Financial Literacy: Building the Foundation for Practice Success
As a new Oral and Maxillofacial Surgeon, your surgical skills are vital to your career, but financial literacy is what will ensure long-term success for both your practice and your family. Transitioning from residency to private practice introduces a world of budgets, billing, and strategic financial decisions that can be daunting without proper preparation. Without a strong financial foundation, even the most skilled surgeons can struggle with profitability, cash flow, and long-term wealth-building.
In this first installment of The Business of OMS series, we’ll guide you through the essential financial skills every new surgeon needs to confidently manage both professional and personal finances.
Managing Student Loan Debt
The financial reality for most new surgeons is significant student loan debt. The average OMS graduate carries hundreds of thousands of dollars in loans, making strategic repayment a top priority. While the numbers may feel overwhelming, thoughtful planning can help you manage repayment while still building toward long-term financial success.
Key Strategies to Manage Your Debt:
- Understand your options: Federal repayment programs like Income-Driven Repayment (IDR) or Public Service Loan Forgiveness (PSLF) offer flexible repayment structures. If you’re considering a career in academia or public service, PSLF could allow for loan forgiveness after 10 years of qualifying payments. However, refinancing might be a better path if you’re entering private practice.
- Refinance strategically: Refinancing with lenders like Laurel Road can lower your interest rates and reduce the total repayment amount. However, refinancing federal loans means losing access to federal protections like forbearance and income-driven repayment options, so it’s crucial to weigh the trade-offs.
- Set a budget and stick to it: Balancing student loan payments with new financial responsibilities can be challenging. Using budgeting tools like Mint or YNAB (You Need A Budget) can help allocate income efficiently. A good rule of thumb is the 50/30/20 rule—50% of income for necessities, 30% for discretionary spending, and 20% for savings and debt repayment.
By proactively managing debt, you can avoid the stress of financial uncertainty and focus on building a successful career.
Mastering the Revenue Cycle
One of the biggest financial challenges in an OMS practice is ensuring a smooth revenue cycle. Even a busy practice can struggle with cash flow issues without an efficient billing and collections process. As a new surgeon, understanding the financial mechanics of a practice is just as important as mastering surgical procedures.
Essential Aspects of the Revenue Cycle:
- Procedure coding and documentation: Proper CPT and CDT coding is essential for minimizing claim denials and ensuring timely payments. Errors in coding can lead to claim rejections, delayed payments, and even compliance issues. Investing in coding courses through AAPC or AAOMS can help you stay compliant and maximize reimbursement.
- Insurance verification and preauthorization: Many claim denials stem from insurance verification issues. Utilizing automation tools like DentalXChange can help streamline this process, ensuring that patient benefits are confirmed before procedures are scheduled.
- Patient collections process: Establishing a structured collections process is crucial for reducing unpaid balances. Many practices use platforms like eAssist Dental Solutions to automate patient billing, send reminders, and follow up on outstanding balances. The goal is to reduce revenue leakage and improve financial predictability.
Understanding the revenue cycle allows you to track financial performance and make informed decisions about your practice’s profitability.
Controlling Overhead Costs
High overhead costs can quickly erode profitability, even for practices with strong patient volume. Whether you’re starting your own practice or joining an established one, keeping overhead in check is a critical component of financial success.
Ways to Optimize Overhead Costs:
- Staffing efficiency: Payroll is one of the largest expenses in a practice. Ensuring that your staffing levels match patient volume can prevent unnecessary payroll costs. Cross-training team members to handle multiple responsibilities can also improve efficiency without increasing payroll expenses. Managing the use of overtime is also critical to keeping labor costs aligned with patient volumes. Perhaps there are times of the year when you need a little more help from your staff to manage patient flow. Be sure to regularly monitor staffing to ensure it matches your practice’s needs.
- Negotiating supply costs: Periodically review your supply costs and negotiate contracts with vendors like Henry Schein to secure better pricing. Bulk purchasing and group purchasing organizations (GPOs) can also help reduce costs.
- Facility and lease considerations: Your office lease is a major expense. If you’re starting a practice, consider whether purchasing property could be a smarter long-term investment than leasing. If you’re joining an existing practice, evaluate whether the facility cost is proportionate to revenue. Small adjustments, like renegotiating lease terms or optimizing utility expenses, can have a significant financial impact.
Managing overhead isn’t just about cutting costs—it’s about optimizing efficiency so that more of your revenue translates into profit.
Practical Tools and Resources for Financial Success
To further strengthen your financial literacy, here are some practical tools and resources:
- Practice management software: Platforms like Dentrix help streamline billing, scheduling, and financial reporting, allowing for better revenue management. Learn what key performance indicators (KPI’s) matter most to you, and consistently track and monitor those with your team.
- Financial advisors with healthcare expertise: Working with a fiduciary financial advisor who specializes in healthcare professionals can help you build a long-term financial strategy. Organizations like NAPFA (National Association of Personal Financial Advisors) can help you find qualified advisors.
- Continuing education: Taking advantage of AAOMS resources such as webinars, conferences, and financial management courses can provide ongoing education in practice finance.
Final Thoughts: How Financial Literacy Sets You Apart
Developing financial literacy is about more than just managing debt and expenses—it’s about building a practice that thrives. Surgeons with strong financial skills can make smarter decisions about practice growth, investments in technology, and personal wealth-building. Financially savvy surgeons are also better positioned to handle economic downturns, regulatory changes, and unexpected financial challenges. As you transition from residency to private practice, remember that a strong financial foundation gives you the freedom to focus on what truly matters—delivering exceptional patient care.
Next Up: The Business of OMS Part Two – Practice Management: Leading with Confidence
With financial literacy as your foundation, you’ll be ready to tackle the operational and leadership aspects of practice management. In the next installment of The Business of OMS series, we’ll explore strategies for leading an efficient, patient-centered practice.