The Group Dentistry Now Show: The Voice Of The DSO Industry – Episode 68

A team of two brothers, Luke and Tyler Johnson, join Bill Neumann on the Group Dentistry Now Show. Luke Johnson, Chief Marketing & Experience Officer and Tyler Johnson, CEO discuss Healthcare Finance Direct’s deep experience in the DSO industry.

Contact Luke Johnson @ lukej@healthcarefinancedirect.com to find out how they can help your DSO or emerging dental group.

Healthcare Finance Direct is a technology platform that allows healthcare providers to offer innovative pay-over-time options to every patient, regardless of their credit. Protect your balance sheet while optimizing for revenue growth.

Though conventional bank-backed options help, they only solve about half the problem. So healthcare providers are left with a large subset of their customers that don’t have a way to pay. When patients don’t have the cash or great credit, everyone loses.

Healthcare Finance Direct offers alternatives that take everyone into account.

If you like our podcast, please give us a ⭐⭐⭐⭐⭐ review on iTunes http://apple.co/2Nejsfa and a Thumbs Up on YouTube.

Our podcast series brings you dental support and emerging dental group practice analysis, conversation, trends, news and events. Listen to leaders in the DSO and emerging dental group space talk about their challenges, successes, and the future of group dentistry. The Group Dentistry Now Show: The Voice of the DSO Industry has listeners across North & South America, Australia, Europe, and Asia. If you like our show, tell a friend or a colleague.

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Full Transcript:

Bill Neumann:

I’d like to welcome everyone back to the Group Dentistry Now show. I’m bill Neumann. As always, we really appreciate all of our listeners out there, whether you’re listening to us on Google or Apple or on Spotify or any one of the other listening platforms, we appreciate that. Or for the folks that like to watch us on YouTube or somehow find us on the Group Dentistry Now website, without you, we wouldn’t have a show. Of course, without great guests, we wouldn’t have anybody watching or listening.

Bill Neumann:

We’ve got two guests on today and actually I think this is the first time we’ve actually had brothers on. That’s the first for us so pretty cool. They both are actually the co-owners of healthcare finance direct. We’ll talk a little bit about what that company’s doing for the dental industry, for DSS in particular, also the patients that those DSOs serve.

Bill Neumann:

We actually have Tyler Johnson and Luke Johnson here today. Thanks gentlemen for joining us.

Tyler Johnson:

Thank you so much for having us.

Luke Johnson:

Thanks Bill.

Bill Neumann:

This is going to be exciting. We’ll talk a little bit about Healthcare Finance Direct. You both actually jumped into the organization back in around 2016. Give you a little bit of an introduction to Tyler first, and then Luke. Tyler is the chief executive officer and is also a co-owner of Healthcare Finance Direct and again, like I mentioned, started in 2016. The Johnson family purchased the organization and that’s when they began to turn around the business. Tyler has established and developed key partnerships that have empowered HFD to provide a finance offering for every single patient.

Bill Neumann:

Then we also have Luke Johnson. Luke is the chief marketing and experience officer and he also sits on the board and is also a co-owner of the organization. He’s been a key designer and creator of the company’s product roadmap and has increased, I don’t know if this is a typo here or not, increased patients served by over 1500%. Is that right?

Tyler Johnson:

That is accurate. We’ve had tremendous growth over the last five or six years that we’re happy to share about.

Bill Neumann:

That’s great stuff. Hey Tyler, did I miss anything? You want to talk a little bit more about your background, maybe a little bit more about your background previously to coming on board for HFD?

Tyler Johnson:

Yeah, absolutely. My background is not necessarily unique to me. Everything that Luke and I have done in our careers have been together. It’s really been family from the start. Our dad actually had a software engineering company growing up since we were little kids for about 25 years and did all sorts of things in software from the oil ag industry, the case management software for the court system, as well as building some practice management software and financing platforms inside of healthcare.

Tyler Johnson:

Luke and I got some exposure to that and just entrepreneurialship and having a family business from the start. We worked in that industry since we were about 10 years old. Luke and I took two different paths. Luke was focused mostly on the IT side, and he learned everything there is to know about engineering and building APIs. In fact, what he learned at 17-18 years old which allowed him to build the API as needed to start some of our biggest accounts when just a few years ago.

Tyler Johnson:

I actually took the more traditional finance route. I got my finance degree and I’ve always just had a passion for finance and the business side of things, organizing. Actually, I shouldn’t say organizing, I’m not very organized. Luke’s the organizational one of the group. What I’ve loved about finance and business in general is just taking something that has value and adding just more value to it, capitalizing on inefficiencies in the marketplace, getting people together. Ultimately that’s what finance is, is to be able to drive growth or to drive opportunity.

