Practice transitions

As a practice management consultant, I usually begin the consulting process by asking new clients whether they are happy in dentistry… do they enjoy their work… do they look

forward to each day?

Unfortunately, dentists often confide that they are not happy… that instead, they are working too many hours, with too little reward. It’s easy to confuse being ‘busy’ with being successful. Bigger isn’t necessarily better and high volume practice usually requires high energy and high overhead… often with low reward.

It doesn’t matter how much you earn, only how much you keep and how much you enjoy your life along the way. What I see most often is hardworking dentists that know something is wrong with their practice, they’re just not always sure what it is or how to fix it.

Obviously, observing practices that have already successfully transitioned is helpful, and attending

courses with technically gifted, like-minded professionals is stimulating and creates enthusiasm and the momentum to begin. Still, it takes more; it takes a plan.

Number one: Know your numbers

Good planning starts by knowing where you are. Start planning by determining profitability (or lack thereof). Many of the dentists I work with are initially shocked when we begin the process of determining their hourly overhead per treatment room Vs the average turnover per hour in those same rooms. Many of these hardworking owner dentists are ‘carrying’ the practice by themselves, not realising that associates on a 50% commission structure are actually costing them money.

Add to that, hygienists that, in striving to try to remain profitable, see high volumes of patients, as many as 16 to 24 patients per day (many of them unprofitable ‘plan’ patients), and you realise that there is little time to build value for, or talk about, needed dentistry. With a high volume pace and little patient education time, it’s not

surprising that cancellations and DNA’s happen frequently and cost you dearly.

By running an Appointment Analysis Report on your computer (all providers) you can determine the number of hours the practice was open the past year. Next look at last year’s Profit & Loss Statement to see how much it cost you to run the practice for the same period (overhead). If you are not computerised – or are unable to run the desired reports on your software – you will have to go through the Diary for that period to determine the hours open. Now, by dividing the amount of overhead by the number of hours open you will know your hourly overhead. Then, divide that amount by the number of treatment rooms and you know what it costs you to run the practice.

Next run the Invoiced Treatment Reports and Appointment Analysis by providers for the same period. Divide the amount of turnover each provider has produced by the number of hours they worked and you will know their turnover per hour. Multiply that by an eight-hour day and you know their daily average for the period. Compare the turnover per day to the

overhead per day (hourly times 8 hours) and you will know who is profitable and who is not. Bear in mind that the daily average for associate doctors must be divided by 50% (if that is the dentist’s commission) before comparing profit and loss.

The Invoiced Treatment Reports will also list what procedures each clinician is doing most often and the average amount being charged for them. By knowing the overhead per hour, and determining how long each procedure takes, you can determine what you need to be charging for each procedure. For example, if you are using the best

laboratories, and your competitors are using poorer quality, you will need to charge more than your competitors.

Many dentists determine their fee structure based on what other dentists in the area charge rather than knowing where their profitability is. A savvy restaurant owner would never do this. Instead, menu choices and charges are based upon what it costs to create a dish. An upscale French restaurant outfitted with the finest décor and high quality food cannot remain competitive by charging the same as a local diner serving mainly lower quality food in a lesser environment. It is important to determine whether your fees are in alignment with what it’s costing you to produce the dentistry.

It is important to realise that many practices that are still contracted with the NHS or other managed care ‘plans’, may not be able to determine their profitability. The very fact that these dentists have high numbers of managed care often precludes them from being able to determine profitability since they don’t know how much dentistry they performed for the amount of money they received from the plans. Often these practices simply deposit monthly NHS/Plan payment checks into their business accounts without posting them on their computer. Ideally, we would keep track of how much we received from ‘plan payments’ and how much dentistry we did for that money. This would mean posting all ‘plan dentistry’ as we would private (and what it would have cost at private fees), and then adjusting the amounts off of the computer to an account listed as ‘plan write-offs’. By doing so, dentists could determine whether it’s profitable to do this type of dentistry and how much they lost by not doing it privately. Often, dentists with a mixture of private and plans are unaware that it is the private patients that are patients.paying for the loss incurred by treating NHS or Plan

Number two: Evaluate your time