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Bentson Clark reSource 1st Quarter 2016 Bentson Clark reSource 1st Quarter 2016 Looking Back at the Practice Valuations of 2015 Easy Rx: Digital Prescription Management An Interview with Dr. Marc Lemchen & Mr. Khashi Rahmani I 'm here today with Dr. Marc Lemchen and Mr. Khashi Rahmani. Dr. Lemchen is a current customer, investor and board member of EasyRx. Mr. Rahmani is the Business Development Coordinator for EasyRx. • • • • Attach supporting digital files, including STL files. Manage prescriptions using the Prescription Dashboard. Submit prescriptions to in-house and commercial labs. Secure, compliant communication between the practice and lab. • Provide Prescription Feedback and comments to the lab using the EasyRx rating system. • Manage in-house labs and multiple users, such as clinician and lab technician accounts. Q: Dr. Lemchen, can you please tell us about EasyRx? A: EasyRx is a cloud-based, digital patient appliance prescription management software for orthodontic practices and labs. EasyRx offers two products: EasyRx Practice for orthodontic practices and EasyRx Lab for orthodontic labs. Back in 2009, Jim and Mike Wright, owners of ODL, a family- owned orthodontic lab in Buffalo, New York, started developing EasyRx for their lab. It was obvious to them that digital was the direction the industry would be going. They wanted to embrace this digital transition - it just made sense to develop an application to allow practices to implement a full digital workflow. This includes creating universal digital prescription forms, uploading the STL files created by scanning patients or models and sending the prescriptions and attached STL files to the labs (both in-house and commercial) that practices use. Plus, we all know HIPAA is ever present, which is why they wanted to develop a better way to communicate securely with encrypted data. They did a great job getting the technology right - EasyRx is a 100% browserbased web application that runs on PCs, Mac, phones, tablets, etc. EasyRx supports multiple platforms, mobile devices and multi-locations. In 2012, a separate, standalone company was formed, which started marketing and selling EasyRx commercially to both practices and labs. Q: What about practice management integration? A: In February, we released our integration with Dolphin Imaging and Management software, which has been very exciting for both us and our customers. Demographic data for the patient is entered in EasyRx with one click, and patient appointment data added to the prescription. We are very excited to work with the other practice management software companies. Q: You mentioned STL files, how does EasyRx work with intra-oral scanners/STL files? A: EasyRx was designed to support attaching, viewing and managing digital files, including large STL files. Most major intra-oral scanners support exporting scanned data in STL format. For practices using the iTero scanner, we recently implemented a really slick integration, making it very easy to attach iTero scans to EasyRx prescriptions, eliminating the need to export them manually. Once the iTero Case Order ID is entered in EasyRx, EasyRx takes care of uploading, sharing and storing these STL files. A huge benefit is that patient prescriptions and supporting digital files are now connected and managed from EasyRx, which practices and labs love. Plus, we developed EasyRx 3D, a no-download browser based STL viewer, allowing the STL scans to be viewed from inside EasyRx. Q: How did you get involved with EasyRx? A: In 2014, I was looking for a paperless patient appliance prescription and lab tracking solution for my practice. During my research, I came across EasyRx and it matched the solution that I envisioned using. My goal was to streamline our prescription process, improve communication with my lab, and move away from the time consuming and often messy prescription. So I began using EasyRx in my practice and immediately my prescription and lab tracking processes greatly improved. The results were so remarkable that I invested in the company. Since getting involved, we have made EasyRx a doctor/office centric program by adding features such as the Practice Feedback form, practice management integration and instant appliance pricing. Adding these and other features have increased the return on investment for practices using EasyRx. Q: What if the practice does not have an intra-oral scanner and is using plaster models? A: Many of our customers continue to use plaster models. Once the prescription is entered in EasyRx, it can be printed via PDF and included in the box with the models then shipped to the lab. The printed prescription even includes a handy barcode the lab can scan when the models and prescription are received. This way labs get a clean and easy-to-read PDF printout instead of a potentially messy and illegible sketch. Eliminated are those extra phone calls or the lab not being able to accurately follow the prescription. Q: Mr. Rahmani, what are the core features of EasyRx? A: When we say "digital patient appliance prescription management for orthodontic practices", we mean EasyRx supports these core features: Q: Can you tell our readers about the in-house lab feature? A: Included with EasyRx Practice Premium is a fully