By Ross Martin, Accountancy Director at Hive Business
NHS contracts are, quite amazingly, still seen as a no-brainer by most dentists looking to acquire a practice, and it’s easy to see why: guaranteed income, easy finance, and the groupthink security blanket of “if it’s good enough for everyone else, it’s good enough for me”.
But there are many problems, not least the farce of trying to differentiate your private treatments in a mixed practice that uses the same staff and facilities. Patients are beginning to realise that the NHS, in all its sclerotic forms, is a catch-all term for services designed for the supplier not the user. Whereas private healthcare prioritise customer needs like convenience, the people running public healthcare prioritise government needs like cost-cutting.
Eventually, when the system makes it hard enough to call up and make an appointment to see a dentist or a doctor, you go private, and you never go back. The NHS is in its death throes and it is difficult to imagine that people in the next generation with the means to do otherwise are going to be prepared to entrust their family’s health to it.
The evidence is anywhere you care to look. The government’s mooted £4bn extra a year — part NHS “birthday present” (it’s turning 70), part “Brexit bonus” — gives the game away. In an organisation that spent £116.4bn in 2015/16 and pays £11 for a packet of paracetamol, £4bn is not structural change, it is window dressing.
The interesting thing about dentistry is that a wholesale public rejection of the NHS is happening here first. There has been an explosion of private dental practices in the past five years as swathes of the public turned their back on the chronic problems in the NHS. Some areas held out well, notably children’s orthodontics, but if you look at the latest NHS tendering rules asking contractors to provide even more for less you can see that this is only going to end one way.
The same is happening north of the border, where many mixed practice owners are furious at the latest unilateral moving of goalposts by NHS Scotland: no more payments for six monthlies unless they are deemed higher risk, possibly no more scale and polish, possibly a “domiciliary” dentist at each practice, fewer items of service payments, etc.
Profitability in NHS practices varies wildly and is usually only good where there is a high UDA rate (£30+), a low payment to the clinician (£10-11, often on the basis of being 50% of a suppressed UDA value of £23), and efficient delivery of UDAs. Coupled with clinical dilemmas in a mixed practice, and often dentists’ preference for carrying out private treatment on private patients, every mixed practice should ask itself the question: is this NHS contract serving the business?
There is always its future sale value to bear in mind, but I would view this as a noose around your neck. An unprofitable contract arguably isn’t worth anything until you sell, but comes with an opportunity cost. Replacing it with private income of the same or a greater amount is surely worth more, in profit but also gratification. By all accounts, I understand that it’s not just no fun working in the NHS, it’s soul destroying. Yet even people who know this stay in it and suffer, eying some future payout when they eventually sell.
A big part of the NHS’s stickiness is not having responsibility for your own marketing and commercial success. Whatever happens, you always get that paycheck at the same time of the month. But even with big NHS contracts we can see 95% of the money go straight back out on costs.
It’s a lot of work, and if it’s not serving your business strategy it can become a burden. If you’re trying to position yourself as a restorative practice, for example, it’s going to be a pain having 14 NHS patients coming in every hour, changing the atmosphere. And do you really want to be in that impossible position of trying to upsell to NHS patients without being allowed to say that the NHS treatment is inferior? Good luck if you do. My advice would be, get out while you’re ahead.
If you would like to discuss how you can make your dental business a success or if you have any questions about this article please get in touch on 01872 300232 or email us at firstname.lastname@example.org.