With the Q2 2022 complete, here’s what the data is saying about orthodontic practice performance in the first half of 2022.
By Suzanne Wilson, MBA
The data is in for the first half of 2022, and it is revealing. When it comes to several key performance indicators (KPIs), orthodontic practices are falling short of 2021, and the data raises some red flags that need to be addressed.
At Gaidge, the business analytics provider, where I am chief operating officer, we regularly recommend that practice owners closely monitor five key metrics: net production, net collections, new patient calls, exams, and starts. Of course, there are several other important metrics, including case acceptance, overhead percentages, and more, but as a starting point, these five are the lifeblood of every orthodontic practice. They provide critical insights into not only your practice’s performance, but also the marketplace.
When compared to Q2 2021, Q2 2022 took a hit. First, the pandemic boom practices experienced in the summer of 2021 has since disappeared. Second, there’s the question of whether the U.S. economy is in recession. While the U.S. economy meets the textbook definition of recession with two consecutive quarters in decline, economists are debating the issue. In large part, the debate focuses on anomalies in the market that have been present since the pandemic began and how they should be accounted for. The reason I want to mention these two factors as we look at Q2 2022 data is so that orthodontic practice owners think more globally when analyzing the data.
Moreover, in this analysis, we want to look at a longer period, January through June for both 2022 and 2021. Doing so allows us not only to normalize spikes but also to better formulate an action plan.
Year-over-year 2022 practice growth down over 2021
To start off, let’s examine some key, aggregated averages across the United States for 2022 through Q2 for orthodontic practices. The data shows net productions were 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.
The aggregated 2022 data, however, revealed some important downward trends in the market that orthodontic practices should keep in mind as they look at their individual practice’s stats. Referrals were down -3.3%, new patient calls were down -7.7% across the country, and total starts are down -7.5%. What’s more, adult aligner starts led the decline, down -8.9%. And while adult starts hit an unprecedented 20%+ growth from July 2020-Dec 2021 following the pandemic shut down, they have now swung nearly 30 points in the other direction. This data indicates an urgent problem for orthodontic practices. But the question is, what factors are at play here?
What’s preventing practices from growing?
To begin to understand what is at play here to cause such a significant swing, we must first look at current economic conditions affecting consumer spending. First, the rescue stimulus that spurred patients to seek out treatment in 2021 is long gone; second, inflation is raising prices across all goods and services (and while it is expected to continue into 2023, it is softening). In addition, the COVID-19 pandemic is still ongoing and remains unpredictable. As a result, consumers are holding onto their cash and reprioritizing where they are willing to spend. Parents will prioritize their child’s braces over their own every time, reducing those new adult patient starts.
But there may be more at play here. We have to wonder: Has the “Zoom effect”—credited with the unprecedented growth in adult starts at the tail end of 2020 and into 2021—run its course?
Record high ‘no shows’ could be a sign of practice inefficiency
Beyond the growth pipeline and the traditional metrics we consistently report on, the Q2 2022 data uncovered something we did not expect for orthodontic practices. Practices are experiencing record high no shows, averaging +10.1% over last year during the same period. Looking at 2021, we still had a fair amount of COVID-related absences and cancellations to manage; but as we’ve learned to largely live with COVID, the increase in 2022 is rather alarming.
Now, what makes this data concerning is that appointments scheduled increased by +2.5% YOY. As reported above, practices saw declines in new patient calls and exams; this should mean fewer appointments scheduled. This 2.5% increase in appointments scheduled may be due to rescheduling no shows, but it also could be due to seeing patients more frequently, a metric that practices should analyze as it represents lost opportunity cost and added overhead. While the downward trends in growth and sustainability might be the headline here, the inefficiency inside the practice is a problem, and if not addressed will sabotage the effort, resources, and dollars orthodontic practices invest into building growth.
Actions to take to build the new patient funnel
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 affecting change. No individual practice nor even the industry as a whole can directly impact the rate of inflation nor accelerate the actions to normalize the market. So what can individual business owners do in the meantime to recover, sustain, or even ensure ongoing growth for their businesses? What follows are two strategies, the first of which may seem counterintuitive, to help stem slowing growth and the effect of inflationary pressures.
Strategy 1: 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 at the same time don’t throw money at it without being strategic. You need to leverage an ROI (return on investment) analysis when making decisions on where to invest your marketing and PR resources. Keep in mind that if you are using Gaidge software, you can automate a ROI analysis.
Now to get started, determine your list of activities, spending per activity, and time investment. We recommend bucketing your spending in at least three categories. At a minimum you want to know your digital spend, such as social and Google advertising; your external marketing spend, such as billboards, print, and promotional events; and your internal spend, such as patient rewards, referral bonuses, etc. Once you know where your money is going, next determine the number of patients calls/starts that can be attributed to each activity. Admittedly, easier said than done; but starting to analyze this data is the only way to open the doors of understanding. Begin by pulling historical spending and making estimates for each major activity. Determine what was beneficial versus what was not, and then determine which activities are worth keeping, doubling down on, or stopping. From there, create a system to measure lead sources using your practice management software.
Other things to keep in mind as you look at investing in marketing.
- Often PR-related activities, like taking part in school fundraisers or health fairs, take more time than money, helping when cash is in short supply. This effort often creates a great community connection that turns into both short- and long-term patient prospects.
- At times, agencies can feel like a big black spending hole, but consider the cost per lead and the legwork you or your team have done to onboard an agency. This is where it is important to have data to know your yield. Be thoughtful about cutting this part of your spending as you will likely return at some future point. And by then not only will you have lost momentum, but you will have to repeat the onboarding process reeducating the agency about who your practice is, your message, your goals, and so on.
- Don’t abandon digital advertising without serious thought. Consider freshening up your message and reinvigorating interest with new promotions or ideas. Work to keep your practice top of mind—a long game strategy that is 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, and knowing that the return will come 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 drive leads to your orthodontic practices. How your practice tracks data, however, may be inflating just how important dentist referrals are to your practice. Unfortunately, practices 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 affiliates. Train staff to ensure lead sources are accurately entered into your software separately from the patient’s dentist and review your reports regularly. Having the correct data here will help you better allocate marketing resources.
Strategy 2: 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, or the email or text comes in, it’s our opportunity to lose. Managing the patient experience from the first interaction all the way through 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 treatment coordinators are the front line for 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 to make the most of the investment you’ve put into sustaining and growing your practice.
Here are some other factors to keep in mind as you look at your practice’s sales funnel.
- 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 increase efficiency and visibility across the entire practice. Ask yourself if your current system meets your needs and explore the options based on your goals. The more consistency you have in your processes, the easier it is to manage daily. In addition, keep an eye on required training during potential turnover.
With these two strategies and a good handle on those five KPIs, practices have an opportunity to turn 2022 around. Because the fact is, when we compare 2022 YTD data to pre-pandemic levels, orthodontic practices are growing, but there is plenty of talk out there that wants to tell a different story.
Now more than ever, it’s important to have access to business intelligence that sets facts apart from rhetoric. Keep an eye on the five KPIs we focused on here, and you will be able to do just that. OP
Suzanne Wilson, MBA, has spent the last 23 years in the oral healthcare industry holding leadership positions in operations, product development, and marketing working for global medical device and technology firms. She joined Gaidge in 2018 as their chief marketing officer and now serves as chief operating officer.