11.17.06 - Issue # 245 Forward This Newsletter To A Colleague
Overhead Breakdown
Effective Leadership
Hygiene Standards

Uncover the Practice Profit Killers
by Sally McKenzie CEO
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They say the evidence never lies. Here are the clues: Production fluctuates regularly. Collections are shaky. The schedule is either feast or famine. Hygiene is booked solid yet the hygienist is spending almost as much time sitting and waiting as she/he is scaling and polishing. All these seemingly inconsequential details of the typical dental practice are, in fact, the smoking gun, the fingerprints left behind, the DNA of a crime scene in which practice profits are the victim

You know how the hairs stand up on your neck when you’re staring at those practice financial reports that are telling you something isn’t right? Or that chill that washes over you when you realize that you may not be able to pay yourself this month? Then, seemingly without warning, there is so much red ink, the books look like a crime scene. Time to bring in the investigators.   

The industry ideal for overhead is 55% of your collections for a general practitioner. If you are currently at 60-65%, you probably don’t need to notify the authorities. If yours is higher, you may be looking at doin’ hard time. Some practices report their overhead as high as 80%. They are making a mere 20 cents on the dollar! Now that is criminal. The first step in arresting the profit killers is to lay down a few financial laws.

Establish the following budget targets:

Dental supplies -
5-6%
Facility -
5%
Laboratory -
10%
Payroll -
19-22%
Payroll taxes and benefits -
3-5%
Miscellaneous -
10%

While there are several factors that influence overhead, look first at the most frequent offenders: high expenses, inconsistent production, and low collections.

One of the probable high expense culprits is facility (rent), that is tipping well over 5% of monthly collections. You say you have an alibi, but it’s probably not going to hold up during cross examination. Your story is this: You moved into this gorgeous new space that you were certain the patients would absolutely love. You reasoned that a little boost in production here and there would cover the expense. You ran the numbers, did the math, and it all added up just fine, at least the way you looked at it. You reasoned that you simply had to take the plunge now for fear that the space would be gone in a month. Unfortunately, you fell into the trappings trap.

Many doctors convince themselves that because the space looks good and it’s in a good location, they will be able to improve productivity. They simply disregard the importance of the 5% parameter. For example, let’s say you produce $55,000 per month. You collect $52,000 per month and you want to move into a new facility with a total rent of $4,500 per month, which would be a $1,450 increase over what you are paying now. You justify the increase by telling yourself that a couple more crowns per month will take care of it – nada problem. And, if it could only be that simple. With a $4,500 per month rent bill, you will have to collect a handsome $90,000 each month to stay within the 5% guideline. Therefore, you will have to increase collections by a whopping 38 grand to cover that itty-bitty, little $1,450 per month rent hike. Feel like you’ve been robbed?

Moreover, there is no guarantee that the bigger, better space will bring in more patients, unless … you develop a plan for how you will attract and keep new patients, as well as, improve treatment acceptance among current patients.

Remember…there is a difference between owing and renting.  If your “mortgage” payment equals more than 5% of your monthly collections, then you are simply exchanging equity for profits. If that is okay with you, then it’s okay.

If you’ve already signed your profits away for the next several years, consider renting a portion of the space to another dentist. Consult your attorney for necessary legal guidance, but consider having the renting dentist pay a specified amount each month or a percentage of his/her production or collections. Determine if the renting dentist is to provide his/her own staff and telephone lines, and what hours the incoming doctor will work. But don’t be too quick to take the money and run. Remember, the new dentist now appears to be associated with your practice. Make sure you are renting to someone whose standards will be a reflection of your own.

Next week, crime doesn’t pay, nor do “no-show” patients. 

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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Dr. Nancy Haller
Dentist Coach
McKenzie Management
coach@ mckenziemgmt.com
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Small Steps Create Big Impact:
Becoming a More Effective Dental Leader

Wish: You want your staff to act cooperatively, promptly, rationally.

Truth: In all likelihood you’ve got at least one disgruntled employee who complains, causes friction, avoids work, or calls in sick because the baby was up all night.

Wish: You just want to do dentistry, and you start the week feeling in control.

Truth: In all likelihood, your hope of getting everything on your task list done vanishes soon after you arrive at the office.

Wish: The last thing you want to deal with is the ‘problem’ of having employees.

Truth: Like it or not, you are the dental office leader and it’s your job to deal with people problems. Unfortunately, few of those can be solved quickly. Worse, some are totally beyond your control. But you DO have influence over many factors that affect your staff. And if you want to run a productive, profitable business, it’s your responsibility to ensure that your behaviors are positive ones.

If you’re like most dentists, you underestimate the impact you have personally on the habits and effectiveness of your team. As the leader, you have the authority to authorize, encourage, or impede most aspects of their working day. This places you in a position of power and responsibility. Leadership development is often less about making big changes, but more about small modifications in your behavior. In turn, these kinds of shifts can create significant improvements in outcome. Consider the influence you have on your team by looking at those automatic, insidious habits you demonstrate to employees.

For example, what impact would you have if each morning you told Jessica, the Clinical Assistant, how she had set up the tray wrong? Or you rearranged the instruments without saying a word?

What if you emphasized to Carol, the Hygienist, that you needed her to pick up the pace, to pay attention, so she could work faster in order to fit in two more appointments?

