Benchmarking and the Path to Continuous Improvement
Top tier dental practices make it a habit to establish performance targets that align with their business strategies and operating plans. These targets serve as “goal posts” toward which everyone in the office drives their daily activities. They’re a key resource for periodic operational reviews to highlight successes and pinpoint trouble spots. And they’re a means to foster continuous improvement over time. As famed statistician Karl Pearson said: “That which is measured improves. That which is measured and reported improves exponentially.”
Based on years of service as expert advisors, we use the following financial and operational benchmarks to assess the health of a dental practice:
New/Active Patients:
- 1,800-2,000 active patients per general dentist
- 85% patient retention as evidenced by routine prophy and PMR visits
- 10-20 new patients per dentist per month of which 70% are from internal referrals
Production:
- Average general dentist production of $300-500 per hour, depending on experience
- Average annual production per active patient of$500-700
- Average diagnosis per new patient of $2,500 minimum with 50-65% acceptance rate
- 30-40% total office production in hygiene with hygienists producing 3-4 times their compensation
- Annual production per operatory at $250,000 per year
Collections/Accounts Receivable:
- Revenue adjustments at 3% or less
- 98% or greater collection of adjusted production
- Total accounts receivable less than half a month’s production
- No more than 5% of accounts receivable 90 days past due
Overhead as a Percent of Revenue:
- Dental supplies: 4-6%
- Office supplies: 1-2%
- Dental lab: 7-10%; 3-5% with use of milling machine
- Marketing: 10-12% for start-up practices; 3% for mature practices
- Team wages or payroll without benefits: 20%
- Facility: 8-11%
Setting performance targets and measuring progress is just the start of a practice assessment. You also need to look behind the numbers to unearth the operational issues that produce a given result. Root cause analysis could reveal processes issues, training issues, personnel issues, or perhaps something wholly outside your control (e.g., an economic downturn). For example:
- Production shortfalls could signal a need to simply talk with patients about their teeth and ask what, if anything, bothers them. They may not be aware of things they could do to feel better about themselves.
- Routine use an intra-oral camera is another strategy for addressing production shortfalls. It highlights health or structural issues, or areas that could be improved cosmetically. When pictures speak a thousand words, the door opens to a discussion of treatment options.
- “Revenue leaks” caused by gaps in the appointment calendar could signal a need for minor adjustments to processes and “scripts” used for patient communication.
- A close inspection of accounts receivable could surface the need for improved conversations with patients regarding their financial obligations prior to treatment. Or it could indicate a process issue with filing insurance claims and monitoring receipt.
- If wages are high, it could be that it is time to increase patient fees and/or ensure your team is making every hour or unit of time valuable. Do you have specific tasks for the team to perform during down time? You can look closely at hygiene wages. We like to see their adjusted production 3-4 times what they are being compensated. There could also be a need to reduce no-shows and that can be done with proper scripting.
Finally, performance metrics tell you where you are and where you’ve been. They’re a great resource for capturing an operational moment in time and analyzing its relationship to other “snapshots” in history. But they don’t capture where you’re going or what’s possible. It takes a deep understanding of your industry’s best practices to truly assess the degree to which you’ve achieved (or can achieve) your potential.
Aldrich keeps an ear to the ground of financial, operational, and technological developments in the dental industry. We can help your practice thrive by applying this expertise to your specific circumstances. Contact us for further information.
