How Do You Measure Your Practice Success?
“If my business checks aren’t bouncing, I must be successful,” is what a client bragged a few years ago. You wonder if many business owners (dentists) feel the same way. “Please, just get me through this payroll period and I will be okay.” Does this sound familiar?
There are many ways to measure success, not including the personal view of enjoying what you do, having free time to spend with family, setting your own hours, etc. Let’s take a look at 5 tangible areas that each, on their own, is not indicative of a successful practice.
#1 - High Production
High production can easily be misunderstood. Depending on whether your practice accepts PPO and/or other reduced fee plans, this can alter the appearance of your production. For example, Office #1 posts the office fees and makes the adjustments after the insurance carrier pays. Crown posted @ $1000, PPO adjustment @ $200, Net production or contracted fee = $800. Office #2 posts the PPO adjusted fees initially. Crown posted with the contracted fee @ $800, Gross production = $800.
What does this mean? A practice that participates with many PPO plans and is posting the office fee and adjusting after the claim is paid will have a much higher “production” than an office that is posting the contracted fee initially (Office #2) when you compare the services.
Another area to review is adjustments that affect production such as courtesies, bad debt write-offs, etc. Standard in the industry for professional courtesies, bad debt, etc. is 5% of gross production. If you find that you are writing off more than this, not including PPOs, you should be concerned. Measurement of success? Always look at your “net” production dollars opposed to your “gross.” You only collect on net and not gross.
#2 - High Collections
Collecting 100% of your net production should be your goal! Does this make you successful? Not if your expenses are more than your revenues. A healthy general practice should enjoy an overhead of 55-62%, not including the doctor or associate’s salaries. If you find that you are postponing paying yourself a salary until next month, this is a sure sign of an unhealthy practice, no matter how much your business team is collecting for you.
#3 - High Number of New Patients
Typically, a healthy general practice sees 20-25 new comprehensive patients a month in order to grow the practice. However, if you are losing more patients out the back door than you have coming in the front door, it doesn’t matter how many new patients you are seeing. It is also possible to have 50 new patients coming in who are not “quality patients” interested in comprehensive dentistry. This doesn’t mean they don’t have the potential to become the type of patient that you embrace - just that you may need to “nurture” them a little longer than other patients IF you can keep them in the practice.
#4 - More Hygienists than your Dentist Friends
#5 - Adding an Associate
Summary: a successful practice is not based on a single indicator, but on many working together in unison. If you are looking to improve the success of your practice in any or all of these areas, contact McKenzie Management today.Forward this article to a friend.
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