Thursday, January 13, 2011

You hear it from me every year. Now it’s time to reflect on the past year. Note your accomplishments and challenges. Outline your goals for the coming year. Write down what you’d like to see happen. Share them with us and we’ll help you make them happen.

Most of our clients with written goals reach most of their goals. It costs so little and it can be so rewarding. Just take an hour right now and do it.

The Latest Word on Practice Overhead:

KDV* has just released its bi-annual general practice overhead survey. It’s a sample of 70+ full-time, mature practices. As such, it’s the best and most detailed information of its kind available for our area. Some highlights:

• Average Net Income was $259,842. This was down from the $275,302 average in 2008. KDV said this marked the first decrease in 25 years of preparing these statistics.

• Overhead as a percentage of fees received increased a point to 65%. So the average net is now 35%. What is yours? Remember, average is not necessarily your aspiration.

• Staff gross wages are still about 26%-27%. If you can’t clearly compare your statistics to the industry standards and don’t have a clear look at your bottom line, we can help. Get QuickBooks Pro really working for you. No serious business owner would go without clear financial reports. This overhead survey is a very valuable perspective to help you in budgeting. It will be posted online at AdvancedPracticeManagement.com on the “Surveys” page. You’ll also find other useful information there on the current Dental Economy, Technology and Insurance Participation.

Our Fee surveys are also online and were recently updated in October.

* Davich, Wilson and Morrow, who have been doing these overhead surveys for 25 years, merged with KDV (KDV.com).

Posted by Bill Rossi at 11:02 AM
Labels: Advanced Practice Management, Bill Rossi, Dental Practice Overhead, Setting Goals

Monday, February 14, 2011

Purchasing a Practice:

Example:
Practice/Collections/Month $100,000
Practice Operating Net per month (at 36%) $ 36,000
Dr. Production per month (2/3 of $100,000)
Non-Owner Dr. Compensation $ 66,000
(30% after lab and write offs) $ 19,800
Practice Sale Price (36,000x12x1.75)
Debt Service/Mo. on Practice $756,000
($756,000 x 8 years x 8%) $ 10,687

The Pay Off:
Practice “Operating Net” per mo. $ 36,000
Doctor Compensation $-19,800
Debt Service $-10,687
Operating Profit/mo. $ 5,513

Annualized:
Operating Profit $ 432,000
Doctor Compensation $-237,600
Debt Service $-128,244
Operating Profit Per Year $ 66,156
The Bottom Line:

For an outlay of $128,000 a year in debt service, the owner(s) receives $194,000, a 50% Return on Investment. Where else can you get that kind of R.O.I?? So what seems to be on the surface a sort of slim net of about 5%-6% on collections per month when leveraged really adds up over the course of the year. Now add to that some solid management for practice profitability and growth and the numbers really pop.

Posted by Bill Rossi at 11:24 AM
Labels: Advanced Practice Management, Bill Rossi, Dental Consultant, dental office overhead, dental office profitability

Monday, February 14, 2011

The Economics of Multi-Location Group Practice

Purchasing a Practice:

Example:
Practice/Collections/Month	$100,000
Practice Operating Net per month (at 36%)	$ 36,000
Dr. Production per month (2/3 of $100,000)
Non-Owner Dr. Compensation	$ 66,000
(30% after lab and write offs)	$ 19,800
Practice Sale Price (36,000x12x1.75)
Debt Service/Mo. on Practice	$756,000
($756,000 x 8 years x 8%)	$ 10,687
The Pay Off:
Practice “Operating Net” per mo.	$ 36,000
Doctor Compensation	$-19,800
Debt Service	$-10,687
Operating Profit/mo.	$ 5,513
Annualized:
Operating Profit	$ 432,000
Doctor Compensation	$-237,600
Debt Service	$-128,244
Operating Profit Per Year	$ 66,156

The Bottom Line:

For an outlay of $128,000 a year in debt service, the owner(s) receives $194,000, a 50% Return on Investment. Where else can you get that kind of R.O.I?? So what seems to be on the surface a sort of slim net of about 5%-6% on collections per month when leveraged really adds up over the course of the year. Now add to that some solid management for practice profitability and growth and the numbers really pop.