integrated in-house module. The in-house lab module allows practices with their own in-house lab to create, submit and manage prescriptions for their lab. The in-house lab module also • Digitally create patient appliance, aligner and indirect bonding prescriptions using the EasyRx Universal Digital Prescription Workspace. Continued on page 11 10 Continued from page 2 Chart 3: Valuation Data by Number of Practice Locations Net Collections Practice Income Overhead Rate Value Before Value as % of Debt Collections Single Location $ 1,490,678 $ 700,026 55.8% $ 1,253,741 78.0% Two Locations 1,849,214 846,758 55.3% 1,520,048 80.1% Three or More Locations 1,955,429 749,299 61.9% 1,402,000 71.1% All Multi-Locations 1,875,768 822,394 57.0% 1,490,536 77.9% Overall Average $ 1,686,724 $ 762,322 56.4% $ 1,374,291 77.9% practice income represents the owner/doctor's total economic benefit received from the practice. While examining the average practice value in dollars (Chart #3), the 27 single location practices' average value was $1,253,741, whereas all mult-location practices, whether two locations or more, had a higher average value. From a collections standpoint, the single location practices' average collections were $1,490,678. The average collections for the 21 two-location practices were $1,849,214. The seven practices with three or more locations had average collections of $1,955,429. As in all prior reviews over the last ten years, we continue to observe that practices with more than one location afford the opportunity for higher collections to the practice owner. The average net collections for all 55 practices during 2015 were $1,686,724. These practices had an average overhead rate of 56.4% and an average value as a percent of collections of 77.9%. The reasons we were asked to conduct valuations in 2015 included the sale of 100% of the practice, adding a junior partner, adding a family member, merging with another local practice, buy-out of a partner and general estate/retirement planning. No matter the reason, the orthodontic practice valuation was an important early step in the process of a planned transition. An analysis of the overhead of the two groups of practices (single vs. multi-locations) reveals that mult-location practices have only a slightly elevated overhead rate, 1.2%, when compared against the single location practices in this data set. As such, we also continue to observe, and the data consistently supports this conclusion, that adding a satellite location has minimal incremental effect on overhead. An understanding of the market's supply and demand, as well as an extensive review of current and historical financial and operational data of a practice, is necessary to determine the value of an orthodontic practice. Valuation principles and methodologies must be utilized and applied properly in order to provide an accurate practice value. The 2015 valuation data presented in this annual review should allow a doctor/owner to benchmark his or her practice versus the current market. The value of a professional practice is largely dependent on the amount of income available to the owner. Therefore, a practice's level of operating expenses (i.e. overhead rate) has a significant impact on the overall practice value. The overhead rates of the practices shown in Chart #1 range from 45.0% to 70.4%, yielding a variance of 25.4 percentage points. This compares with a variance of 26.6 percentage points in last year's review (Bentson Clark reSource, 1st Quarter 2015). These overhead rates have been adjusted to remove non-operating expenses, personal and discretionary expenses of the owner/doctor (e.g. automobile, payroll taxes, cell phone, discretionary travel and entertainment, family member salaries) and the owner/doctor's compensation and retirement contributions. Any associate doctor compensation has also been removed. Therefore, the overhead percentages represent the true costs to operate the practice, while the Regardless of the location of your practice or its size, increased focus on the metrics and factors that drive profitability will be financially rewarding, not only in 2016 but for years to come. Increasing your scrutiny of practice expenses while working to grow your collections will create a positive and compounding result not only in your practice but in your overall financial health as well. Chris Bentson is a partner with Bentson Clark & Copple, LLC. Chris is a veteran in the field of orthodontics with a 26-year career in the industry. He can be reached via email at [email protected] Doug Copple is a partner with Bentson Clark & Copple, LLC. Doug is a Certified Valuation Analyst (CVA) and has excellent knowledge in both valuation methodology and tax allocation/negotiations in the transition process. He can be reached via email at [email protected] 3 Bentson Clark reSource 1st Quarter 2016 Bentson Clark reSource 1st Quarter 2016 Looking Back at the Practice Valuations of 2015 Easy Rx: Digital Prescription Management Continued from page 1 Continued from page 10 limitations, we have selected 25 valuations to include in Chart #1 (located on page 1) to provide a representative sample of the body of work completed last year. The data in Chart #1 should be used as a rough comparison tool for similarly situated practices, but this article will