need more money to live on. I had one doctor in May. One of our clients came by and he said by the CDA and he said, Art, I had an employee who's a key employee. I can't live without this employee asked me for a raise from 26 to $40 an hour. And that's what's going on out there, folks. So your costs are going up. Now, in most businesses, when your costs go up, what happens? You raise your prices. But what if you're a dental practice where 60 or 70% of your practice is based on contracted peoples? In other words, you are contracted with an insurance company and 60 to 70% of your patients. You can't raise their fees.

Now, let me ask you a rhetorical question. Let's say you call the insurance company up. It doesn't matter what insurance company it is and you say, hey, insurance company, you know, my costs are going up, my employees want raises, my rent is going up, my PPE I had to do because of this pandemic, my supplies are going up. Everything is going up. You need to give me an increase in reimbursements because I need it because I'm going to I'm going to make less money. And they're going to say, well, that sucks for you. They're not raising that. They're trying to find ways to reduce your reimbursements. That's what they want to do. They want to reduce your reimbursements and they want to raise the premiums. They're charging businesses and or individuals to buy the insurance. So what does this mean, folks? And what is my point? My point is, is that it is now more important than ever to consider changing your relationship with insurance companies. And my good friend, Gary Takacs, who is another iconic person in dentistry, he does a podcast. It's called the and he has a whole organization. It's called RIDA Reduce Insurance Dependency Academy. He does a podcast on how to reduce your dependency on insurance.

So I will tell you that I'm not telling you to listen to this podcast and to go into your office tomorrow. And to basically go out of network with every people you're in, that's professional suicide. There are right ways to do this. You need to look at these relationships you have with these people. You need to look at the discounts you're giving. You need to look at the number of procedures you're doing all right. And you need to determine, is it appropriate to go out of network with insurance company X, Y, Z? Because if you do, the math is very simple. If you do it right based on everything that I've heard and that I know, you should be able to retain anywhere between 70 and 80% of the patients on that plan. Now, that's not going to be the case in every single situation, and it's scary. But you start with your plan that's got the deepest discounts. All right. Because think about it this way. If you are giving what is the average discount on your UCR fees, which is somewhere between 38 and 42% on the average. Some of you are giving more. Some of you not so much. But if you have an average of 40%, let's say, of a discount and you lose, okay. Let's say you lose. 40% of your patients. All right. So you're giving a 40% discount and 40% of your patients leave your practice. You're going to have the same revenues because those, you know, remaining 60% are now going to pay full fee. You'll help them with their insurance, but they're going to pay full fee and you'll be working 40% less. It's a very simple math problem. I'm going to have that in my lecture in Orlando. So we need to be thinking about the relationship we have. We need to be looking about the fact that your bottom line is being squeezed. Your answer might be to me. Well, I'll just work harder. I'll just see more patients.

That's not what I want you to do. I want you to spend more time with your patients. I want you to help them with their total health. I want you to spend time explaining to them the, you know, the urgency of doing this treatment. The risks. You know, the links between periodontal disease and all kinds of afflictions. I had recorded a podcast, came out about a month ago with my new best friend, Dr. Ed Zuckerberg, who is Mark Zuckerberg's, the founder of Facebook. His dad was an incredible dentist, and he was talking to me about the risks and the links between periodontal disease and Alzheimer's disease. And he was showing me some Facebook posts and I mean, it's unbelievable, folks. So we need to be educating our patients and we need to be able to make a fair profit. You need to be able to make a fair profit and not let another entity who doesn't understand what you do to tell you how much you can charge. And the most efficient way to do that is to build world class faith and trust that your patients have world class faith and trust in you. So that when you when you explain to them, if you make the decision to go out of network with insurance, if you explain to them why you're making the decision, you're making the decision because you want to keep them safe. You're making the decision because you cannot provide them the Ritz-Carlton quality of care.

And this is not being flip here. You can't provide them the quality of care being paid 60% of what your usual and customary fees are in the area. You can't do it. And. The amount of money that the patient is going to have to pay out of pocket as compared to being in network versus out of network in many cases is not, as my late mother used to say, the national debt. Right. Bye bye. My late mother, Cynthia, would have turned 92 a couple weeks ago, and she had these great sayings she would go, Arthur. I am going to you know, you're out of the well, except I'm leaving you my debts. And she would always tell me that if I didn't like something, she said I should go bang my head against the wall. So I started doing that when I was a pre-teen, which may explain a lot of things in my adult life, which we probably shouldn't get into today. I'm just kidding, folks. But anyway, the point is, is that we need to look at the math. We need to talk to our team. We need to sell our team on this. And I would assure you that you're going to have team members who are going to be scared. Well, we're going to lose all our patience. No, you're not. There are many, many officers out there that have done this.

