We cannot not lose sight of “Practice Benchmarks for a well-run General Dental Practice”: I want to remind each of you of the benchmarks you should be pursuing. Lose sight of these, and you lose profit and ruin your chance at a successful transition. From a young doctor’s perspective, if the practice you are considering working with cannot hit or get close to these benchmarks, I can almost assure you that you will not find the right mentor or a profitable place to work. Both sides, the young doctor as well as the seasoned owner, need to go into this with a perspective and knowledge of what benchmarks and numbers should be considered.
$25-$30K production per operatory/month (5 Ops = $125K-$150K/month). If you are not at this production level, it does not mean you are a failure. It does mean you have room to grow, and there are no physical capacity problems. There is no need to add more rooms to produce more until you meet or exceed this ratio. Keep in mind that if you bring in another doctor, your goal would be to have twice the number of hygiene hours as doctor hours. That means that within 12-24 months of hiring another doctor, not only would you need to double your new patients, but you would, in short order, need to hire more hygienists. Most offices are surprised at how quickly a successful transition causes a physical blockage by not having enough ops to work out of or not anticipating the fact that your office is not equipped to bring another doctor in.
$20-$25K production per employee/month. If you are not meeting this benchmark, you are either overstaffed, or under producing, or both. Once again, you have no staff blockages (not enough staff) if you fall short of this goal. It is possible to increase production without adding a single staff member. This one area is the most over abused cost item and the number one reason for little or no profit.
50-75 new patients/doctor: (Remember: We are talking about a well-run general dental practice, not a “Boutique” practice.) Normal dental practices have both a mixture of treatment and a wide range of patient ages. As you and your practice age, it is normal to see fewer children. Along with this increase in age, confidence, and competence, comes more and more crown and bridge. The negative is that you have limited the size of the patient pool that you can compete for. Generally speaking, a dentist will only attract and inspire patients who are about 10 years on either side of his or her age. Open a practice today and still be in the same location 15 years later and you are probably in the wrong location. Demographics will change and before you know it, the neighborhood has gone downhill and there is a dentist on every corner. (To help you compete, you need to have a ratio of 1 dentist for about 2000 residents). Go to www.zipwho.com, or any other demographic website, and put in your zip code and up will pop all your demographic information. Next, you will need to assess the number of dentists in your draw area. You can go to your State Board site and use a zip code or codes and see how many there are, or you can just Google the number of dentists in a particular zip code. Online Yellow pages can do the same thing. If all else fails, Google search for “list broker” and pay for the information. Bottom line: There is no excuse for not getting your share of the new patient pool. You either grow or die. There is no way to just stay at a particular production plateau. Inflation, demographics, supply and demand, and the economy slowly erode your business until it is too late. It is like cooking a live frog. You can’t drop him in boiling water because he will just jump out. Put him in cold water and slowly raise the temperature, and he never realizes his plight until it is too late. Welcome to the story of the average dentist. No one ever left dental school wanting to end up an average dentist. L.D. Pankey said: “The average dentist is either the best of the worst, or the worst of the best.” One last point concerning the large number of patients the Super General Dental Practice will need. In 1975 the average adult had 16.3% of their teeth decayed, missing, or filled. Basically, a high demand, needs based patient population. Anyone could make it then. Fast forward to 2020 and we see the average adult having only 2.7 decayed, missing, or filled teeth. This is a perfect example of “supply and demand” economics. We graduated 6,800 dentists last year and it has increased every year over the last two decades. Our potential clients are needing less dentistry in a population of ever-growing dentist numbers. Don’t ignore the reality of facts and the ripple effect on your practice and profits. Everything is changing, and each of us must identify our vulnerability, situation, and embrace change or die.
2 Hygienists per doctor. Another way of stating this would be twice as many hygiene hours as doctor hours. This indicates a healthy recall, new patient flow, and shows that you have the back door closed. This is the lifeblood of a healthy practice. If you have been in practice for more than 5 years and have not found the need to hire another hygienist, you are not inspiring your patients. With the average new patient flow of 25 new patients per month, you would need to add a new hygienist every 24 months just to service them. If you are not seeing this, then you have as many patients leaving as you have coming in. You have the back door wide open. This usually indicates a lack of systems, internal marketing, and the ability to inspire the patients you have. It is black or white: You are either growing or you are not. This is one of the reasons I believe that every practice needs to invest in a coach: Someone to fine tune your practice and help you to the next level. Without exception, everyone needs a mentor. I would have to say that the success of my own practices is directly related to practice management coaching, meeting with a mentor, and hiring for attitude. Practice consulting is not expensive. It is priceless. It is the best investment you can make in building a successful practice.
