The best form of advertising is “word of mouth”, and yet many dental practice owners apply this advertising adage to their key performance indicators (KPIs). In other words, rather than measure numbers, they believe that if they continue to provide excellent care and patient satisfaction, the business will thrive. Often, great dental practice owners and esteemed dental surgeons ask, “Why isn’t my practice growing?” or more to the point, “Why is their practice growing? Especially when we provide better care.” That’s what Infinite Hygiene Consulting can help with. Rather than relying on educated guesses or personal preferences, let’s identify KPIs to target, to grow your practice.
Practice production is something you’re likely already tracking, be it formally or informally – i.e. you can recognize a busier week from a slow week. This KPI is also usually the initial cause for concern. “We had a 10% increase in production per patient this month, and yet our margins have remained the same; where is the money going?” It’s this question that can lead a dental practice owner to panic.
Tracking production is essential, but it’s also why you need more than this single KPI to have a panoramic view of your business. Practice production is a high-level KPI that should give you that 50,000 foot view of how your business is doing daily and annually, but all other KPIs should feed into this narrative so that, if you’re not making as much as you believe the practice should be, you know where to drill down to find the answer.
2. Overhead
If you own a dental practice, then you already know how much overhead eats into profits. The dental industry has some of the largest overhead of any business with the median hitting just over 74% (in 2015) – although that doesn’t stop some patients from treating dentists like used car salespersons. Overhead consists of your recurring costs. Salaries, rental space, equipment, supplies, utilities, internet, etc. etc. Of course, with overhead, there’s a lot that can be done to reduce costs or, in the case of rental space, negotiate for lower costs. Of course, if you’re going to reduce costs, you need to be tracking them.
3. Accounts Receivable
From a high level, you should know how much money is owed on a daily basis. Irregular payment schedules can lead to an inefficient practice and attributing correlations to causations, which can be the silent killer of a dental practice.
4. Debt Collections
How many of your patients are paying you on-time? If you’re in your first year, it can be difficult to forecast month over month profits if you’re still trying to get payments from weeks or months prior. The best way to optimize this process is by making financial arrangements ahead of time and making clear treatment plans.
5. Average Production Per Patient
This KPI is critical in understanding your profits. Patients are in a unique situation where most visit the dentist once or twice a year. If you’re not actively tracking your patients however, you may think you have thousands of active patients, when you really have hundreds and special cases are offsetting the profits. In 2017, the average production for an average patient was between $675-775 per year. Start tracking what your patients’ productions are worth if you want to improve your practice.
6. Average Production Per New Patients
This may seem like an obvious KPI, but too many dental professionals don’t track it appropriately. Getting a new patient isn’t just measuring how much time went into acquiring them but acquiring a new patient can mean acquiring their family members as well. A new patient provides the practice with an opportunity to diagnose and treat larger cases due to the level of services offered, fresh eyes or greater needs due to the lack of prior dental care. New patient production should be two to three times higher than the average production per patient.
7. Active Patient Count
Your active patient count is one of the best ways to measure your practice growth. For different dental practices, the “active patient” timeframe can vary, but most range from 14-18 months. Your active patient count however helps to recognize genuine growth as opposed to artificially increased metrics. What I mean is, if you have a hugely profitable two-month period and were only tracking procedures, salaries, etc., then you may forecast a stronger forthcoming quarter. However, if your active patient count has dropped off and continues to decrease month over month, then you’re not getting the whole picture by only tracking profits as emergency procedures, for example, may offset how profitable your practice is (in the short-term).
8. Practice Profit
Your practice’s profit works hand-in-hand with a lot of other KPIs on this list, but here’s what makes it different and why it’s worth tracking. After materials and labor, you can determine what percentage a procedure costs you. So, if 82% of your revenue from a root canal goes to overhead, then you’ll know what kind of financial loss you’ll take if you accept a lower-paying insurance provider.
9. Scheduling & Time Allotted
Time tracking is something that can instantly create a sour practice culture, but it’s imperative if you want to ensure your practice is running efficiently. As far as KPIs go, it’s important that you allot the window of time for a patient to arrive, if they’re undergoing anesthesia, that’s another 15 minutes before the procedure can start, not to mention the actual time for the surgery, followed by encouragement or follow up time. This KPI can help you deduce where, in this relay of sorts, you can increase efficiency and/or monitor individual patients for proper scheduling. If a particular patient continues to be tardy or cancel last minute, then you’ll know not to provide a prime-time slot to that patient moving forward.
10. Case Acceptance Rates
Many dental practices struggle with their case acceptance rates with just over 50% of existing patients agreeing to treatment and less than 30% of new patients accepting treatment. A huge reason for low case acceptance rates is a lack of trust between patient and doctor as well as insufficient communication. It’s one of the many reasons why Co-discovery can help increase case acceptance rates.
11. Doctor production
In 2013, Dental Economics surmised the doctor’s daily production averages $440/hour or $3,500/day. With this in mind, if your doctors are in the ballpark of those numbers, then your practice’s production is running fairly efficiently. To really quantify the value however, you’ll want to calculate your daily production from your daily overhead. If you’re seeing low margins, your dentist’s production may not be as efficient as it could be.
