Summer Blues or a Bursting Bubble? What Business Intelligence is telling us about the 2022 Market

August 26, 2022
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At Gaidge we recommend practice owners regularly and closely monitor five key metrics, which provide critical insights into the marketplace and your practice's performance. Net production, net collections, new patient calls, exams and starts. There are several other important metrics such as case acceptance, overhead percentages and more, but as a starting point, this is the lifeblood for every orthodontic practice. Further, it's important to not only take in these data points for the business, but the best way to understand your performance is to create context comparing to a prior period, marketplace, and if possible, businesses of similar type and size.

Q2 2022 compared to Q2 2021 took a hard hit due to the pandemic boom we saw last summer. In 2021 we experienced the joy of growth that we felt we were due, in some ways, following a tumultuous 2020. The stock market and media has pounced on the newsworthy nuggets and economists have debated if we are truly in a recession, despite achieving the definition of recession with two consecutive declining quarters. The reason for the debate is greatly due to the anomalies in the market we've experienced the last two and half years and it's valid to broaden our perspective to level our perceptions about the conditions we are facing. In this analysis we will compare January-June 2021 and 2022, while still including the market abnormalities, longer periods normalize spikes and help us better determine what our actions should be. In our comparison to 2021, we saw some surprising revelations in the data.

To start off, let's examine some key, aggregated averages across the US for 2022 through Q2. Net production was down -5.8% YOY when comparing Jan-Jun 2021 to Jan-Jun 2022. Net collection averages remained healthy as expected up 1.7% YOY with the influx of patients who started in 2021, still part of the active paying patient population.

However, the aggregated data revealed some important declines that practices should also analyze for themselves. Referrals were down -3.3%, new patient calls were down -7.7% across the country, and total starts are down -7.5%. The top of the marketing funnel through the new patient to close funnel presents an urgent problem that most practices are feeling. If practice owners aren't realizing and acting on this information yet, they must dig in and determine the right strategies to execute as quickly as possible. Adult aligner starts led the decline, down -8.9%. Adult starts that hit an unprecedented 20% + growth from July 2020-Dec 2021 following the pandemic shut down, have now swung nearly 30 points.

To begin to answer such a significant swing, we must first look to the current economic conditions impacted greatly by inflation and the rescue stimulus, now long gone. In addition to the economy, the global political concerns as well as the unpredictability of ongoing COVID, consumers are holding on to their cash and reprioritizing where they are willing to spend. Parents are going to prioritize their kids' braces over their own every time. Lastly, while the Travel and Leisure industry was hit hard while we were celebrating the post pandemic boom, now they are reaping many of the rewards of current consumer choices. However, perhaps there is more to consider. Has the "zoom effect" credited for the unprecedented adult starts growth run its course for the time being? Have DTC companies tightened budgets as well, limiting awareness? Has your practice pulled back on marketing or even hesitated in recommending the desired aligner treatment due to out of pocket costs? Have you had turnover in the practice and has this, or another factor, impacted how your new patient pipeline is being managed?

Beyond the growth pipeline and the traditional metrics we consistently report on, the data uncovered something we did not expect. Practices are experiencing record high no shows, averaging +10.1% over last year during the same period. Looking back to last year, we still had a fair amount of COVID related absences and cancellations to manage, so the increase is rather alarming. In addition, the appointments scheduled increased by +2.5%. Declines in new patient calls and exams should also result in less appointments. The increase is likely due to having to reschedule no shows, but it also could be a factor of seeing patients more frequently, a metric that should be analyzed as it represents lost opportunity cost and added overhead. While growth and sustainability is the headline, the inefficiency inside the practice is a problem, that if not addressed, ends up sabotaging effort, resources and dollars you've put into building growth.

Returning to the issue of our new patient funnel, the best approach is to determine where we can take action with the highest probability of effecting change. None of us nor even the collective whole of the industry can directly impact the rate of inflation nor accelerate the actions to return the market to normal, so what can individual business owners do in the meantime to recover, sustain or even ensure ongoing growth for businesses? The data and the guidance we are following tells us growth is slowing and inflation is expected to be a factor well into 2023, though it is softening. This means two things, the first might be perceived as counter intuitive.