Would Jessica or Carol be pleased by your attention? Would they look forward to these little chats and prepare simple questions to clarify aspects of their work? Or would they develop a habit of hiding each morning to avoid your reminders?

Of course you would never be so destructive, if you thought about it. And you must. Many seemingly simple habits can have a huge impact upon your rapport with your team.

Here’s another example. Suppose you often voice public appreciation for self-sufficiency and initiative displayed by one or more employees? After all, you’re trying to be supportive. Then suppose - as a busy dentist - you respond abruptly to questions and interruptions? Think about it. Probably your team will leave you alone. They will not raise problems. You will be left in the dark. They won’t question your instructions, and ambiguities will exist.  They will feel unsupported and fail to develop loyalty.

Simple behaviors can result in a quagmire of errors, misdirected activity, and utter frustration. Leaders need to hear about problems. Your employees will only tell you if they see you as approachable. Model interest and curiosity about what they are doing. Tell them this repeatedly. Ask questions from a position of open-mindedness. React positively when you hear of problems in-time rather than too-late.

Look carefully at how you behave and whether problems are due to your previous inattention to the human factor. You might be the problem andthe solution.

Next article: Small steps to motivate employees.

Dr. Haller is available for to help you strengthen your leadership and team impact. Contact her at coach@mckenziemgmt.com

Interested in having Dr. Haller speak to your dental society or study club? Click Here.

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Jean Gallienne RDH BS
Hygiene Consultant
McKenzie Management
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Is Your Hygiene Department Producing
At Industry Standards?

Most doctors have a yearly, monthly, and daily production goal. As a hygienist do you know what your yearly, monthly, and daily production goals are? Do you know how these goals are set? Do you know what your raises are based on?

Doctors, have you determined what your hygienists’ goals are? Have you made your hygienists aware of these goals and how you determined what they should be?

Every well-run business sets goals. Dental practices should do the same. These goals help to establish proper fees, salaries, budgets, and capital expenditures. Hygiene salaries should be no more than 33% of their adjusted production, not including the doctor’s exam fee.
 
Many of you are already working and have an established income level set and are thinking, “Well, I am not taking a cut in pay.” Well, you do not have to.  Most of the time it is not that the compensation is too high, but that the production is too low. Let us take a look at how we can determine what the daily production for an individual hygienist may be based on the following example.

  1. Hygienist is paid $40,000.00 a year.
  2. The hygienist’s benefits and related expenses include
    1. Holiday pay
    2. Vacation pay
    3. Medical
    4. Payroll taxes
    5. Employer pension contribution, etc.
  1. These benefits can or cannot be added to the salaries for a total compensation. This is at the discretion of the doctor.
  2. If the practice pays $3000.00 a year for the above benefits that is added to the hygienist’s gross salary for a total compensation of $43,000.00 for the year.
  3. The hygienist production for that same year is $100,000.00
  4. Hours worked per week are 32 for 48 weeks a year

The hygienist’s daily pay ends up being $223.96 for an eight-hour day. Unfortunately, the current hygienist is being paid 43% of what he/she produces, when the industry standard is 33% or less. Therefore, if you take the daily pay and divide it by the industry standard you will come up with how much the hygienist should be producing per day in order to have the compensation be at 33%. This particular hygienist will need to produce $678.66 a day or no less than $84.83 an hour.

Now we have goals, but how is the hygienist going to track these goals on a daily basis? One way is to have a daily monitor that he/she keeps in the operatory while working.

The hygienist will mark what procedures were done for each individual patient, how many hours were worked that day, how many cancellations, no shows, and open units. At the end of the day, add the total amount up based on actual fee schedules and divide by the hours worked. This will tell the hygienist what was produced hourly. Is this meeting the daily goal? If not, what do you do to increase the production in the Hygiene department?

One place to analyze is the interceptive periodontal therapy program. Is 33% of the hygiene production coming from periodontal procedures and ancillary products? An ancillary product does not include x-rays.

Is the recall system being implemented in your office successfully? Are you pre-appointing? Do you have more than 0.5 appointments open per day per hygienist? As a hygienist, if you are paid a guaranteed hourly rate and there is one hour of open time, not only does the office lose the hourly production that could have been produced, but the office also loses the income that you were paid during that hour. Do you have an x-ray protocol that is providing the quality of care you want for your patients?

These are some of the systems that tend to break down in the Hygiene department. Having any of these systems not functioning at 100% can make a difference of a Hygiene department that is profitable and one that is creating a loss for that office.

Our goals with the Advanced Hygiene Performance Enrichment Program are to help prevent open time, no-shows, or cancellations from occurring in the first place and to have the Hygiene department meet or exceed the industry standards.  If you have determined that your Hygiene department is not producing enough, you may want to consider having an outside professional come in to your practice in order to help prevent further breakdown.

Interested in knowing more about how to improve your hygiene department? Email hygiene@mckenziemgmt.com.

Interested in having Jean speak to your dental society or study club Click Here.

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McKenzie Management
A Division of The McKenzie Company, Inc.
3252 Holiday Court, Suite 110
La Jolla, CA 92037
Email info@mckenziemgmt.com
1.877.777.6151
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