12. Hygiene Production
Tracking hygiene production helps to identify the health of your hygiene department, which team member is doing the work and what work is being accomplished. It’s more than keeping your hygiene schedule full and busy but are you profitable? Ideally, hygiene production should be 25-35% of total office production. A thriving hygiene department will contribute up to 75% of Doctor’s production.
13. Office Admin Production
Obviously, office admin are vital members of your team, but it can be hard to gauge how many you need on the team for your patient load. A good rule of thumb is to have 1 admin per 50k-60k/mo. Then, for every 25k increase, add an additional office admin. One office admin should be able to run an office efficiently if you’re seeing up to 21 patient visits a day.
14. Cancellations & No Shows
Perhaps more than any other KPI, I’ve seen this one be a pain point for a number of dental practices. Many practices operate on a projected “perfect day” outcome rather than the reality of tardiness and truancies. You need to be tracking your cancellations and no shows to account for daily bookings. It’ll also help you to gauge if you’re overscheduling or, more than likely, under-scheduling.
15. Recare System
One of the more surprising aspects of this KPI is many dental offices don’t track it because they don’t implement it. A recare system is critical when your average patient is seen once every 12 to 14 months. The recall system is most often considered the backbone of the practice. Today, it’s easy to set up an automated system to save office admin time and still persuade existing patients to return.
16. Number of New Patients a Month
This is an especially important KPI, if only to demonstrate how necessary it is for your business. Many practice will try to convince you that new patients are the deciding factor on whether or not a practice will grow and succeed. The reality is, for most dental practices, it’s the existing patients not the new ones that will determine a practice’s profitability and growth. A reason for this is, new patients are often a gamble, it’s unclear what their habits are, what insurance they carry, if they pay promptly and how much time your dentists will need to spend on them. Therefore, tracking your number of new patients a month to your gross profits is essential for evaluating how much priority new patient acquisition should take.
17. Patient Attrition
In short, how many of your patients become inactive in an 18-month timeframe, i.e. have not scheduled an appointment or come in? Looking at this metric adjacent to “new patients per month” and “current active patients” can help identify what impact the patient loss is having. If it’s not impacting overall profits substantially, then you’re running efficiently. However, if you’re noticing substantial losses then it might be time to reevaluate certain elements of your practice, such as making a more personal connection by building stronger doctor patient relationships.
18. Employee Wages
You never want to get to a point where you must let someone go because you can’t afford to pay them. It’s embarrassing for you and unfortunate for them. However, many dental practice business owners continue to dole out raises and bonuses to team members even when the company’s profitability hasn’t increased and market rates haven’t been accounted for. Labor percentage should average 24%. If your percentage is higher than that, you may need to do a more detailed analysis.
19. Total Procedures Performed
This may be a given, but it’s a high level KPI that can help you quickly understand how your production is going and how to repeat success. At a glance, you should be able to see how many procedures were performed and how much revenue was earned. This way if you see days with a low volume of procedures, but high volume in revenue, you can determine what caused the ROI. Additionally, and more importantly, you can determine if your practice is running inefficiently, if you have high-volume procedures but low revenue.
20. Production by Procedures
Tracking the total procedures is important but tracking the volume and earnings of individual procedures shouldn’t be neglected either. For some practices, this information can inform how their practice is structured, whether or not they choose to accept certain types of insurance or even change to a fee-for-service practice. This KPI will help identify procedures that have low, moderate or high profitability.
21. Insurance Production
Many people include insurance costs in their overhead, but it’s worth separating this KPI so you can determine which insurance providers most of your patients have and which ones are treating your practice fairly vs causing substantial losses. Today, it’s not uncommon for dental practices to become completely fee-for-service practices but tracking your insurance production will help you discover if that method is more or less viable.
22. Fee-for-Service
Tracking elective procedures and fee-for-service production can help you identify what’s worth your practice’s time and what could be more efficient. If you’re not producing enough, it’s typically a matter of optimizing your case presentation. Help them understand, in laypersons, terms the price and value of the service. Tracking this can help you analyze what’s working and why production is as high or low as it is.
23. Clinical Days Worked
This applies to dental surgeons, specialists, and hygienists alike. Tracking who worked, days worked, and procedures performed can help you determine a myriad of factors. For instance, if certain days are consistently slow annually then you identify if being open that day is efficient. Additionally, you can assign value and merit when certain team members are working and there’s a correlation with your daily production.
24. Retention & Turnover
Many dental practices struggle to identify why they’re experiencing turnover and – although a much more positive problem to have – why they’re experiencing retention. Measuring turnover can help you identify where your business may be running inefficiently. As an example, many hygienists suffer burnout, making it more cost efficient in the long term to have two hygienists working part-time rather than one working full-time. If you’ve noticed consistent turnover after 6 months, restructuring your team could increase retention.
25. Office Overhead
It’s worth pulling this type of overhead into a separate category because it can unveil some hidden fees. As discussed previously, overhead consists of recurring costs; fees you can count on every month. However, there’s a handful of overhead fees that don’t make a lot of dental practice owners’ spreadsheets: office overhead. How many personalized pens does your company buy? How much on magazines? How much on fish food? Often, these aren’t factored into the overhead business expenses as they’re essentials, not typically “monthly” expenses and more “nice-to-haves” but they need to be accounted for so you have an idea of what it costs to maintain.