I realize that I am about to step off the deep end with hygienists and am placing a huge challenge in the lap of every doctor that reads this article, but the time has come to move away from hourly wages for hygienists. Years have passed and pay for our employees has increased, and we failed to notice that “overhead creep” has stolen our profits while staff continued an ever-increasing salary base. In other words, staff costs have outstripped office profit as well as office productivity. In business this is untenable over the long haul. Push the cost of living raises, longevity raises, and bonuses out far enough, and we reach a point of total financial ruin. The reality is that hygienists have continued to have higher salaries in offices where managed care has decreased our reimbursement yearly only for us to find that the percentage of our collections for staff costs has tripled with no way to compensate by raising our fees. Fee increases today, basically, don’t affect our actual reimbursement because of managed care. With hygienists, the reality of supply and demand, ever decreasing reimbursement, and competition has not translated into a pay scale that is sustainable. This is where we find ourselves today. Most doctors are unaware of the inequity of work to pay levels they currently have with hygienists and also associates.
When we look at hygienists as the hygiene department, we have some pretty hard and cold facts that you should consider. First, let’s look at some hygiene basics. Ideally, hygiene department revenue should be one third or greater of the total practice revenue. I define “hygiene department revenue” as consisting of everything that gets done in the hygiene operatory. For example, I consider the doctor’s exam as hygiene department revenue. Certainly, you could remove that, but I would like you to study my module on The Hygiene Factor before just discounting this strategy. We need our hygienists to partner with us to help the patient want what they need. They can play a huge part in case acceptance while at the same time not overwhelming the patient or coming off as overly assertive. I’m sorry, but most doctors are completely ignorant of a hygienists training and it is silly not to think that your hygienist could compensate for many of the things you do not do well. Great offices have great long-term hygienists that live and breath the culture of the practice. Giving them this small percentage (25%-30%) of that fee for the exam will pay huge dividends in more patients ending up on the doctor’s side as well as more direct referrals for your office. Keep in mind that you still get to keep 70%-75% even if you do share this with the hygienist.
Whether you have one or a dozen hygienists you need to look at hygiene as the hub of your entire practice. They should be bringing in at least 33% of your entire production. Hygiene should never be considered a “loss leader”. They should partner with you to help patients want what they need while building up the doctor’s image in the mind of the patient. Cleaning teeth is the last thing on the list of important functions that hygienists perform. If you, like many others, find your hygienist thinking their job is just cleaning teeth, you definitely will be challenged to grow your practice. A hygienist’s foundational job is inspiring our patients to show up, pay for their treatment, and refer every one they know.
So how do we reset the image that many hygienists have of their role in our practice? How do we elevate the importance of their part in a successful practice? How can we create incentives and consequences to ensure their growth and engagement in the business of dentistry, while not having them act like a privileged prima donna where the world revolves around them? Why would this ever happen? This pandemic and a few months of not working gives you an opportunity that will never happen again. A reset button to put things right while creating a system of commission pay that will give the hygienist the possibility of making more money while actually lowering the percentage of collections going to staff salaries. One could almost say that the average practice has a hygiene department that failed to launch.
Failure to launch in your hygiene department is the result of “no pain”. We are all familiar with the phrase: “no pain, no gain”. When you work out, that leg exercise, if done correctly and consistently, is going to hurt in a couple of days every time you do it. Striving and straining increases the likelihood of physical gain. The pain of putting off gratification in order to succeed in life has become a worthy goal. When I say, “no pain” here is what I am talking about. If you pay your hygienist hourly you have created a one-sided accountability formula for mediocrity. Hygienists that are paid hourly do not feel the pain or consequences of:
- Cancellations and No-Shows: When someone does not show up for their appointment or cancels at the last minute, an hourly employee has no skin in the game: They feel no pain. They get paid whether they produce or not. Especially if that hygienist feels that making recall calls, reactivation efforts, or cleaning up a room for a busy assistant is beneath the station of an educated hygienist. Most good hygienists are more than willing to pitch in and help the team, but most good hygienists also should be responsible for their schedule by anticipating recidivistic no-showers and consistently late patients. They should constantly follow their own schedules to be productive every minute of the day regardless of the circumstances. Your hygienist must be engaged to the point that they will not tolerate anything less than a 90%+ utilization each and every day. Hourly pay decreases their productivity.
- Fewer Scaling and Root Planing appointments: The number one indicator of a poorly trained hygienist and a marginal standard for clinical excellence in your dental office is having anything less than 20% of your patients going thru Periodontal procedures. Hourly hygienists don’t feel the pain when they fail to keep up with technology, clinical excellence, and patient education. They get the same pay regardless of whether or not they continue to learn and care for their patients at the highest standard of care. If you pay them hourly, they will have a patient every hour. If the numbers for scaling and root planing are at or below 20%, then your hygiene department is practicing “supervised neglect”.