Posted by Bill Rossi at 11:24 AM  

Labels: Advanced Practice Management, Bill Rossi, Dental Consultant, dental office overhead, dental office profitability

Monday, February 21, 2011
Like Arby’s?

Years ago we thought the trend would be franchise practices in retail settings. It hasn’t exactly happened that way but there has certainly been a growth of multi-location group practices.

In most cases, the model is less formalized than say an “Arby’s.”

Of course, there are the more “corporate” type of large clinics in multiple locations, such as Metro (37) and Park (23).

But, if you look at the recent activity in the Midwest, what you see are groups such as Midwest Dental and Heartland (word is Heartland is coming to our area). Midwest Dental owns more than 77 upper Midwest practices. Heartland (centered in Illinois) has about 300.

Then there are smaller multiple location groups such as Main Street Dental (5 locations in southern Minnesota) and Family and Cosmetic Gentle Dentistry (12 locations) in the Metro area.

There are other niche-type practices such as The Smile Center (7) and Emergency Dental Care U.S.A. (7 Nationally).

Midwest Dental and others are eager to buy and they’re growing. Heck, Heartland Dental even owns a corporate jet! You have to be making some serious moola to have one of those. Let’s take a look at how some of these groups do it.

Posted by Bill Rossi at 11:09 AM
Labels: Advanced Practice Management, Bill Rossi, dental office profitability, Dental Practice Overhead, Economic news for midwest dentists, Group Practices

Monday, March 7, 2011

Step outside, please.

If you can step outside yourself for a moment and look at your labor as a Doctor separately from your role as an owner, you can see what a desirable investment your dental office is. Now let’s look at key points in increasing the profitability of a practice (whether you own just one or 20):

1. Hygiene productivity makes a big difference on the bottom line. Your sweat aside, it’s largely where the profit of ownership comes from!

An approximately $10 per hour (or patient visit) increase in hygiene translates to an almost 10% increase in profits. The average hygiene production per hour is $139 in the Metro Area and $122 for Outstate. Why would any Doctor (owner) in his right mind pay market rates for hygienists that are producing at less than the market?

2. Lower Costs: Some of these group practices have negotiated better prices from the supply houses and labs.

3. Negotiating with PPOs: Because they have a network of practices, they are sometimes able to negotiate better reimbursement.

4. Standardized Systems, training and supervision.

5. Serious Business Ethic: These groups are less tolerant of sub-standard performance than private practitioners often are.

Your Advantage:

You don’t have the group buying or bargaining power that these large groups do but you have one key advantage. You’re an on-site owner! You are totally invested in your practice, both financially and personally. And one more thing, you have the best management team in the upper Midwest (if not the country) eager to support you and add to your success (us). Our depth of experience and perspective in advising and receiving data from over 200 offices gives you a powerful ally in the marketplace.

Our Job:

Group practices aren’t the enemy, but as long as you own your own practice, you are competing with them and their economies. It’s our job to help you continue to thrive in an increasingly competitive marketplace.

So, relish the fact that you own your own business. Be resolved this year to leverage our recommendations and your business systems into greater profits.

Be resolved to let your staff know that you want them to be happy and focused. And, be resolved to hold them accountable for working the systems as planned and be resolved to reward them well for performance.

You and your staff will prosper in direct proportion to how well you follow through on our advice.

Posted by Bill Rossi at 12:03 PM
Labels: Advanced Practice Management, Bill Rossi, Dental Consultant, dental office overhead, dental office profitability, Group Practices

Monday, September 12, 2011

AVG 75%ile 95%ile
Front Desk Collections
as a % of Production 33% 38% 59%

It’s not just about the money! Our client base averages 33% front desk collections. Collections at the time of service can reduce billing costs and of course eliminate completely the chance of not collecting! However, the real benefit in increasing front desk collections is in increasing patient commitment. Low front desk collections are a sign that conversations are not happening about treatment costs and insurance at the front desk.

