Class 1: Introduction to Practice Management
What is Business?
Why is business important in dentistry? In general a business aims to make a profit. Profit is revenue minus expenses. An entrepreneur will seek to earn a profit for them risking their money and time with the business.
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More contemporary businesses try to balance profit and purpose. This can be seen as a triple bottom line of profits, societal impact, and ecological sustainability (https://bcorporation.net/about-b-corps).
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As a dental business we have a great opportunity to help society in general and the economy. However, there are also potential negative aspects of a business in dentistry. Can you think of any potentially negative aspects?
Website FAQ
In an effort to make your learning experience more interactive we have incorporated this resource into your practice management course. You can go through the information at your own pace, however please complete the class by the dates provided in the syllabus. The case study discussions and quizzes will be based on you having the knowledge gained from these online classes.
Each online class will have multiple topics. The topics can be found on the left side of the page. You can navigate to the topics by clicking on them or simply scrolling down. Most topics within the class will have a video associated with it. You can think of this video as your traditional lectures. Additional information is provided within the text next to the video. Even more information is provided in links which look like this. Some of these links will go to other websites for further learning. There are lots of other great resources that can be found online.
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Introduction to Economics
Economics can be complex, although knowing a brief overview is important to understand the economic landscape that dental offices are operating within. Dental offices are subjected to the same economic factors that any other business must deal with. Generally there are three types of economic systems: 1) Planned economy, 2) Mixed market economy, and 3) Market economy. These are theoretical systems so most economies fall under mixed market economy.
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Given that resources are always limited the choice to purchase or produce a good is a complex decision. In general, we model the supply and demand based on a market economy in which a private enterprise system is operating.
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The video reviews multiple economic indicators like GDP (gross domestic product, inflation, consumer price index, and unemployment). What other economic indicators are there? Why would economic indicators be of interest to a dentist? The main reason a dentist might be interested in economic indicators is that they will make business decisions based on many external factors one being the economy that they are operating within. The economical environment might cause you to change your strategy for expansion, purchase decisions, etc. Although, it is important to remember that while these are macroeconomic concepts and can correlate to corporate profits, it is not specific for any one company.
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To stabilize the US economy there are two arms the fiscal and monetary policy. The Fed (https://www.federalreserve.gov/faqs/about_12594.htm) controls the monetary policy. For more detailed information on the stabilization policy click here.
Economics in Dentistry
So, we reviewed overall economic concepts, but how does that impact a specific dental office? If the GDP increases, and as general prosperity improves, the dentist might be able to create more wealth through increased profit. A dentist might want to market discretionary services during this time.
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If inflation increases to keep up with this a dentist might want to increase the cost for their services. However, if the GDP is decreasing their patients might be less likely to be able to pay for this increased cost in services. Using economic indicators can influence business strategy decisions.
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Product vs. Service
A product is an item that is a tangible item that is sold. Some examples of this are cars, TVs, or our dental supplies.
A service is an intangible item like car insurance or a concert.
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Why does this distinction matter? It is because these sectors operate differently. The service industry requires more of a trust-based relationship where quality and features of service are not obvious to the consumer. In addition, each service provided is unique to the consumer and this cannot be produced ahead for peak demand seasons. Similarly, increasing output requires increasing staff/labor costsin more of a linear revenue growth.
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A private good is consumed as an individual and the rest of society does not benefit. An example is a TV or vacation. In contrast, a public good is consumed by many people or society and non-payers can benefit from the good. Some examples are roads or national defense. In the US we consider dentistry a private good.
Ethics in Business
Ethics is an important aspect of all professions. In a business context you will be faced with multiple ethical dilemmas. In general we can use frameworks to provide a more standard approach to working through ethical problems. In the dental field, we can also use the ADA's Principles of Ethics and Code of Professional Conduct as guidance for our core principles and organizational values.
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A dental office can use multiple techniques to create a culture that upholds ethical principles and educates employees. A business has multiple stakeholders (customers, employees, investors, suppliers, and the local community) that they are responsible to address their needs and expectations. In addition to these stakeholders companies should be aware of the social responsibilities to the environment and be socially conscious. Ethical obligations are not the same as legal obligations, however in general the more ethical the more likely one complies with legal codes.
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The Changing Dental Profession
There are multiple external factors that ultimately decide if a business succeeds or fails. These external factors are: 1) Economic, 2) Technological, 3) Sociocultural, 4) Domestic Business, 5) Global Business, and 6) Political-Legal.
Demand is the willingness of buyers to purchase a good. Supply is the willingness of producers to offer a good for sale. The market price will be the price at which the quantity of goods wanted are equivalent to the quantity of goods supplied. Shortages and surpluses will occur causing fluctuations in the market equilibrium causing the market price to readjust.
Self-Assessment
Please use this self-assessment tool to see your understanding of the material. Click on the answer that you feel is the best. If you choose the incorrect answer you can use the arrow on the upper left or click "try again" to go back to the question.
