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An Effective Dental Practice Performance Check-up

This resource explores the crucial differences between dental practice performance and success, highlighting essential metrics for evaluating efficiency. Learn how to analyze revenue, expenses, and patient data effectively. Discover practical solutions to common revenue challenges, improve recall system effectiveness, and enhance overall practice management. Understand the significance of return on investment (ROI) and how to optimize clinical operations for better patient retention and referral rates. Equip your dental practice with the insights needed to thrive in a competitive environment.

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An Effective Dental Practice Performance Check-up

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  1. An Effective Dental Practice Performance Check-up H. Jack Stockton, DMD, CFP, MBA, FICD Box 478 St. Pierre-Jolys, MB R0A 1V0 Phone: (204) 433-3292 Email: jack_stockton@umanitoba.ca

  2. Practice PerformancevsPractice Success • Practice performance is measured by comparing your practice to industry norms. • Practice success is achieving your personal goals. • You don’t have to “keep up with the Jones” to be successful. H. J. STOCKTON

  3. Performance Measures to Be Discussed • Revenue data • Expense data • Return on investment • Patients/new patients data • Recall system effectiveness • Accounts receivable control H. J. STOCKTON

  4. Revenue Data • G.P. Gross billings vary significantly depending on: • Type of practice – with or without hygienists/associates. • Regional variations. • Dentist’s age/years since graduation. H. J. STOCKTON

  5. Revenue Mix • Average AB mix for family practice with hygienist(s): • Dentist(s) = 62% • Lab = 8% • Hygiene/CDA = 30% • But, depends on type of practice: • Preventive vs restorative • Children vs adults H. J. STOCKTON

  6. Expense Data • Wide variations in overhead. • G.P. total overhead averages 60-65%. • Operating overhead % (excludes financing and depreciation) is a more useful performance indicator. • <55% operating overhead is good. • Specialty endo & O.S. practice overheads are significantly lower. H. J. STOCKTON

  7. Expense Data (cont’d) • Use managerial accounting and divide expenses into fixed and variable • Have a separate category for staff wages, the largest expense - (mostly fixed, some variable) • Next 3 largest expenses are: • Lab (variable) • Dental supplies (variable) • Rent (fixed) H. J. STOCKTON

  8. Expense Data (cont’d) • G.P. averages (as % of revenue): • Staff wages 20-32% • Lab 7-10% • Dental supplies 6-9% • Rent 5-6% • All other operating expenses 10-13% H. J. STOCKTON

  9. Staff Wages • To assess properly, must exclude dentists’ compensation & adjust family member’s wages to market. • Average staff payroll for G.P. Practices is 25-27% of revenue. • Normal variation can be 18-35%, depending on revenue mix. • Expect staff payroll % to be higher with more hygiene and less lab billings. H. J. STOCKTON

  10. Staff Wages • Refer to ADA&C Practice Management Manual for expected staff wages for different revenue mixes. H. J. STOCKTON

  11. Return on Investment • Measure of profitability. • Excellent indicator of practice efficiency • Two measures • Return on assets (most useful) • Return on equity H. J. STOCKTON

  12. Return on Investment (ROI) • An owner-operator dentist should be remunerated in 3 ways: • For professional dental services • For management skill & effort • For capital investment in practice (ROI) H. J. STOCKTON

  13. Return on Investment Reported practice net income (adjusted) less, Professional remuneration less, Management remuneration -------------------------------------------- Return on investment (ROI) H. J. STOCKTON

  14. Patients/New Patients Data(Urban GP Practices) • Average no. of “active” patients (seen within 2 yrs.) = 1,200 – 1,800 • Average no. of “regular” patients (seen within 1 yr.) = 850 – 1,300 • Average no. of new patient exams per month = 12 - 18 H. J. STOCKTON

  15. Recall System Performance Indicators(Urban GP Practices) • Average no. of recalls per month = 90 – 120 per full-time dentist. • AB hygienist billings (excluding exams) average ~ 30% of gross. • Average % of patients on regular recall is only 50-60% of total patient base. H. J. STOCKTON

  16. Recall System Efficiency Calculation(% of patients on regular recall) = Average recall frequency X no. of recalls/mo. Total no. of active patients H. J. STOCKTON

  17. Accounts Receivable Control • Average A/R 6-8% of annual gross (3-4 weeks billings) • Average bad debts ~ 1% of annual gross • Average accounts over 90 days ~ 15% of A/R. H. J. STOCKTON

  18. Other Useful Data to Monitor • Missed/cancelled/open appointments. • Sources of new patient referrals. • Patient referrals • Staff referrals • Other professionals’ referrals • Advertising • Location • Other sources • Re-treatment costs (especially with associates). H. J. STOCKTON

  19. Solutions to Revenue Problems • Add staff/dentists (if saturated) • Marketing • Internal • External • Improve recall system/patient retention • Improve diagnosis and treatment planning • Improve case presentation/acceptance H. J. STOCKTON

  20. Solutions to Revenue Problems(continued) • Improve clinical ability • Range of skills • Efficiency • Improve appointment book control • Improve productive capacity of facility • Improve staff selection/management • Raise fees • Relocation (if unlikely to increase revenue) H. J. STOCKTON

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