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7.25.08 Issue #333 Forward This Newsletter To A Colleague

Numbers Every New Dentist Should Know
by Sally McKenzie CEO
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It certainly doesn’t take long for every new dentist to realize that there’s far more to a dental career than simply “doing the dentistry.” Just as important as your role as doctor is your role as CEO. It is critical that you understand completely the business side of your practice. There are 22 practice systems and you should be well versed in each of them. If not, seek out training for new dentists. The effectiveness of the practice systems will directly and profoundly impact your own success, today and throughout your entire career.

For starters, routinely monitor practice overhead. It should break down according to the following benchmarks to ensure that it is within the industry standard of 55% of collections:

Dental supplies—5%
Office supplies—2%
Rent—5%     
Laboratory—10%
Payroll—20%
Payroll taxes and benefits—3%
Miscellaneous—10%                                  

Keep a particularly close eye on staff salaries. These can mushroom out of control and send overhead into the 70–80% range in record time. Payroll should be between 20–22% of gross income. Tack on an additional 3–5% for payroll taxes and benefits. If your payroll costs are higher than that, here’s what may be happening:

  • You have too many employees. More staff does not guarantee an improvement in efficiency or production. It does, however, guarantee an increase in overhead—unless you are hiring a patient coordinator who will make sure the schedule is full and production goals can be met.
  • You are giving raises based on longevity rather than productivity/performance. If production is going down and overhead is going up, payroll cannot be increased. Establish a compensation policy stating that raises will be given based upon employee performance, but ONLY IF the practice is making a profit.
  • The hygiene department is not meeting the industry standard for production, which is 33% of total practice production. If the doctor steps back and takes a closer look at what is happening, he/she will probably find that the hygienists have far more downtime than they should, that patient retention is seriously lacking and that periodontal treatment is minimal at best. The recall system, if there even is one, needs immediate attention to ensure that the hygiene schedule is full, the hygienist is scheduled to produce 3x his/her salary and cancellations are filled.

Hand-in-hand with practice overhead is production, and one area that directly affects your production is your schedule. Oftentimes new dentists simply want to be busy. Sure you want to be busy, but more important than being busy is being productive. Take the following measures to get your schedule on the path to productivity.

Start by using your schedule to meet production objectives first and establish a goal. Let’s say yours is to break the million dollar mark. Taking 33% out for hygiene leaves doctor with $670K. This calculates to about $13,958 per week (taking four weeks out for vacation). Working 32 hours per week means the doctor will need to produce about $436 per hour.

A crown charged out at $950, which takes two appointments for a total of two hours, exceeds the per-hour production goal by $39. This excess could be applied to any shortfall caused by smaller ticket procedures. Unfortunately, you are probably not doing crowns every hour on the hour.

Use the formula below to determine the rate of hourly production and whether you’re meeting your own personal production objectives.

  1. The assistant logs the amount of time it takes to perform specific procedures. If the procedure takes the doctor three appointments, she/he should record the time needed for all three appointments.
  2. Record the total fee for the procedure.
  3. Determine the procedure value per hourly goal. Take the cost of the procedure (for example, $215) and divide it by the total time to perform the procedure (50 minutes). That gives you a production per-minute value of $4.30. Multiply that by 60 minutes and you end up with a rate of $258/hour.
  4. The amount must equal or exceed the identified goal.
Now you can identify tasks that can be delegated and opportunities for training that will maximize the assistant’s functions. You also should be able to see more clearly how set-up and tasks can be made more efficient. Then you’ll be well on your way to achieving your own production goals, whatever they may be.

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com.

Interested in having Sally speak to your dental society or study club? Click here.

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