- Poor hygiene recall: This falls squarely on the heads of hygienists as they interact with their patients. 100% of patients should be scheduled for future appointments for cleanings and exams. The sad truth is that the national average is 42%. We spend all this money on marketing to attract new patients and yet fail to maximize our return on our current patient load by not continually and consistently caring for those already in the practice. Check for yourself. You will be horrified at what you see. Just look out 3 or 4 months on the hygiene schedule and see what you find. Most of the time you will see 3 or 4 patients scheduled and those are all early in the morning or late in the afternoon. The very times that new patients will demand. Not only are they not pre-appointing their current patients, but they have undermined the front desk by not guarding the peak demand times that new patients will want. Poor recall happens when there is no pain.
- Weather: How many times have you made it to work in bad weather to find that only one or two employees show up, and none of the hygienists. If you pay hygienists by the hour, there is no pain or at least not enough to get them to try and make it to work. No pain, no gain.
- Poor production per hour in hygiene: Being paid hourly allows anyone to stop looking at their own productivity because they make the same regardless of the day. Accountability goes out the window. The office takes all of the risk while the hourly hygienist takes home a fixed wage. The reality of business is that systems that encourage mediocrity should be challenged. Hygienists and doctors are the only people who can control their productivity by improving their efficiencies and effectiveness. At this time of great challenge to come back from the COVID-19 pandemic, we can ill afford to not act on areas that we have allowed to get out of hand. None of your staff are employed now. Today is the time to rectify who works for you and how they are paid.
- If you don’t measure a hygienist’s results: What gets measured, gets done. That is why policy manuals, job descriptions and benchmarks for every position are so important. They create a black and white score card for excellence. We measured the hygienist’s production per week, the number of scaling and root planings they did per week, and the number of crowns they presented per week. This was kept on a graph posted in the staff area where everyone could see. The hygienist was tasked with keeping this up to date weekly. While their job descriptions may have dozens of other requirements, these three areas, if done well, will insure a super productive hygiene department that will continue to grow while offering the hygienist an ability to improve what they are paid in a commission based or hybrid pay system.
While we could probably add a few more areas where there is no pain in an hourly based pay scheme, I think you can see how consequences create an accountability that drives hygienists to re-engage in their jobs while understanding the business of Dentistry. Moving to commission will erase these failures to launch issues almost immediately.
Why would an office consider this change from hourly or salary to a commission based on net adjusted production (adjusted for any write-off)? As a reminder and reference point, we already know that historically 20-35 years ago every person including associates were paid in the form of a salary or hourly wage. The cost of doing business was offset by inflation and increased demand for dentistry in a growth market with very little competition. Back then we could afford cost of living raises without altering our profit margins. It wasn’t until we started to see managed care whittle away our fees that the smart doctors began to question the validity of continuing to use this pay structure. The new dental economy we find ourselves in has an ever-increasing dental graduation rate (6,500+ this year translating to more competition), overhead increasing 11% in the healthcare field over the last 5 years with no end in sight, a decrease in patient spending for dentistry, and higher debt carried in our practices. Ask yourself: How can I continue to pay an increasing hourly wage or a salary when what the office gets per procedure has continued to diminish each year, while our overhead continues to rise? In its simplest form, we make less every year but we pay our employees more. This is why since 2008 the average dental practice owner has taken home less every year. Added to the fact that most doctors still give a cost of living raise or even “longevity based” raises (you get payed more because you have been there longer even though the office profit continues to tank) and any “simpleton” can see that there will be a time in the not too distant future when there won’t be any money left to pay ourselves unless we address this inequity and one sided risk. Consider the burned out or aging doctor that produces less each year and you have an eventual untenable situation.
The hard fact is this: 90%+ of dental offices make no profit. When I ask doctors how much profit they made last year, they generally tell me 25%-35% which would be amazing if that meant after paying everyone, they had 25%-35% left over. The reality is, they were telling me what they took home out of the total collections. See, that is not profit. That is just part of your overhead for a doctor to work there. It is the going rate for what you would have to pay another doctor to do the same work. It is your salary as an employee of your corporation, it is not profit. As an owner of a small corporation you are a shareholder (the boss) but you are also an employee (the dentist). In other words, that percentage if it is in the 25%-35% range represents the owner doctors pay, and most practices find that it is even less than that. Keep in mind that you are not guaranteed this or any fixed percentage if you are the owner. Most doctors are happy if they get this much. Profit is that amount of money left over after paying all the bills (including the owner doctors pay), and even in a one-doctor office it should cost you 25%-30%. That means that if you have a 70% or higher overhead, there is no profit. In case this is not hitting home, it is “BAD”. It’s also “bad” that most of us never look at it this way or realize how vulnerable our financial future is.
Now add in the fact that most of you have let your staff go, they are on unemployment, and the specter of COVID-19 and a far reaching financial recession is upon us and you have a “do or die” situation as you contemplate bringing back staff and especially your hygienists. Even if many practices make it back and production returns to something resembling normality, most are still “dead men walking”. It will just take a little longer for you to figure it out. A day of reckoning is coming. Probably it is sooner rather than than later.
