The Concept of Shrinkage

Whenever a bank considers the merits of a commercial real estate property–whether an apartment building or a mall with stores–they make their financing decision and loan allocation based on expected revenue. That revenue is always reduced by some kind of historical metric that accounts for shrinkage, because there will always be periods of time when an apartment is not rented or some store suddenly goes out of business.

Dentists tend to go ballistic when a gap opens up in their schedule affecting their expected revenue. Especially when it is because of a last-minute cancellation for a large block of time reserved for some profitable comprehensive dental treatment. Unfortunately, these kinds of situations go with the territory. People will always disappoint you, and there is no way to totally eliminate this behavior. The trick is how to reduce it. I have been around long enough to realize that success is how you deal with plan B.

I have never been a fan of charging for broken appointments. People always rationalize their actions and will not accept responsibility. The negative ramifications and publicity from someone bad mouthing your office for the charge is simply not worth it. And the amount of money you charge can never come close to replacing the revenue that was lost. Another strategy that doesn’t work is having people leave a significant nonrefundable deposit on a credit card to guarantee the appointment. This, in my opinion, seems unusually harsh and severe.

I have found success in reducing last minute cancellations by using a concept I call “the power of the doctor”. When the diagnosis is made and the patient agrees to treatment, the doctor–looking the patient directly in the eye–says the following to prepare the patient for any crown and bridge appointment:

“Mrs. Jones–I’m excited to be able to perform this treatment for you. But I want to let you know that we only schedule these appointments on certain days and at certain times of the day. You probably are not aware that there are many people involved in this appointment: I have a lab technician on call, I have a delivery person standing by to be sure the impression gets to the lab on time, and I have a ceramist all set to make sure that the color is perfect. So since so many other people are involved with this procedure, when you schedule this appointment with Jane, please be sure to do so at a time when you will absolutely have no conflicts in your personal schedule. Is that okay?”

When the patient answers in the affirmative, the patient has in fact made a promise to their doctor. This is very different from giving the impression that you are going to lose a lot of money if the person doesn’t show up. I have found this technique to be extremely successful in reducing last-minute cancellations and no-shows in the doctor schedule. But it has to be the doctor -not anyone else–delivering this message.