discuss the averages of all 55 practices valued. A summary of the averages for the data published over the last nine years in the Bentson Clark reSource is provided in Chart #2 (below). As with prior reviews, the 2015 data represents rounded net collections, practice income, adjusted overhead rate, debt-free value and value expressed as a percentage of collections for each respective practice. However, we caution that solely looking at the high-level data presented in this annual analysis does not provide the full compliment of data used to accurately value any given practice. Many other factors should be considered in order to fully understand an individual practice. These factors include, but are not limited to, current and historical financial and operational data, demographic data, condition of the practice's physical facilities, competitive environment, operating systems in place, referral patterns, marketing program(s), treatment modalities and staff. In order for a valuator to place a reliable fair market value on any individual practice, a thorough analysis of all operational and financial data must be performed and an on-site practice visit conducted to verify assets in service and understand the intangible and tangible aspects of the drawing area. That information should then be analyzed utilizing recognized valuation and accounting principles and methodologies, to arrive at a final conclusion of value for any given practice. Certified Valuators and Analysts' Professional Standards, and results are presented in a detailed summary report. Of the many methods available to value a closely-held entity like an orthodontic practice, an earnings approach, such as a Capitalization of Income method, is generally preferred by both the accounting and legal communities. All Bentson Clark & Copple's published valuations are signed by a Certified Valuation Analyst (Doug Copple, CVA) and a company representative visits each practice. includes a complete workflow module, allowing prescriptions to be submitted and marked as completed. This provides a strong management platform where doctors, clinical staff and lab technicians can easily exchange information via comments, make prescription changes, track revisions and even rate appliances to constantly improve the quality of the appliances. We found this supremely beneficial for large, busy practices or multiple location practices. The value as a percent of collections for all 55 practices valued in 2015 ranges from a low of 46.5% to a high of 105.6%, a variance of 59.1 percentage points. This range is similar to those seen in previous reviews. The significant variance this year and in years past in this common metric illustrates that simply using a "rule of thumb" (i.e. value as a percent of collections) does not provide any meaningful and reliable guidance as to the value of the practice being examined. Each practice being valued has unique characteristics that cannot be fully captured with just a few high-level numbers like the ones given in the sample of practices. However, over the last four years average practice value as a percent of collections has varied only 1.7 percentage points. We can conclude from this that average practice values have remained fairly consistent during this time period. A: For 3D printing users, EasyRx provides a great space to create prescriptions and to save and pull the STL files. This STL management component often is not properly handled by the embedded software included with the 3D printer. We have practice customers that actively take 3D scans/STL data from patient prescriptions and use those files to then print using a 3D printer. For labs using 3D printers, EasyRx Lab accounts can also configure a nifty 3D modeling service to price and invoice plastic resin model requests from practices. As in previous years, we tracked the number of office locations for each practice valued. Of the 55 total valuations completed, 27 practices had one practice location, 21 had two locations, and seven had three or more locations. Of the single location practice, all but one was operating at the time of the valuation with one doctor. Of the multiple location practices, three operated with two doctors and two operated with three doctors either as partners or associates. Valuation studies performed by Bentson Clark & Copple follow a strict valuation methodology and are completed in accordance with the National Association of Chart 2: Annual Valuation Summary Year Net Collections Practice Income Overhead Rate Value Before Debt Value as % of Collections 2007 Average $ 1,366,000 $ 690,370 50.6% $ 1,056,440 75.3% 2008 Average 1,375,500 646,342 55.0% 1,023,240 71.5% 2009 Average 1,383,680 623,568 53.9% 1,049,280 75.1% 2010 Average 1,326,320 580,038 55.4% 1,020,280 76.1% 2011 Average 1,569,480 697,965 55.1% 1,206,200 75.8% 2012 Average 1,805,360 794,756 54.9% 1,428,640 79.6% 2013 Average 1,549,520 702,622 55.6% 1,260,960 79.0% 2014 Average 1,502,273 674,561 55.8% 1,190,491 76.9% 2015 Average $ 1,686,724 $ 762,322 56.4% $ 1,374.291 77.9% shipped?", "What is the tracking number?". All of this is done via one EasyRx account for all patient prescriptions for both commercial and in-house labs. No longer is the office juggling logins to multiple portals. Not to mention, EasyRx stores and backs up patient