Commission pay on the other hand should be an algorithm based on overhead and profit margin. It is not some predetermined percentage because everyone uses that amount but a carefully analyzed percentage representing a reasonable pay based on an office with a reasonable overhead, but many offices don’t currently have a “reasonable” overhead. Done any other way, you will come up short. Done correctly, and it will be a formula that is scalable, sustainable, and fair. It makes business sense and inspires your employees by its impact on what they take home. At the very least, understanding this foundational reality of business will cause you to engage and act to improve your results. The greater number of offices out there are dealing with hygienist and associates and how they should be brought back on board and is there a way to set a pay scale that ensures that both the owner and the hygienist have set up a realistic pay protocol that will fit the situation we find ourselves in.
For those offices that are also dealing with associates and how to bring them back, allow me to take one paragraph and address this situation also. Most doctors call me asking what percentage or daily pay should they offer. The correct question should concern finding out exactly what your overhead actually is. Let’s assume it is 70% (average office is 67%-75% which is a red flag in that average offices are not ready to have another doctor and teeter on the edge of long-term solvency). Each of you should assume that if you hire an associate you expect to make at least some passive income off of the young doctor’s work. If not, why would you hire someone? Let’s use a small percentage of say, 5% to 10% profit above and beyond what the associate brings in as our goal for passive income. Most associates, if you explained it this way, would think that it makes sense and sounds fair. Ah, but you have a 70% overhead. The most you could pay is 20% if you wanted 10% profit and paying 25% would be 5% profit. But wait, you had to finish out that op that no one wanted to work out of and also hire at least another assistant for the new doctor, so you no longer have a 70% overhead. Hopefully you get the picture. Basing a commission or pay without looking at your overhead is a recipe for disaster.
Now we look at the hygienists. In considering the transition to commission we have to do a little home work. I want you to run a “production by provider” report for the last twelve-month period. For our purposes and to negate any effect due to COVID-19, we will use the 12 months of 2019 for your data. This will give you all of the producers by name and the total production for that period of time for each of those providers. Secondly, you need to get your CPA to give you each hygienist’s pay for that same period of time (be sure to include taxes, benefits, continuing education, etc.). Now we go to work. Take the pay for the first hygienist and divide that amount by her production for that same period of time. Example: Total Production for the last twelve months was $137,000 and her pay was $70,000. Do the math and you find that although you payed her $40/hour, effectively her pay represented 51% of her production (probably more if you did not use the adjusted net production after write-offs). You don’t make this much of your production and neither should she. In fact, ask yourself this: Would I even pay an associate anything close to that percentage? Paying by the hour or salary exposes you to great risks of ever-increasing costs with little or no risk to the employee even though they are the only ones that could control what they produced. It is human nature. If paid hourly, the hygienist will see one patient per hour. It has nothing to do with the actual time they need for that patient, they just don’t feel the pressure to engineer their schedule to be productive within the reality of a sound business strategy. FACT: Your hygienist should produce three times what you pay them, and the hygiene department should produce about 33% of the total production of the office. NOTE: If your hygienist is assisted then the production as to be three times the cost of the hygienist PLUS the assistant. So, go and look to see if that is the case. Most of you will find your hygiene department is falling short and needs some attention. Now go and look out 3-4 months on your hygiene schedule which would be somewhere in the middle of a 6-month recall cycle. Evidently hygienists who are paid hourly seem to only average about 42% successfully scheduling patients for their recall visit. This is huge. If they go on commission, it’s almost like magic. Recall goes up to 85%, more patients refer and the doctor has an increase on his or her schedule, too. Next, do a production by procedure report for each hygienist. It appears that hourly paid hygienists fall short on doing a reasonable amount of scaling and root planing of about 20% plus. Go to commission and boom, SRP’s go up. If you sell products and they go on commission, sales go up. It’s amazing how human nature and cause and effect come into play with a well thought out commission pay for hygienists and associates.
Great practices have figured how to partner with their associates and hygienists on commission and have blown the roof off of growth. A few other pearls before we go. Whether we are speaking about associates or your hygienist, I always paid a new commission-based employee a daily salary for about 90 days, or the commission, which ever was higher. But at the end of that period of time they went directly to a commission pay basis. If you spoke to any of my 10 hygienists, each and every one of them would never go back to hourly pay. They were given a career, the training, and paid well for what they did. Instead of just an hourly job, they felt like they were in more control of their career. The last thing is the miracle of the “ripple effect”. When your hygienist goes on commission your recall rate increases, cancellations and no-shows almost disappear, overhead drops, staff turnover goes away, and stress goes way down. Commissions encourage an ownership mentality that goes a long way to getting you to the practice you always thought you would have. This is how you Summit.
Michael Abernathy, DDS
PS. By the way, the blog page on our Website contains a search feature allowing to quickly scan over 500 articles we have written on just about every aspect of a Super General Dental Practice. If there is a topic you’re interested in or perhaps struggling with, this is a great resource. (www.summitpracticesolutions.com/blog)