Hygienists have a net production $1100-$2500 per day unassisted per hygienist. Sad to say, but most office have broken recall, reactivation, and hygiene departments marked by poor production and no profitability. With lower and lower reimbursements for hygiene procedures paired with an ever-increasing pay demand from hygienists, we may see offices eliminating this position without some sanity in pay, better results, and consistent profitability. I believe that hygienists should be paid more. The only way this can happen is to pay them like you would pay another doctor. It must be a system of pay based on what they can produce. No business can survive with employees that cost more than they produce. The lack of understanding of the “business of dentistry” finds offices paying 45%-67% of net adjusted production in hygiene in the form of hourly wages without any checks and balances to risk and reward economics. The biggest problem is that the owner dentist has no idea what percentage of hygiene net production is paid in salaries and benefits. Do yourself a favor and run a net adjusted production by provider (this will give you the collectable amount each hygienist has produced for the year) and then divide that number into what you paid that individual hygienist for the same time period. This gives you a percentage that represents what your hourly wage is. You will be surprised. My hope is that by sitting down with each hygienist and discussing this, the two of you can come up with an amicable way to increase hygiene production and increase your hygienists pay while controlling your overhead in this new dental economy. Until you see an excellent productive hygienist in action, it is hard to believe how profitable hygiene can be. Hygiene services should never be viewed as a “loss leader”.
Hygiene department produces 33% of the total production of the practice. Whether it is 1 or 10 hygienists, you should be seeing at least one third of your total office production from hygiene. If you are not monitoring this, you will be surprised at how easy it is to lower your overhead and increase production when your hygiene department is running on all eight cylinders. NOTE: 67% of all the clinical production your office will do comes from recall patients, not new patients. If your recall is low (50% or less), you have a sucking chest wound and need immediate attention.
60% of your day is filled with substantial cases. A substantial case is anything that is about the fee of a crown. Example: Your production goal is $5,000/day. If a crown is about $1,000, you would need to have 60% of $5,000, or $3,000 (3 crowns or their equivalent) booked each day to reach a significant goal. This is also true in hygiene, except the dollar amount would be different. A substantial case for hygiene might be quadrants of sealants, or soft tissue management patients, not normal everyday recall patients. 60% of their day must be in substantial cases also. Fail to do this and you are guaranteed to not make a significant goal for you and your hygienist. Your hygiene department should account for about 33% of your total production. Each hygienist should produce about 3 times what they are paid.
Recall effectiveness of at least 80% plus: Nationally you see the average general practice at 42%. Getting this ratio up will insure a healthy base to your practice. Statistically, you will find that 67% of your office production will come from hygiene recall visits, not just new patients. Failure to have a healthy recall means you will not have great production. If you are not currently keeping an 80% recall, you are not inspiring your patients.
50-60% of your new patients come from direct referrals from a patient of record. Practices that are not inspiring patients to refer find themselves “marketing” driven. You are paying patients to come in the door, and they are leaving just as fast. If you are not growing, you are not inspiring your patients. In a society that votes with their feet, you cannot afford to have a majority of your patients getting second opinions or not scheduling for treatment. You cannot get better at giving patients what they do not want. Change your direction and reap a new outlook for your practice. If you are constantly seeing the back of your patient’s heads while they walk on down the street, you are doing something wrong.
Collection rate higher than 98%: (The average practice does 94%. This will not do.) Take the time to actually see how much money a 2-3% decrease in collections can mean on a yearly basis. NOTE: If you had a million dollar a year practice, 1% would equal $10,000. If you only collect 97%, you are leaving $30,000 a year on the table that should and could be collected with the right protocols and systems. You could easily pay off your school debt or buy a car for cash. Now multiply that figure over a 30-plus year career. Next add interest that could be earned if it were properly invested. Staggering, isn’t it?
Consumer hours: 7-10am, 3-6pm, Monday-Friday, and Saturday hours. This is difficult without multiple doctors, but 9-5 Monday thru Thursday does not meet your patient’s needs. Consumerism is a creed you need to adopt to prosper in any economic environment. Convenience is huge is today’s practice. Patients show up where their needs are met. Add to this the fact that we are a small consumer driven business where our potential clients vote with their feet and wallets.
A small incremental fee increase, every January and July. Inflation and the subsequent cost of operating a practice continue to climb. Review and update your fees on a systematic, regular basis. A usual scenario would be to compare your fees to a national fee survey and place them in the 80th percentile. You would then raise your fees a couple of percentage points every January and July. This would offset the effects of inflation and cost of living and would in the long run garner you an increase in reimbursement from managed care. While this will not help your managed care fees initially, you should be filing all claims with your “standard” office fees (the ones that you have set and kept at about the 80th percentile). This is the only way that you can get any future increase in your reimbursements.
Pricing: Keep comparables comparable: Do a fee analysis (This is available to our Summit Clients at no charge. Just give us a call). Try to keep your fees in about the 80th percentile area. Consumers shop and price is important. Note: A fee increase of 10% creates a 9% decrease in overhead. Over the lifetime of a practice, millions of dollars are lost from having fees that are 5% too low. The cumulative effect could fund a substantial portion of your retirement. One more consideration.