prescription data (including STL files) per ADA and HIPAA mandates. EasyRx Also Provides a Better Patient Experience. Not only do doctors love new technology, but we all know patients do as well. Using EasyRx gives doctors a digital workspace that they can share as a benefit of their practice. Patient data is more secure, turnaround times and communication on prescriptions are typically faster, and it allows doctors, in real time, to check the status of any EasyRx prescription at any time, from anywhere. We also recently added a Prescription Feedback form where practices can "rate" their completed appliances from both commercial labs and in-house labs. This allows the labs to get real feedback to improve items such as the timeliness of the requested prescription, the accuracy of the appliance, and address quality concerns like if the appliance needed readjustment. If the lab tech learns about a consistently required adjustment, the issue can be corrected. Ultimately, the quality of the appliances is going to affect the satisfaction of the patient as well as reduce chair side adjustments that take the doctors time. The feedback forms provide in-house labs with the added benefits of generating performance reviews for their lab techs and a method for addressing quality control improvements. Q: How does EasyRx work with 3D printers? Q: Dr. Lemchen, why would a practice start using EasyRx? A: We've already talked about a few critical reasons why: EasyRx is digital, secure, compliant and connects the patient prescription to digital files. Some additional benefits are: Consolidate Workflow, Improve Efficiency and Reduce Mistakes. Manual processes like faxing or emailing prescriptions and completing prescription forms online at various lab web portals are not just cumbersome, but also are prone to mistakes and often require back and forth communication with the lab for clarification. Not to mention these methods make protecting patient data more difficult. The EasyRx prescription is clear, legible and easy to understand. Using Prescription Templates created by the practice, prescriptions can be created in just a few seconds - with the doctor being confident the prescription is correct while making adjustments or changes to the prescription on the fly. This helps standardize appliance and part design, from assistant-to-assistant, doctor-to-doctor and across multiple locations. We also want to engage in a broader initiative: EasyRx helps practices go "paperless" by eliminating burdensome paper trails and providing a 'green' space for doctors. Plus, I'd say there is also a cool factor there as well - patients can pick their colors and designs from the screen when viewing the EasyRx acrylic chart! Q: Mr. Rahmani, given all these features, how does EasyRx impact the bottom line? A: All of these benefits have a real impact on the bottom line. Practices can manage their prescriptions better and more efficiently, saving staff and lab-tech time. The clear, legible and easy to understand EasyRx prescription improves communication with labs - avoiding delays required to clarify prescriptions and extra costs in redoing appliances due to incorrect or confusing instructions. Remakes and repairs are handled more quickly. Patient reschedules due to unfinished appliances are reduced. EasyRx displays the lab's standard price for parts and appliances as prescriptions are created, which improves cost management. This also helps the practice ensure the appliance price is fairly accounted for with the patient. Our clients report that their lab techs have much better control over their lab work, both in-house and commercial. Dr. Scott Frey, an EasyRx customer in Allentown, PA, commented that his involvement in the prescription process has been reduced and EasyRx also organizes past, present and future prescriptions for each patient, making it easy to see what was previously prescribed and when it was submitted and received.This makes ordering a replacement as easy as a few mouse clicks as opposed to copying or re-creating previous information. We also save the history of uploaded files such as STLs, so if the practice needs to re-use a previously uploaded scan, it's already there and accessible. EasyRx provides a secure platform for the practice and lab to communicate. It offers greater control over prescription management and workflow. The Prescription Dashboard is always up to date, allowing the practice to easily answer questions like "Did the lab receive the prescription?", "Did the lab receive the models?", "Has it Continued on page 12 Continued on page 3 2 11 Volume XI Issue I 397 South Swing Road Greensboro, NC 27409 1-800-621-4664 www.bentsonclark.com 1st Quarter 2016 Looking Back at the Practice Valuations of 2015 In This Issue: By: Chris Bentson & Doug Copple, CVA ollowing our tradition, the first quarter edition of the Bentson Clark reSource begins with our highly anticipated annual review of practice valuation metrics we've seen during the previous year. This year celebrates the tenth consecutive year that Bentson Clark & Copple, LLC has released this data. The information presented is compiled from several high level statistics extracted from the orthodontic valuations we completed. We have found that many of our subscribers find the data useful and the information