Tyler Johnson:

I’ve been completely on the opposite side. Luke’s been strictly on the, on the IT side. We really compliment each other. Both of our careers, as we’ve mentioned, have been in this industry. We started in our family business growing up. Back in about 2012-2013, we’ve gotten more involved with HFD. HFD actually wasn’t started in 2016. That’s when the family ultimately bought the business, but it was started in 2009. It was started based off of really noble idea that you shouldn’t judge people’s ability to pay based on their credit score. Sounds a lot easier to say, easier said than done. But coming off the great recession, there’s a lot of people that lost their jobs, but it doesn’t necessarily mean they weren’t disciplined payers or didn’t want to pay. Well, I should say that the company originally thought that there were ways to analyze someone’s propensity to pay without using their credit score.

Tyler Johnson:

For about five or six years, they built some partnerships, some underwriting and some trial and error and built up book of data. A lot of that was built on top of the software that my dad’s company had built. That was the connection. We’re that company built that software.

Tyler Johnson:

Luke and I built some exposure to this company through that. We started getting more involved, asking questions, trying to better understand the need of HFD and what HFD was trying to do for providers. We realized pretty quickly that HFD was sitting on gold. It was sitting on an opportunity that the marketplace was demanding, this idea of serving everybody. It wasn’t necessarily executing properly, but we bought into the vision from the early stages that if we can get the right people in the right place, get the right technology and kind of view the world through a lens of what it could be, not the way it is, over time, we can disrupt an industry.

Tyler Johnson:

That’s what’s really attracted us to it, but we’ve been in the company, different roles. I’ll speak for myself and we can add for him. But I started out as the financial controller. I was kind of in between the software company and HFD helping out how HFD just managing their turtle corporate finance. Then I moved up to managing the actual operations, how the customer experience, how the patient was served, how they’re presented financing terms, and then what happens during their program as they’re paying over time.

Tyler Johnson:

I then got promoted to director of operations and then COO two years ago, chief operating officer. Then last December, I took over as chief executive officer, which now I’m focused mostly on market facing. We’ll dive into what that exactly means, but understanding provider needs, provider pain points, and also working with the capital markets to make sure I understand what their needs are and really being a bridge between those two.

Bill Neumann:

Excellent. Thanks Tyler. Luke, it sounds like, I don’t know if this was planned or not, so Tyler goes down the finance path and you’re on the software path. Did you think you would be working together? Was that always that grand plan or no?

Luke Johnson:

No. I’ve been trying to get away from him for the last 10 years, honestly. No, I’m just kidding. No, it’s been great. It’s been awesome with my brother as a leader, and our dad. We can’t give him enough credit.

Luke Johnson:

I remember Tyler and I went, like you said, this happened, it started 20 years ago with us sitting in our family little five foot jacuzzi learning as much as we could from our dad and him explaining all these innovative ways to change the world. Really, it’s been so much fun working with Tyler. It’s been a lot of fun working with Ron, but our team as well.

Luke Johnson:

Tyler, you stole all my talking points, as far as the history of our family and whatnot. But I would say that it’s been an interesting rid,. The marriage between technology and finance. Ron and I, our dad, Ron, he’s a tech background, we would always think that every problem needed a technology solution and Tyler with finance would always think that everything, every problem needed a finance solution.

Luke Johnson:

It wasn’t only until a couple of years ago where we realized there was a FinTech solution, there’s a whole industry dedicated to the marriage between technology and finance. Once we came up with that revelation, we’ve been able to grow 1500%, like I said, Bill. It’s been a lot of fun.

Luke Johnson:

I’ll say my current role with HFD is chief marketing and experience officer, like I said. My previous roles were technology officer and product officer. The underlying theme, I guess I’d say with all of my roles in HFD, is making sure that we’re spending our time on the right things, whether our title was I guess lower on the totem pole or higher on the totem pole, we were always this white blood cell in the company, just to make sure that we were doing things that truly provided value to customers and did things that allowed customers to, I guess I’ll say it this way, where they’d actually pay us for our services. That’s really all I can think of right now.

Bill Neumann:

That’s great. It’s kind of interesting. Let’s talk a little bit about this because it’s probably best that you explain exactly what HFD, Healthcare Finance Direct, is. You’re not a lender. Talk a little bit about that. I think that would help.