Invest in Marketing

Analyze your marketing activities and begin to understand where your practice is yielding the greatest number of leads. Do not pull back on marketing but don't throw money at it without being strategic and leveraging an ROI (return on investment) analysis to make decisions on where to invest your marketing and PR resources. Determine your list of activities, spending per activity as well as time investment. We recommend bucketing your spending in at least three categories, and the ROI analysis can be automated using Gaidge software. At a minimum you want to know what your digital spend is such as social and google advertising, your external marketing spend such as billboards, print and promotional events and your internal, such as patient rewards, referral bonuses, etc. Once you know where your money is going, next determine the number of patients calls to starts that can be attributed to each activity. This may sound easier said than done, but start by pulling historical spending and making estimates for each major activity. From there, create a system to measure lead sources using your practice management software.

  • Often PR related activities take more time than money, helping when cash is in short supply, and can provide a great community connection that turns into both short- and long-term prospects.
  • Agencies can feel like a big black hole of spending at times but consider the cost per lead and the legwork you or your team have done to onboard an agency. Without data you don't know your yield. Be thoughtful about cutting this part of your spending as you will likely determine a need to return at some future point. By then you may have lost momentum and certainly will be starting over learning about your practice, message, goals and so on.
  • Don't abandon digital advertising without serious thought. Freshen up your message and reinvigorate interest with new promotions or ideas. Work to keep your practice top of mind - a long game strategy that is an effective in a slowing market. While consumers are guarding spending you want to be first when consideration kicks in to increase the chance of a call to your office. This requires commitment and time, knowing the return is coming at a future point and not to expect immediate results in most cases.
  • It cannot be taken for granted that your referral network of dentists is driving the most leads. Practices unfortunately have a habit of putting the referring dentist in the lead source field within their practice management software, but leading indicators are showing us less and less referrals are actually coming in from our affiliates. Train staff to ensure lead sources are accurately entered into your software separately from the patient's dentist, and review your reports regularly.

Manage Your Sales Funnel

We are part of retail healthcare and the lines between need and want get blurrier depending on market conditions. We are in the business of improving lives and we live and work in one of the best industries that is not only full of joy and objectively financially stable, but also pretty competitive in most places. When the marketing work has done its job and the phone rings, the email or text comes in, it's our opportunity to lose. Managing the patient experience from the first interaction all the way though treatment has been a popular topic for good reason; it's a hard job worthy of attention, discussion and continuous improvement efforts. Our front desk, scheduling coordinators, new patient coordinators and TCs are the front line of sales in the office and there are a multitude of tasks that must be managed. Having the right people in these roles with proper training and tools is essential in making the most of the investment you've put in to sustaining and growing your practice.

  • Prospective patients are consistently seeking excellence, expediency and high-quality care. The person answering calls carries a meaningful responsibility of engaging prospects and helping them realize the unique value the practice offers. While information gathering is an important component of this, connecting with the patient and understanding their needs should be the principal goal.
  • Keeping track of patients begins in your practice management system, but the activities that are not operational can get lost. Seek easy to use tools like Gaidge's New Patient Tracker to manage your new patient forms, follow up actions and reminders for new, observation and pending patients. Reduce no shows by being proactive and save time with a clear to do list. Use the payment presentation features to customize payment options that ease financial concerns with the option of remote, digital acceptance that is proven to increase closure rates.
  • Systems and software that enhance the patient experience, increases efficiency and visibility across the entire practice. Ask yourself if your current system meets your needs and explore the options based on your growth goals. The more consistency you have in your processes the easier it is to manage daily as well as potential turnover.

From growth to efficiency, business owners must look to business intelligence, leveraging factual data points and insights that can be harvested to get the full picture of their performance. In the US we are subject to the influence of a culture that promotes constant and unwavering growth. It's beautiful in its way but it can also create a sense of doom without all the facts. For example, when we compare 2022 to pre-pandemic levels, we are still growing. Having access to business intelligence level sets facts from rhetoric. Data mining is time consuming and unreliable for anyone who is not a data analyst. Businesses of all sizes benefit from visualizations that only software automation can provide. Gaidge is a business intelligence platform that provides over 80 metrics, practice comparisons and benchmark guidance to help orthodontists run their businesses better.