published is often referenced within the orthodontic specialty. F Last year, Bentson Clark & Copple, completed a total of 55 orthodontic practice valuations. This article will review the averages of these 55 practice valuations, offering a window into the current values of orthodontic practices as seen by our company. However, in order to provide similar examples to past years and due to space Chart 1: 25 Sample Practice Valuations from 2015 Bentson Clark reSource 1st Quarter 2016 Easy Rx: Digital Prescription Management Continued from page 11 his lab tech just seems happier, which has to be worth something. Plus, when new staff is hired, EasyRx is easy to learn and adopt. We have a volley of cool knowledge-based articles with screenshots to get newbies using EasyRx quickly and efficiently. We also have fantastic email and phone support to manage any lingering questions to ensure our users are successful. attach/store/share all file types (including STL), manage prescriptions using the Prescription Dashboard, submit prescriptions to in-house and commercial labs, Prescription Templates, secure practice-lab communication, prescription feedback, prescriptions and files stored securely in the cloud, live phone and email support and access to new features. The Premium subscription includes the in-house lab, practice management integration and other features. For complete details, please visit www.easyrxortho.com. Q: What if the practice's preferred commercial lab does not use EasyRx? A: Practices can easily ask their preferred lab to sign up for EasyRx. There is no charge for a lab to sign up to receive and download EasyRx prescriptions. Additionally, labs can pay monthly for more integrated solutions. Plus, a practice can connect to any lab already using EasyRx. Just browse the list of current EasyRx lab customers. Finally, the EasyRx prescription can be printed and mailed, emailed or shared with a lab not using EasyRx. This allows the practice to benefit from many of the great features of EasyRx we've discussed. Dr. Marc Lemchen founded Dolphin Imaging Systems, which became Dolphin Imaging and Management Solutions. Dolphin was acquired by Patterson in 2008. Dr. Lemchen is involved in several other software companies including V.Com and Oaktree Storage.He has worked on the development of a number of technologies used in orthodontic appliance systems. He currently operates a private practice in New York City. Khashi Rahmani has been in technical sales and marketing for more than eight years working with various Fortune 500 clients. He graduated from Kennesaw State University with a degree in Psychology and dedicates his spare time volunteering for the Wounded Warrior Project. He also has six IT sales certifications from industry leaders such as Cisco, Dell and VMware. Q: Can you provide some information about pricing? A: We offer three EasyRx monthly subscriptions for practices: Per Script, Standard and Premium. All three plans support the following: create and manage patient appliance prescriptions, For more information or questions, please contact Khashi Rahmani, EasyRx Business Development Coordinator at [email protected] or call 1-888-340-3751 x700. Practice Net Collections Practice Income Overhead Rate Value Before Debt Value as % of Collections 1 $ 2,032,000 $ 601,472 70.4% $ 1,045,000 51.4% 2 2,410,000 751,920 68.8% 1,428,000 59.3% 3 815,000 281,175 65.5% 529,000 64.9% 4 1,105,000 329,290 70.2% 764,000 69.1% 5 845,000 321,945 61.9% 606,000 71.7% 6 5,380,000 2,458,660 54.3% 4,475,000 83.2% 7 750,000 331,500 55.8% 545,000 72.7% 8 605,000 223,850 63.0% 442,000 73.1% 9 603,000 288,234 52.2% 468,000 77.6% 10 1,270,000 532,130 58.1% 995,000 78.3% page 1 Digital Marketing Trends to Watch in 2016 page 4 The Stress of it All page 6 Easy Rx: Digital Prescription Management page 10 The Bentson Clark reSource (ISSN 1559-1360) is published quarterly by Bentson Clark & Copple, LLC, 397 South Swing Road, Greensboro, North Carolina 27409. Periodicals postage paid at Greensboro, North Carolina 27409. Telephone: (336) 379-8822 / (800) 621-4664 Fax: (336) 333-0015 Website: www.bentsonclark.com Email: [email protected] Editorial Address: 397 South Swing Road Greensboro, NC 27409 11 893,000 400,957 55.1% 712,000 79.7% 12 500,000 232,000 53.6% 409,000 81.8% Subscription Price: $95.00 per year, 4 issues Cover Price: $28.00 each 13 1,190,600 575,060 51.7% 975,000 81.9% 14 904,000 469,176 48.1% 741,000 82.0% 15 1,859,000 836,550 55.0% 1,538,000 82.7% 16 1,900,000 913,900 51.9% 1,596,000 84.0% ©Bentson Clark & Copple, LLC, 2016. Copyright strictly reserved. This journal is intended for use by the individual to whom it is addressed and may not be reproduced in whole or in part or redistributed in any way including reproduction for internal distribution - without the prior written permission of Bentson Clark & Copple, LLC. 17 810,000 445,500 45.0% 703,000 86.8% 18 1,423,500 681,857 52.1% 1,239,000 87.0% 19 3,197,000 1,694,410 47.0% 2,864,000 89.6% 20 2,945,000 1,560,850 47.0% 2,658,000 90.3% 21 1,628,000 857,956 47.3% 1,492,000 91.6% 22 3,547,000 1,745,124 50.8% 3,294,000 92.9% 23 960,000 311,040 67.6% 582,000 60.6% 24 3,300,000 1,590,600 51.8% 2,888,000 87.5% 25 $ 1,397,000 $ 523,875 62.5% $ 1,090,000 78.0% Continued on page 2 12 Looking Back at the Practice Valuations of 2015