Tyler Johnson:

Absolutely. We’ve asked ourselves for years what exactly are we. That’s the tough part when you’re trying to pioneer and innovate inside of an industry is you can’t use conventional wisdom or conventional thinking to describe yourself. Ultimately we were buying out pay later before it became cool. We’ll talk about that trend over the past couple of years. A lot of people are jumping into it.

Tyler Johnson:

But we had the ability to pay over time. We built this technology, this infrastructure to allow people to pay over time and essentially mirror and replicate the entire infrastructure of a traditional lender, so an all-in-one solution end-to-end FinTech platform. Luke can dive into the specifics of what that platform means. But essentially what that does is it gives the provider the keys, the engine to the infrastructure that traditional lender would have, but it puts them in control.

Tyler Johnson:

That’s the thing with in finance, traditional lending is. He who has the gold makes the rules a lot of times. When you’re trying to get money from the capital markets, they’re oftentimes giving you programs that are bank backed or bank driven, and you don’t really have a ton of flexibility that’s honestly tailored to your customer.

Tyler Johnson:

What that results in is oftentimes not very many approvals. They’ll lower approval rate or conversion rate. It possibly could be punitive or somewhat predatory interest rates even. What we said was, “Let’s just build a program that essentially puts the provider in charge of their financial program and then listen to them and their needs.” That’s what we did for about nine years where the provider was in complete control, which they still are today, but I’ll get into the difference into where things have evolved.

Tyler Johnson:

But for the first nine years, the provider, in order to essentially be the owner of the financial program, essentially was the bank. They were keeping all of these patient contracts on their balance sheet. They weren’t getting money up front. Again, Luke will dive into the specifics there.

Tyler Johnson:

But what that meant though, was we’ve actually accumulated for nine years, a bunch of data on inside dentistry about how people pay, people that traditional lending companies wouldn’t approve. We found ourselves in the past couple of years and really reinvented ourselves during COVID last year and said, “We have all this data. In fact, we have hundreds of thousands of records, over 800,000 records, primarily in dentistry, and a lot of it in with customer data that most lenders will decline.” We said, “Here’s an opportunity to really disrupt this industry, bring in the capital markets, get them involved and really provide a solution that the lenders currently cannot.”

Luke Johnson:

Just to, I guess, add the marketing side of the context that Tyler just provided. At the end of the day, we have three products. We have a sale of origination product, which is a non-recourse. You get your money up front. It’s for any provider that would rather have their money up front at a discount, they could get paid for it. The key there is up to 100% solution. It’s not just that top half that the banks engineer for. It’s anyone that walks in the door. There is a solution for them to be approved.

Luke Johnson:

The second financial product is balance sheet, which as Tyler said, that the history behind that was, it was our only product for 10 years. It worked for some specific providers. It was more of a niche. It really only worked for the very large providers, the ones with huge finance teams that could actually go shop after the fact. They would accumulate the receivables and they’d end up shopping it anyways.

Luke Johnson:

The third financial product that we have is a structured portfolio cells, which is basically just a hybrid of the two that I said. We have a non-recourse option, a recourse option, and then a hybrid option that allows them to keep all of the control, traunch up the receivables, the patient contracts that were originated. If they want to, if they have a strategic investment that they need cash for, then hey, sell a portion of your portfolio so that you can have access to the gas to feel growth in some other area of the business. But you don’t have to walk away from those higher yields right up front.

Luke Johnson:

Again, these are financial products that empower the healthcare provider to choose themselves for themselves, what is best, and really that flips the entire market on its head. For anyone that can’t pay cash or insurance, it was basically just prime customers that would have a solution. You already have some costs and then the people that turn away, Tyler will talk about this more. But what we’re seeing is that you end up getting more volume across the credit spectrum because of the fact that you’re able to mark this 100% approval.

Bill Neumann:

Talk about really the issues that you see out there. You probably have problems, some issues at the provider level. Then there’s of course the issues at the patient level as well. You’ve got patients that may not qualify or may want certain type of plans, and then of course the provider may be in a certain market where you have people that may not qualify, or you may have a mix. Talk a little bit about that, and then how HFD addresses those issues in the market.

Tyler Johnson:

Absolutely. It’s funny, for years at HFD, we’ve debated about who exactly is our customer. Is it the patient, or is it the provider? We’ve had some internal debates about that. We finally just recognized that it’s both. Let’s just have world-class standard for both the provider and the patient.

Tyler Johnson:

Ultimately, we don’t sell direct to consumer, so we’re not lending to the customer. This is, we’re building programs at the point of sale for the provider so essentially the provider is paying us, but they’re paying us to serve their patients. We’ve addressed the value exchange there for both.

