Eleven essential KPIs every dentist should monitor

Ads Thanki – When should you start your own dental practice? – part one

Ads Thanki explores the 11 different key performance indicators (KPIs) he monitors to keep his practice in good health.

Maintaining good health is often said to be the foundation of wealth. This concept applies equally to dental practices.

A thriving, well-managed practice not only sees consistent production but also enjoys a strong financial performance. To ensure their practice remains in good health, dentists should regularly monitor key performance indicators (KPIs).

KPIs are specific metrics that provide insight into the critical aspects of a practice’s success. These should be tracked and summarised in a concise report every month. While many dentists might think that reviewing their profit and loss (P&L) statements is sufficient, the reality is that some of the most important KPIs do not appear on these statements.

P&L reports can sometimes give a false sense of security, suggesting a practice is performing better than it actually is. The KPIs outlined below are based on real data and offer a comprehensive view of a practice’s overall performance. A practice that fails to monitor these KPIs is at risk of missing early warning signs of potential problems.

1. Production levels

Production is the most crucial KPI for any dental practice. Without growth in production, a practice will eventually see a decline in overall business performance. Even if overhead costs are reduced, this can only temporarily mask the underlying issue.

It’s important to track production daily, weekly, monthly, quarterly and annually. Comparing actual production against set targets allows practitioners to quickly identify any downward trends. Growth in production is always a positive indicator.

2. Collections

While production is vital, the money actually collected by the practice is what truly impacts cash flow and income. It’s recommended that practices aim to collect at least 98% of all fees owed.

3. Profit margins

Profitability is a key measure of a practice’s financial health. This KPI combines production, collections and overheads. Each practice should have a clear target for profitability, which is simply calculated as the difference between total collections and overheads.

The resulting profit can be used for various purposes, such as investing in new technology, saving for retirement, or increasing the dentist’s personal income. The focus should be on accumulating profit rather than just spending it.

4. Patient scheduling

The percentage of active patients who are scheduled for their next appointment is another important KPI. Ideally, this percentage should be close to 98%, although many practices fall below 85%.

Given the increasing challenges and competition in the dental industry, it’s essential to keep as many patients engaged as possible. Patients who are not scheduled for their next visit are at risk of being lost to the practice. A growing number of scheduled patients signals good health and potential growth for the practice.

5. Overhead costs

Overhead costs can quietly erode a practice’s profitability. Fixed expenses, which are difficult to reduce, often put significant pressure on the practice’s financial health. Overheads should be monitored closely and kept within industry benchmarks.

If overheads exceed these targets, it’s important to investigate why, identify which costs are higher than necessary, and develop strategies to bring them back in line.

6. Revenue per patient

The average revenue generated per patient is a critical financial metric. Successful businesses regularly analyse the revenue per customer and strive to improve it.

Similarly, dental practices should aim to increase the average revenue per patient each year. If this KPI is stagnant or declining, it could indicate underlying issues. Dentists and practice managers should explore ways to enhance this figure, such as introducing new services or improving patient care programmes.

7. Revenue per new patient

This KPI differs from the overall revenue per patient. The goal is for the revenue generated from new patients to be two to three times higher than that from existing patients. New patients often require more extensive treatment, either due to a lack of previous care or because the dentist is identifying new issues.

Ensuring that the revenue per new patient remains high is crucial for the practice’s growth.

8. Case acceptance rates

Case acceptance rates can vary widely across different practices. Smaller cases typically see higher acceptance rates, but the overall target should be at least 85%. It’s advisable to aim for a 90% acceptance rate for simpler procedures, acknowledging that acceptance rates may drop for more complex cases.

9. New patient acquisition

The number of new patients is a critical growth metric. In some specialties, such as orthodontics or oral surgery, new patients make up the majority of revenue. General practices should set specific targets for new patient acquisition, based on their overall production goals.

For instance, a practice might aim for a model where a certain percentage of production comes from new patients, supplemented by existing patients and emergency cases.

10. Patient retention

Retaining patients is just as important as acquiring new ones. The patient attrition rate measures the percentage of patients lost each year. Practices that are highly successful tend to have lower attrition rates. Managing patient retention is key to maintaining a stable and profitable practice.

11. Labour costs

Staff wages and benefits represent a significant portion of a practice’s overheads, making this an essential KPI to monitor. It’s important to ensure that labour costs remain within a reasonable percentage of total expenses. If labour costs are too high, it may be necessary to review staffing levels and efficiency.