Production of $600-$750 per hour per Dentist. There is a point of production that makes all the numbers work. If your hourly production is not in this realm, you are either practicing managed care, young and just building a practice, don’t have enough new patients, or lack the confidence and competence to fully utilize a transition strategy. When I look at practices considering adding a doctor, the owner needs to be at a point where the solo practice has at least two hygienists, over 40 new patients a month, less than a 63% overhead, and collections averaging at least $120,000 a month. At this point, the practice has learned the lessons of profit and production in a consistent reproducible way and is poised for growth. Owner doctors should be able to produce at a level of $800-$1,200/hour consistently on their own (not including hygiene or other producers).
A goal of 15% growth per year in productivity. Growth is a sign of meeting your patient’s needs. No growth means you are not inspiring your patients. Lack of growth means there is something drastically wrong. There should never be a point of permanent ceiling to growth in any business. There is always a strategy, product, or service that you can add to continue your climb. Managing a practice by the numbers to establish goals to ensure growth and the proper overhead is the only logical choice. Insurance company statistics tell us that 97% of the population at age 65 will either be “dead or dead broke”. Only 2-3% will become financially independent at that age and this number is applicable for dentists, too. In fact, you can’t even purchase disability insurance after age 64 because insurance companies know that if they sell that policy, they will lose. Add this to the fact that the average dentist has gone from retirement at age 62 to age 71 in the last 15 years. Failure to plan is a plan to fail. You must start from day one to lay out a strategy for financial success. No one else can do this for you. The one saving grace is that it is never too late to start. If you have reached that age where you are closer to your “use before date, than your born on date”, or even a young doctor or midcareer doctor who has an entrepreneurial bent, we have the number one wealth building strategy to share with you: Ways to remove equity from your practice, while producing more and lowering your overhead to insure a comfortable retirement at any age. You cannot discount a life with “choices”. A secure financial future is the best choice you can provide for you and your family.
Production of $2,500/new patient. (National average is $1,400/new patient) Just divide the monthly production by the number of new patients and this will give you a ratio of production per new patient, not production oneach new patient. The $2,500-$3,500 per new patient is a lofty goal for a great general practice but is doable. Production over $3,500/new patient puts you in the realm of a boutique practice. Along with a fee analysis, you can see how a failure to do a certain type or number of procedures indicate a lack of planning. You can restructure your fees and treatment modalities to maximize your demographics to create a lower overhead and increased production without more staff, facility, or stress.
90% case acceptance. The “monkey score” for case acceptance is less than 60%. The number one reason people do not have dental work done is that they were never told what they needed to do. Just tell them what they need and statistically 67% will say yes. Add in consumerism and consumer driven scripts and it will always go up. This should give you a place to start. Give me a call if you have a problem. Look at each of the benchmarks and compare where you are to where you want to go. Take these goals and set a path for the next 12 months to improve in every category. It is no longer possible to just get by. We must set challenging goals and begin to run our practice like a business. Make the difficult decisions about staffing and when and how to work. Pay the price and take the prize. This exercise in comparing where you are now to where you want to go will need to be shared with the staff.
As you begin to interview potential trial partners, you should have a firm grasp on all the numbers. This will impress the young doctor and put you in the driver’s seat during negotiations. Of course, this works in reverse. The young doctor will want to see some, if not all, of your numbers to make a decision to come to work for you. You must take steps today to put your practice in line with the guidelines we have provided on overhead and benchmarks. In almost all cases, I recommend you consider investing in a few months of coaching prior to, and during the first few months of bringing in a trial partner. It positions you as a proactive employer who has a vested interest in giving these young doctors the start they deserve. Another reason to consider coaching is that at some point (6-12 months) your trial partner/associate must be producing at least $50,000-70,000/month. Think of it this way. If they were producing $40,000/month in a practice with a 50% overhead (the national average is approaching the mid-70%), then half, or $20,000, would be consumed in expenses. We pay them a 30% commission plus matching taxes, benefits, etc., or around 34% of what they produce. We only collect 98% or a little less. Meaning that this doctor would take home before taxes about $12,000 a month. Pay a school debt of $2,500 plus per month, pay their owed taxes, and they have about $8,000 left to pay all their personal expenses. This just barely works, and these numbers were generous by having a very low overhead and we even left some costs out of the example. If your office is not striving toward a 63% or lower overhead, you will find it difficult for the trial partner to produce at a level that would allow them to service the debt associated with school and or a buy-in or buy-out of the practice. From a senior doctor’s perspective, it is always great to think about what you will make in selling either a portion or all your practice, but you need to consider how you are going to be able to help your young doctor produce at or above $50,000-$70,000/month. Consider that they may have to produce more than you do monthly just to be able to service the note. This can be very sobering. Hopefully you are beginning to see the ripple effect of transitions along with the reality of having another mouth to feed in the form of another dentist.
Michael Abernathy, DDS