9.17.10 Issue #445 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

Nancy Caudill
Senior Consultant
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How Does YOUR Practice Compare?
By Nancy Caudill, Senior Consultant McKenzie Management

Dr. Brian Holley – Case Study #311

How many times do you ask yourself the question - “I wonder how I am doing compared to my dental school classmates?” Your recollection of some of your buddies in school was that your dental skills were better than theirs. Therefore, you must be doing better.

“So… how am I doing compared to everyone else?” In order to answer this question, let’s make sure that we are comparing “apples to apples.”

Dr. Holley’s Practice Statistics

  • His A/R (from the Aging Report) not including credit balances is $156,500
  • The practice is producing $125,000/month
  • He employs 3 full-time hygienists, each working 4 days/week
  • He personally works 200 days a year

The A/R
There are two important facts about a practice’s A/R that determine whether or not it is healthy. First, the A/R total should NOT include any credit balances, as the credit balances will reduce the actual amount that is owed by patients. If you struggle with this concept, think of it this way:

Joe owes you $10 and Betty owes you $20 for a total A/R of $30
You owe Bob $5
What is the total amount owed YOU? $30 - not $25

If the Aging Report was generated and included credit balances, the A/R would be $25 and not $30.

The second piece of the puzzle that you need to know about Dr. Holley’s A/R is his monthly NET production. Industry standards would indicate a healthy A/R to be 1x or less the monthly net production. Therefore, if Dr. Holley’s net production is $160,000, then his A/R is okay. If his net production is $75,000 a month, it is $81,500 - too high!

The Production
There are two definitions of “production” - gross and net. One is before all the various production adjustments are posted and the other is after all the production adjustments are deducted. What are considered “production adjustments?” PPO adjustments, senior courtesies, employee discounts, bad debt write-offs, cash courtesies, etc. Any adjustments that reduce the amount that the patient pays are considered “production adjustments.”

Some practices that participate with the various PPO programs will post “their” fees to the patients’ ledgers and post the PPO discount/adjustment AFTER the claim is paid and the EOB (Explanation of Benefits) is reviewed to determine how much to adjust. Other practices will post the PPO fees for all their services in the practice management software, assign the Fee Schedule to the Account and post the PPO fee (which is already adjusted) to the patient’s ledger.

By understanding these two concepts, when you hear that your dental buddy is producing $125,000 a month - is this Gross or Net Production? The average production adjustments in practices that participate in 3 or more PPO plans are 30-35% of their gross production. It could also be as high as 48% if a few of the PPO plans have low contractual fees.

The average practice that does not participate with any PPO plans will adjust around 5% of their gross production for courtesies. What do you do? Do you even know?

Number of Hygiene Days
Wow… Dr. Holley is working with three hygienists every day that he works. He must be doing really good! The better question is: are they producing at least 3x their daily salary? How “busy” are they? Are there enough openings per day per hygienist that, in reality, the practice is really only supporting two full-time hygienists? The practice may actually be spending one full-time hygiene salary in additional overhead because the practice cannot support three full-time hygienists.

After generating Dr. Holley’s recall report for the next 12 months and factoring in the number of new patients, SRPs, and past due patients, it was determined that he actually only needed 10 days of hygiene per week instead of 12. As a result of being over-staffed, none of his hygienists were producing to their optimum because there were too many unscheduled time units.

Number of Doctor Days
The same scenario is true for the doctor. Just because the “door is open” does not mean that there are enough active patients to keep the treatment rooms efficient. I have had more than one dentist tell me that his/her accountant indicated they needed to work more days to increase their revenue. It is not that simple! A dental practice is not a retail store that generates sales by being open MORE days. The key is to be open at times that encourage patients to schedule appointments.

By reviewing the number of “unscheduled time units,” the same theory is applied to a doctor’s schedule. If Dr. Holley can produce as much revenue in 192 days as he can in 200 days, his overhead will be reduced by 8 days and he will be more productive per day. And a dentist that is not being productive during the day is a dentist that is at the front desk “bugging” his/her Schedule Coordinator by asking questions like “Have you called Jack Jones?” or “Did you call Sue Roberts?” Of course we called them!  We knew you were going to ask!

As you and Dr. Holley read about how well other offices are doing, causing you to feel “inadequate” about yours, get your facts first and make sure that you are comparing apples to apples and not apples to oranges!

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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