Tyler Johnson:

How we aim to help providers is to, number one, grow their patient base. I mean, and that’s also on the flip side where that helps the patients is we don’t believe that any patient should get turned away from healthcare. We think that we’re optimists and that we think that most people who actually want a healthcare procedure want to pay, and we think the data supports that. It’s a pretty revolutionary idea because again, with healthcare, as everyone listening knows, it’s not a collateralized asset. It’s not selling a car and you go repossess it if somebody doesn’t pay. You can repossess their teeth.

Tyler Johnson:

Traditional lenders, traditional financers typically don’t want to lend to the traditional credit spectrum. They only want to lend on the traditional bank model to people that frankly don’t even need the money or that have other ways to pay. It’s primarily about 40% to 50% of people are approved inside dentistry, the dentistry vertical.

Tyler Johnson:

What we aim to do is to double that. We want to plan for every single patient 100% approval. It’s not even about us. It’s about what the provider wants. If the provider wants a solution for 75% of the spectrum, we can do that. It’s whatever their need is, depending if they’re trying to drive growth and maximize conversion, if they’re trying to preserve a certain margin, then we could tailor for that. If they want to drive extremely customer friendly terms, we offer 0% APR products up to 12 month terms across the entire credit spectrum, by the way, which is something that nobody in industry can say, 100% approval, every single customer, 0% APR for 12 months. We can do that.

Tyler Johnson:

From the provider’s perspective, it’s really three things, drive more customer volume, increase net contribution margin. One thing that we have substantial data on is we always like to say that the customer you say no to is worth seven times more than the ones you’re already saying yes to. The one that’s walking out your door, the one that you already brought them in, set them in the chair, you gave them a plan diagnosis, what you need to do. If they’re walking out the door, you have sunk costs already built into that. It lowers the customer acquisition costs and allows you to essentially capitalize on every single opportunity, every single patient that walks in the door.

Tyler Johnson:

Then on the flip side for the patients, the patients are, number one, gaining access to care. We really take pride in having the most customer friendly terms. A lot of the other people in the space we’ll do almost credit card level interest rates, and we take pride to not going there. We don’t want to do that. One, because we think it’s not good for the customer. We think it ultimately hurts conversion, but we think there’s ways, and it’s the challenge we put upon ourselves to innovate of how do we make it sound and sustainable while still being customer friendly? It’s better for everybody. It’s easy to understand for the customer and then easily understand for the provider.

Luke Johnson:

Bill, one thing I’d like to add to that too, when talking about the provider’s problem is the CFO or the VP of finance, whoever we’re talking to, it’s typically the person on finance. They say, “Yes, this is amazing. I love it. I want it. But how are we going to roll this out across 150 centers?” Our retention and engagement is a huge deal. That’s why we’ve taken an engaged approach to it.

Luke Johnson:

We send teams to all the locations if we have to, to understand their workflows. We have multiple different options for origination. We have our own self hosted, easy apply, but we also partner with a few lender aggregators that have a lot of the prime lenders baked into their software, because a lot of these DSOs already have contracts and I guess engagements with other private banks. We love them. We have great relationships with them.

Luke Johnson:

At the end of the day, we’re looking for a way to provide a plan for every single patient. We’re happy to work with the prime banks that they have in place to make that happen. We have an origination product for every situation, and there’s a lot of different circumstances out there. There’s no one size fits all and we’ve over the last 10 years, made all the investments necessary to custom tailor the solution for the DSL we’re working with.

Tyler Johnson:

I’d like to point this out real quick, because Luke hit the nail on the head here, which is the reason why we’ve purposely positioned ourselves as a platform and not a lender is so that we can essentially be the advocate for the provider. We are completely agnostic to the approach the provider wants to take. If they want CareCredit as a prime option, which CareCredit is great. We have a partnership with them. We have a waterfall product with them, the only ones in the space to have a CareCredit waterfall. We were in multiple enterprise DSOs, Sage Dental, DECA Dental, on the CareCredit waterfall. We are happy to pick up all the CareCredit turndowns, so anything that CareCredit declines, we can approve everybody else. It’s driving tremendous conversion and an uptick in overall revenue and overall patient served for those providers. That’s something we’ve built over the past 18 months, I’d say during COVID, and we’ve launched with a few DSOs. We really hope to scale that with CareCredit over the next few years.

Tyler Johnson:

But we also have a product that, like Luke said, the easy apply where for the smaller DSOs that we can get into a distinction that we’re seeing with smaller offices, even the mom and pop.