Gary talks about the office, and I have no problem talking about this because he talks about this on his podcast all the time. Gary owns, in conjunction with another dentist, I believe, a very successful dental office in the Phoenix, Arizona, area. And when he bought that practice. He had it was contracted with 33 PPOs. Over a period, I believe, he said over three years he got rid of every single one of them. And the average write off was 38% and he retained 84% of the patients in that practice. Do you think his profits went through the roof? Yes, they did. So if you're going to choose to change your relationship with insurance companies, what you need to do is you need to work with a professional consultant. There are consultants out there who this is what they do. They basically work with you to put together a plan. And it's not something you do in a couple of days or a couple of weeks. It's a year long project of talking to your patients and building the trust and gearing them up for what's coming so that when you do decide, if you decide to pull the trigger and go out of network, then what will happen is, is they'll be ready for it.

And the insurance companies will no longer control your practice. You'll make more money. And I will tell you that I have many clients who have changed their relationships with insurance companies, and they are happier. They're making more money. And their patients understand the value of going to their office, the fact that their total health is taken care of. I've talked on this podcast til I'm blue in the face about the fact that it was a dentist who diagnosed my sleep apnea and probably saved my life. And you as dentists. If your hygienists are not. You know, doing the work necessary to look at preventing periodontal disease, your patients are at risk. So these are the things, again, doctors and I'm a broken record. You are not just fixing teeth. You are about a better life. Better health, better quality of life. Better job, better relationship, better self-esteem. And if you build the relationships with your patients that you should be doing. If you choose to make this choice to change the relationship you have with one or more insurance companies that you have a relationship with, it will be a lot easier than if your patients are thinking, Wait a minute, what is he pull in the area. What's going on? I'm going somewhere else. And there will be patients who do that. Okay. And remember, that's why there are different types of dental practices in different types of business.

And you have to decide what is it that you want to be? Do you want to be the discount dentist on the corner who takes every single plan and is on roller skates and has the high end, is doing 15, 20 minute prophies? If that? Or do you want to be the doctor who is fee for service? Who is spending a lot of time with their patients, who is educating their patients, who's building the trust in those patients so that when you present that treatment plan to show them how it's going to change their lives for the better, instead of saying, well, I don't know, but I can afford it, they're going to say, Doc, if this is what you say, this sounds great, let's get it done. And we have lots of clients who do that and it takes time and it takes effort and it takes some coaching because, you know, they don't teach this stuff in dental school.

So that's my word for today. And I hope that today was helpful to you. Maybe a couple of controversial subjects. I don't know. I'm not the most controversial guy out there, but I think these are things that you should be thinking about in your practice. And if you have any questions about any of this stuff, shoot me an email. awiederman@EideBailly.com. Phone number 657.279.3243. Be happy to help you. That's what I'm here for.

I've spent 38 years working with wonderful, wonderful dentists in the dental profession. Again, I always say, if you had told me coming out of Long Beach State in 1980 that I was going to be a dental CPA, I would have said there is such a thing is that? Well, that's what I've spent my career is serving the dental profession. I will say it again. I will say it until they drag me off this microphone. Dentists are some of the most wonderful, caring human beings I have ever met. I am privileged to call many of them my really good friends through the work that I do. The people that we work with in the professions of serving your wonderful profession.

The attorneys, the accountants, the consultants, the bankers. I mean, I can't tell you what a wonderful, wonderful group of people and how everybody goes to sleep and wakes up at 3:00 in the morning worrying about Dr. A or Dr. B or Dr. C and how are we going to help him or her get to their personal goals or help get their bank loan or help them with a legal issue? I mean, it's just it's amazing. So I'm honored and humbled and privileged to have served the dental profession for my entire professional career. And it's just it's a joy. It's a joy working with all of you. And again, dentists are some of the nicest human beings I have ever met.

And it's just really fun to be able to get on a stage or get on this platform and talk to thousands of you at a time. It's wonderful. So, all right, folks. With that said, I want to remind you again about our wonderful partner, Decisions in Dentistry magazine. www.DecisionsinDentistry.com. I'm sorry. 140 wonderful CE classes available for one very, very reasonable price.

If you need a dental CPA that's what I'm here for. That's what my team is there for. That's what the Academy of Dental CPAs are there for. www.ADCPA.org. And just promise me that you'll start working on your practice instead of just in your practice. Work on it. Work on the numbers. Work on the metrics. Work with your team. Have regular meetings. Hire the right coaches to help you. Because coaches, dental coaches and many of them have been on this podcast and many more will be on this podcast can really make a difference in your dental practice.

Well, you know what, guys? It's about 10:30 here in the evening here in Southern California. And I'm doing this in the evening because let's see, the Stanley Cup finals ended last night. The NBA finals ended about a week ago. The College World Series ended over the weekend. So other than baseball and got a lot of that to watch coming up, this was a good night to do this. So I want to wish all of you well. I want to wish you all good health. I want to wish you safe travels if you're going to travel this summer. We've all been cooped up for the last two and a half years and it's nice to get out and go on a trip and get on an airplane and go to a resort or go to a beach or go to a fly fishing lake or river, you know, whatever whatever it is that you do. I always say that I have I have three happy places my hammock in my backyard, a golf course and on the river or on a lake with a fly fishing rod.

So with that said, folks, that will be about it for this episode of The Art of Dental Finance and Management with Art Wiederman, CPA. Please tell your friends about our podcast. Please keep listening and we'll see you next time.