The next Michaelisms were formulated decades ago and have proven their lasting truth for thousands of practices. They were so fundamental to understanding a dental practice, that we created the infamous “Yellow Card”. This small plastic business size card was given to attendees at speaking engagements and to clients. It became so “infamous”, that other speakers and authors began to use its fundamental benchmarks to describe what we later named, The Super General Dental Practice benchmarks. It has become a goal and benchmark for every doctor who is striving to create the best business model in dentistry that they can.
This installment is taken directly from our book, The Super General Dental Practice. A free digital copy is available at www.supergeneralpractice.com. This explains each item of the “Yellow Card”.
Practice Benchmarks for a Well Run General Dental Practice:
$25-$30K production per operatory/month (5 Ops = $100K-$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 room to produce more until you meet or exceed this ratio.
$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 another single staff member. If someone quits, do not replace them. Try and work with fewer employees.
50-75 new patients/doctor/month: (Remember: we are talking about a well-run general dental practice, not a “Boutique” practice.) Normal dental practices have a mixture of treatment and patient ages. As you and your practice age, it is normal to see fewer children. Along with this increase in age, confidence and competence grows as well as doing more crown and bridge. The negative is that you have limited the size of the patient pool that you can vie for. Generally speaking, a dentist will only attract and inspire patients who are about 10 years on either side of the doctor’s age. Open up a practice 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 doctor for about 2000 patients). Go to www.zipwho.com, put in your zip code and up will pop all of your demographic information. This will be a revelation for most of you and an aid in getting more new patients from updated marketing for others. Bottom line: There is no excuse for not getting your share of the new patient pool. You are either growing or you are declining. There is no way to just stay at a particular production plateau. Inflation, demographics, 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.” If you’re average, which are you?
Two (2) Hygienists per doctor. 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 has been 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 are producing $1100-$2500 per day unassisted. Once again, shortage of available hygienists, yearly cost of living wages, longevity raises and diminishing reimbursement for hygiene services from insurance companies have destroyed profitability in our hygiene departments. Hourly wages of $60 dollars per hour (and above) is becoming more common. Based on what hygienists bring in, most practices are losing money at that pay level. Take the time and run a net adjusted production by provider report for the year, get your CPA to run a total pay statement for the same interval of time for each of your hygienists and divide what they were paid by what they produced to give you a percentage. This calculation will give you the percentage of pay compared to what they bring in. Now, look at that number. Are you willing to pay a hygienist 40%-60% of what they produce when an associate dentist is making about 30%? Now you have it. What are you willing to do to make hiring a hygienist work? You can’t manage what you don’t measure.
Hygiene department produces 33% of the total production of the practice. Whether it is 1 or 10 hygienists, you should be getting at least one third of your production out of your hygienists. 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 8 cylinders. As an addendum to this hygiene discussion, take the time and determine what 1% of your yearly collections represents. One percent of a $1,000,000/ year is $10,000. Now start to look at where you are in your overhead, production, and collections. Let’s say your hygienists only bring in 25% of the office’s collections. If the goal is 33% and you have a one million dollar a year practice, you have a short fall of 8% or in this case, $80,000 a year that you have the capacity to achieve.
60% of your day is filled with substantial cases. A substantial case is anything that is about the fee of a crown. For example: Your production goal is $5,000/day. If your crown fee averages about $1,000, you would need to have 60% of $5,000, or $3,000 (3 crowns or their equivalent in dollar amount) 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 just 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 at least 3 times what they are paid.
Recall effectiveness of 85% (Nationally, you see the average general practice at 42%, and this is average). Direct referrals and recall effectiveness percentage the two best measurements of a successful office. In a way, these two numbers represent the level of success and future growth in your dental business.
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 for 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 realize a new outlook for your practice.
98% or greater collection rate (The average practice does 94%. This will not do.) Our practices have always collected more than 100% a month. Poor collection ratios indicate deeper problems in staffing, training, systems, and financial arrangements. A lack of good collections percentages should cause you to radically change your protocols and improve systems across the board. Each of these Michaelisms concerning benchmarks should encourage you to act, rather than just accepting
Consumer hours: 7-10am, 3-6pm, Monday-Friday, and Saturday hours. This is difficult without multiple doctors, but 9-5 Monday through Thursday does not meet your patients’ needs. Consumerism is a fact we all need to embrace. You need to adopt consumerism to prosper in any economic environment.
Convenience is huge in today’s practice. Patients show up where their needs are met. We talk a lot about consumerism and capacity. The best definition I could give you is your ability (capacity) to give patients what they want, when they want it, at a price they can afford (consumerism). (another Michaelism)
Small incremental fee increases of about 2-3% every January and July. Inflation and 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 our fee survey and place them in the 85th 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.
Pricing: Keep comparables comparable: Do a fee survey. Try to keep your fees in about the 85th percentile. Consumers shop, and price is important. As a note: An 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.
A minimal production of $600-$750 per hour per Dentist. In today’s economic cycle, we can ill afford to pay for the increase in staff and materials if we are not cognizant of the reality of production per hour. It all comes down to making a profit and diagnosis, getting patients to say yes, clinical speed and competence will always help or hinder our ability to run a strong business in dentistry.
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. 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 dentists at age 65 will either be “dead or dead broke”. Few dentists ever arrive at financial wealth or security. Many have to live on social security or work till they can’t. Only 3-5% will become financially independent at that age. 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+ per new patient. (National average is $1,100 per New Patient) Just divide the monthly net adjusted production by the number of new patients, and this will give you a ratio of production per new patient, not production on each new patient. The $2,500 per new patient is a lofty goal for an average general practice, but it is very doable. Production over $4,500/New Patient puts you in the realm of a boutique practice. There is always a way to maximize your demographics to create a lower overhead and increase production without more staff, facility, or stress.
At least a 90% case acceptance rate. The “monkey score” is a case acceptance rate of 67%, and that is for fillings. 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, great systems, and a willing team, and it will always go up.
Take a look at each of the benchmarks and compare where you are to where you want to go. With your team’s help, take these goals and set a path for the next 12 months to improve in every category. It is no longer possible for dentists to just get by. We must set challenging goals and begin to run our practices like a business. Make the difficult decisions about staffing and when and how to work. Pay the price and take the prize. Keep in mind that many of the Michaelisms refer back to these benchmarks and overhead items. Take the time to act and rewrite your financial future.
Michael Abernathy DDS
972.523.4660 cell
[email protected]