06.26.09 Issue #381 Forward This Newsletter To A Colleague


Nancy Caudill
Senior Consultant
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Is Now the Time to Downsize your Practice?

Dr. Melvin Black – Case Study #689

Dr. Black has been considering downsizing his practice for the past few years and is wondering, is now the time?

Practice Statistics
Dr. Black’s practice has been in its present location for ten years. He is buying the building and it has appreciated considerably over the past ten years. He employs six team members: 2 hygienists that work 7 days a week total; 2 business team members; 1 expanded duties dental assistant and 1 certified assistant.  His college age daughter also works part-time assisting with the marketing of the practice.

He is presently seeing 20-25 new comprehensive patients a month. In 2008, the practice was averaging $67,000 a month in net production. The first quarter of 2009, he averaged $72,000 a month.

Why Downsize?
To lower his stress. Dr. Black was working between two treatment rooms. The EDDA was placing composites and taking impressions for crowns and bridges while he was prepping teeth in the other operatory. He felt out of touch with his patients because of the pace he was working under.  At times, he was uncomfortable with the quality of the dentistry that was being performed under his watchful eye.

Dr. Black’s practice overhead in 2008 was almost 80%. His employee overhead expenses were at an all-time high of 34%.

Bottom line – What Dr. Black was experiencing was an example of working too hard and making too little after all the expenses for the practice were paid. Did it make sense to reduce the number of employees, perhaps see fewer patients and/or work more efficiently but perform 100% of the dentistry himself in order to net more income?

Practice Goals
In order to reduce his employee overhead to 25%, which is still 3% higher than the standard in the industry of 19-22%, he needed to have gross production of $4,544 per day and collections of $4,453 and or downsize staff.  Based on the hygiene salaries and what is achievable in the industry, they could be producing $1,200 per day.  Last year he and the EDDA averaged $3,409 per day in gross production and the hygienists averaged $850 per day.

Changes
Dr. Black determined that he wanted to work on all his operative patients from the beginning to the completion of their treatment. It made him feel accomplished and in control of the quality of dentistry that was being provided.  He also didn’t want to work as many days as he had previously felt he needed to, in an attempt to reach the daily goals that were necessary to keep his employee expenses under control.  Therefore, he elected to work with only one assistant after his EDDA announced that she was relocating.  Since working more days was not accomplishing anything except increasing his employee overhead and incurring overtime, he elected to return to working four days a week and offering evening hours on Mondays. He is now averaging $3,248/day, $161 less than with the EDDA that was costing him over $200/day.

Hygiene is now assessing and selling more interceptive perio treatment and has increased up to $950/day on the average. By downsizing one employee, working more efficiently with his assistant, and training for hygiene, his new salary overhead for the practice is now 18% and his total practice overhead is 67%. These numbers mean an additional $112,320/year in Dr. Black’s pocket, with less stress and happier patients because he is providing all of their care.

Now, is 67% all that great? No. But upon further evaluation of his expenses, there is an additional 7% above the standard in the industry of 5% for his facility cost. The good news here is that he is purchasing the building!   If his practice mortgage was not included, his overhead is 54%.

Do you think that Dr. Black made the right decision?  He sure does!  Are you interested in investigating the possibility of downsizing your practice now? 

If you would like more information on how McKenzie's Practice Enrichment Programs can help you IMPLEMENT proven strategies, email info@mckenziemgmt.com.

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