2020 Year in Review
2020 Year in Review - How Did Your Practice Fare Compared to the Industry?
2020 was an unprecedented year for businesses and Gaidge has provided a detailed look into how orthodontic practices and the industry performed amid the pandemic.
Gaidge is the industry leader in providing practices with automated performance analytics, business intelligence, benchmarks, aggregated comparison data and operational consulting to facilitate efficiency, profitability and practice growth.
Through aggregated data analysis across the US, there are a number of metrics that provide us with a readout of how COVID-19 impacted the industry this past year.
Pre-pandemic (Q1 2020)
At Gaidge, we regularly recommend practice owners look at five key metrics to determine practice and overall industry health: Net Production, Net Collection, New Patient Calls, Exams and Starts. For the first two months of 2020, the industry average for all U.S. practices across each one of these metrics was flat with a range of +/-1% compared to 2019. When we experienced the industry shutdown on March 16, most offices lost the final 12 days of production in March/Q1. The industry was hit with declines across all metrics as expected. The U.S. averages compared to 2019 across each of the five key metrics were reported: Net Production (-6.4%), Net Collection (0.3%), New Patient Calls (-8.4%), Exams (-11.6%), and Starts (-9.3%). The Net Collection number remaining positive tells us that existing patients were still able to pay, though we know even in the early stages of the pandemic many people were impacted economically.
Post Shutdown (June-December 2020)
Orthodontics as an industry has been relatively resilient. It has also been inspiring to see how orthodontists have adapted to new ways of working, leveraging their data to ensure they were following the numbers and using their previous year's comparisons to benchmark where they should be, so they ultimately could make plans to stay healthy, get creative, and acclimate to the changing environment. Often we rely on quarterly data but with April being completely shutdown and May only having some practices across the country reopening, this period created a backlog for many practices leading to a lot of anomalies as we compare the same periods to any previous year. By June, the majority of practices had returned to seeing patients with new covid safety protocols in place and it gave us the opportunity to look at how the year rebounded by looking at the last 7 months of data (June-December). We were somewhat surprised to see solid growth trends across the key metrics: Net Production (+12.0%), Net Collection (+1.4%), New Patient Calls (+3.7%), Exams (3.1%), Adult exams (+14.7%), Starts (+10.4%), and aligner starts (+21.1%).
Net Collections being positive instead of negative is very meaningful. It's a lower percentage because we are still factoring in 6 to 10 weeks of lost production March-May in the Jun-Dec number. Several factors might be contributing to those significant increases in the adult exam and aligner category such as young, healthy adults having expendable income and spending more time online shopping, pent-up demand following the reopening, DTC companies raising awareness, and speculation about the impact of adults working from home and spending hours every week looking at themselves in Zoom meetings.
Pent up demand from patients that already called and came in from an exam prior to the pandemic, some families that remained employed have additional discretionary money to spend since things like travel and other leisure events have been limited during the pandemic, and as mentioned above the DTC online and "Zoom effect."
2 Areas That Declined in 2020
Drilling deeper into the data vs 2019 (comparing June through December), there are two metrics that are down significantly versus 2019: child exams (-5.2%) and the ratio of exams to new patient calls, (2020 averaging 83% vs the target benchmark of 90%).
The child exams decline could be explained by considering that some parents may have had safety concerns about starting their kids in treatment or perhaps may have been directly impacted financially or simply worried about the pandemic's uncertain impact on the economy.
When we examine the ratio of exams to new patient calls, ideally, the drop-off should not fall below 90%. As you approach 80%, those numbers warrant close attention from practice owners. This means for every 100 people that call, only 80 are actually coming in. It is not clear what is causing the issue, but it may be that some prospects decide against scheduling consultations due to safety concerns or it could be a number of other factors within the office, including schedule availability due to backlogs. We advise owners to make certain that everyone who calls is informed about how infection control is being addressed in your practice and explore options for virtual consultations should prospective patients want to minimize in-person visits.
Case Conversion Saw a Notable Increase
The Case Conversion average jumped by ~4.5 points to 70%. There are a couple of drivers behind the increase in conversion rates. Many orthodontists have been incorporating virtual tools into their workflows and reporting that patients responded well to a virtual appointment option, for reasons of both safety and convenience. It serves as a pre-screening of sorts and opens up schedules to see more people. Plus, at the discretion of the practice, this can allow for extended hours for virtual where a full staff is not required. Also, since many practices reopened, it has been reported that people are less likely to be 'shopping' at the consultation stage. Prospective patients are doing their research online in advance and may already be inclined to choose the practice with which they make a consultation appointment. Finally, during the pandemic the data tells us that those who pursue any type of consultation may be more likely to be very serious about starting treatment.
2020 Full Year-in-Rear-View
We are certainly better for what we learned in 2020, but by and large, most practices experienced some professional setbacks. Those that experienced flat-small practice growth were the successful outliers who pursued strategies to counteract the impact of the shutdown period. With the full twelve months of data across the five key metrics, the final reports are as follows: Net Production (-7.6%), Net Collection (-5.6%), New Patient Calls (-13.1%), Exams (-13.1%), and Starts (-8.4%). Practices saw the greatest challenges in getting more prospects in to their offices during the time of the pandemic but were quite fortunate to see smaller declines in collections, evidence that the majority of patients in treatment were also fortunate enough to be able to continue as planned.
How Should Practices Tackle 2021
At Gaidge, we often discuss the basic business model for orthodontics with what we term the Consumer Conversion Waterfall. This measures how effectively an orthodontic practice is taking a new patient call and converting it to a start, which drives production. As practices think about their businesses using this basic model, it is imperative to begin with a strong, targeted, tactical marketing plan to drive patients to call the practice. Once they have initiated contact, it is critical to monitor the patient experience through the exam. The new call to start ratio is where we see many patients falling out of the sales funnel, costing practices hundreds of thousands of dollars, impacting efficiency and practice growth. Monitoring new patient calls to exams to starts is the backbone of any orthodontic practice, but every business should be looking at their critical KPIs as compared to prior year and also planning for the coming year. Using our five key metrics, practices need to understand how 2020 has impacted them and of course do their annual review with their accountant to evaluate the health of the business. Importantly, practices should create a growth (or sustainment) plan for their business in 2021 and a mechanism for regular review to determine the success of the plan or if there is a need to pivot. Whether that includes the automation of Gaidge or another method, we advise creating a set of metrics to strive for and bringing the team in to align on monthly, quarterly, and annual goals.
Since 2010, Gaidge has been a pioneer in analyzing practice performance using data science to create actionable, business insights for orthodontists. We are uniquely positioned to make data meaningful and easy to leverage so that our clients can transform their practices into smarter, happier and more profitable businesses. 50+ years of orthodontic expertise, combined with our love for the people in this industry, has driven us to answer the need for metrics and analysis, educate clients on their opportunities, and advance us towards a more data-driven, efficiency-oriented future of orthodontistry.