9.14.12 Issue #549 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 


Nancy Caudill
Senior Consultant
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How Do You Measure Your Practice Success?
By Nancy Caudill

“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
If you simply look at the dollars produced, you would assume success.  However, if a practice is producing but not collecting, this is an indication of an unhealthy practice.

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
Now this seems like it would be an automatic indication of a successful practice. But on the other hand, have you been in a position where it doesn’t seem to matter how much your Financial Coordinator is collecting, it’s never enough to cover all your business expenses?

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
Yes - you hear about how important it is to have 20-25 new non-emergency patients a month per doctor to be successful. However, we have observed offices seeing over 50 new patients a month for one doctor and still not successful. How could this happen?

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
Multiple hygienists are an indication of a healthy and growing practice, assuming that the practice can support all the hygiene appointments that are available. If you added a hygienist because you don’t have a new patient appointment available for 6 weeks or you have no appointments available for your patients diagnosed with periodontal disease and are in need of SRPs, you may not need another hygienist - instead, your recall system might be broken!

#5 - Adding an Associate
You feel you have “arrived” when you add an associate to your practice. But did you do your homework to make sure your practice could support an additional dentist? Do you find that there are times when you aren’t working and your associate is? Be sure that you have a sufficient number of new patients to support an additional dentist, or be willing to give up some of your patients and work less days in order to avoid having a very unhappy associate that is pushing up your overhead.

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.

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

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