The Business of Pay
I just got these emails Saturday evening. Thought the answers might help others.
Not sure how you calculate hygiene salary.
For a basic re-care appt. with no X-rays Delta pays $43 for our hour cleaning and $24 exam.
Our usual charge for a Cleaning is $100 and exam $90 I think.
If you add my exam fee to the hygiene production, then she brings in $67.
If she only gets the cleaning fee she brings in $43. That doesn’t even account for my overhead per hour for that room or the cost of the disposables.
I’m sure any of my questions have been asked by thousands of dentists.
Dr. Confounded, DDS
Another email arriving on the same day said:
I do not want to put my hygienists on commission because they will make too much money!
Dr. Cheaper, DMD
I want to actually address both of these emails together in this slightly long post. Now I’m not sure exactly what each pays their hygienists, but you can be assured that it is hourly or a salary, and I bet every recall is one hour long. This is a much too common scenario in most unproductive offices with poor overhead models. Here are a few things to keep in mind:
1. Everyone’s goal should be to lower their overhead for staff compensation while paying their staff more money based on profit and an ideal staff overhead of 25% (pay, taxes, continuing education, sick days, bonuses, insurance, uniforms, staff meetings, and any other benefit or pay). Only a commission basis will achieve this.
2. Pay should be based on sound business principles, benchmarks, and overhead constraints. In other words, the pay should basically be what a person in that position should make in your area of the country. Go to www.indeed.com and on the landing page at the very, very bottom in almost faint grey lettering is the word “salaries”. Click this and then put in your position (hygienist in this example), and your zip code. Instantly you will see the average pay in your area. This is not a “guesstimate” but an actual number based on hires within the last 12 months. In fact you will see the actual amounts paid just below the average number. Assume an average hygienist works 4 days a week for 49-50 weeks and about 8 hours a day and you can figure out the approximate hourly wage. NOTE: I would throw out any salaries listed that are very low or high and refigure the average. This gives you a starting point and from there you can compare where you stand.
3. Hygienists and associates should be paid on their adjusted net production and the offices collection percentage averages. It wouldn’t make sense to pay someone a thousand dollars a day if they just produced $800, but I see this every day. Pay should reflect the realities of your overhead and collections, nothing else.
4. Hourly pay or salary is the worst way to pay producers (hygienists and associates). Hygienists and associates are the only staff that can actually control what they produce. Salaries, while creating security for your hygienists, tend to expand the amount of time for procedures, create poor recall systems (ideal would be 85%), and build a culture with no consequences for poor results. Salaries place 100% of the risk on the doctor’s shoulders because you pay whether a patient shows up or not and/or has poor reimbursement. Both increase your overhead. Commission based pay shares the risk/rewards, encourages the hygienist to become both efficient and effective, while giving them the opportunity to make more within an ideal overhead model.
5. Pay/salaries should be dictated by the realities of the market and economic pressures: insurance reimbursement, missed appointments, poor recall, fewer patients accepting care, and diminishing productivity. Dentistry now resides in what has become an insurance driven economy based on the consumers desire to have the kind of dentistry they want, when they want it, at a price they can afford. To survive, both the doctor and the hygienist will need to deliver a better product 20-35% faster. Paying someone a guaranteed salary regardless of overhead, new patients, insurance, or effectiveness is just dumb.
6. In commission-based pay, cost of living raises are already taken care of if you raise your fees twice a year. If they do the same number of procedures this year that they did last year, they make more due to the fee increases while not costing you a greater percentage in the pay category.
7. Longevity-based pay raises should never occur. Just because you have been there longer does not mean you get paid more. Increased profit means more pay shared with the staff. They earn it through a well-designed bonus system. Never give longevity based raises. Not ever.
8. The actual percentage is not a fixed number in one part of the country or another. A hygienist should have net production (not just the fee for service production number, but the actual number you can charge minus managed care mark downs and any other discount you might offer) at least three times what they are paid. If someone was paid $40/hour times 8 hours a day times 16 days a month you would need to also factor in the taxes, unemployment, benefits, etc., to find out what the 3X number would be. In this example, it is not just $320/day. Now let’s assume that you actually had someone that produced over three times what they were paid. I would just run the numbers and figure out what that percentage would be if we took into account that the taxes, unemployment, benefits, continuing education, etc., need to be added to the total amount. For most of us it would make the percentage pay about 25-27%. If they are not producing three times what they are paid, then you can once again figure out the actual percentage that they are paid with their current production numbers from last year and use that percentage. The benefit here is that they will not make more unless they produce more. If someone doesn’t show up they bear the risk. If they don’t pre-book appointments in the future or follow through with recall, they suffer and your cost for that hygienist drops. If they figure it out and produce more, then you make more and the overhead cost for the office drops.
Hygienists and associates as well as the owner doctors are faced with diminishing profits without making changes in the efficiency and productivity of their practices. Doing what you have always done will not allow you to survive the new Dental economy we currently face. Your current systems guarantee a struggling business model wrought with poor recalls, few referrals, few new patients, poor production, and a languishing team. Make these changes and forget the ludicrous poor logic that I see in these emails. This is how you Summit.
Michael Abernathy, DDS