In every office there are situations where the Doctor and hygienist recommend treatment and then are surprised to find out later on that the patient didn’t schedule or cancelled. “I thought they understood completely why they needed to get this stuff done now…” So sometimes the Doctors can feel that the front desk isn’t able to field the treatment they are sending their way.

Of course, the front desk isn’t the only possible culprit here. It’s a matter of getting the patients to the front desk with the right information at the right time so they can do their jobs. If your front desk collections are under 33%, they can be better. We can help! We coach teams on this all the time. As front desk collections go up, watch, your crown and bridge will too!

$25 Million per month in Perspective:
(from the APM Database)
Each month we collect data from offices all over the Upper Midwest. The collective productivity of these offices is over $25,000,000 per month. That’s a lot of data. How do we make it useful? We can look at Hygiene Production per Hour, Doctor Production per hour, Crown and Bridge, New Patients, Down Time, etc. All of these statistics give you a very real perspective on how much you can expect from you and your staff. What is possible and what is a stretch.

Here are some key statistics from the recently compiled 2010 data:

Metro Area
Average 75%ile 95%ile
Dr. Production per hour $589 $665 $825
Hygienist Production per Visit $138 $148 $167
Collection Percentage 85% 87%
Accounts Receivable Ratio 1.04 1.22
Front Desk Collections 30% 35%
Production per Active Patient per Year $677
Outstate Area
Average 75%ile 95%ile
Dr. Production per hour $453 $509 $681
Hygienist Prod. per Visit $117 $130 $138
Collection Percentage 91% 95%
Accounts Receivable Ratio 1.1
Front Desk Collections 36% 40%
Production per Active Patient per Year $519
Obviously, if you increase your and your hygienists’ production per hour, all things being equal, you’ll make more!

You can increase your production per hour (capacity) by looking at the main factors that go into determining it such as:

1. Staffing, Delegation and Teamwork: Presumably, with more staff working together that you delegate more to, you can do more than with less staff not working well together that you don’t delegate to!

2. Treatment Plans and Procedure Mix: If you’re doing Quadrant Dentistry or higher end procedures, you’ll produce more than if you’re doing patchwork all day. If you went to CE for cosmetic, ortho, implants, etc., use the techniques.

3. Facility, Equipment and Technology: With more rooms, better equipment and more advanced technology, you can get more done than with fewer rooms, less equipment and less technology.

4. Clinical Speed: Not the biggest factor. The “time on tooth” for dental procedures between dentists isn’t all that different. There are exceptions though, for example, with Cerec. Some Dentists (through delegation, training and experience) can complete the whole procedure in 1 hour. Others need 2-1/2 hours.

5. Appointment Book Control/Scheduling: In most offices, the schedule is simply a list of patients coming in. Make your schedule a planning tool and you’ll profit accordingly. If you take care of each day, the months and years will take care of themselves!

This can involve setting a production per day goal. I’m sure that you’ve all heard of this many times. The goal has to be realistic though and really designed to leverage the resources you have. For example, often Doctors have two assistants but don’t make full use of them. For that second assistant, you have to comfortably see at least two more operative visits per day than you would if you only have one. If you don’t, your overhead is going to be above industry standards.

You don’t have to be booked out a long way to increase your hourly production.
Good planning can make sure that every day is more productive. Plan your “Perfect Day” and block it out accordingly. Sure, you’ll rarely attain “perfect” but if you start putting together each day with a plan you’ll end up with more good days!

If you haven’t already worked with us to do so, it’s time to set your statistical targets for the year. Then we can work back to your and your hygienists’ production per day and hourly goals. Let’s give your staff a little direction on how to put those days together the way you want them.

Posted by Bill Rossi at 8:26 AM 0 comments
Labels: Advanced Practice Management, Bill Rossi, collections, cost control, dental office profitability, result control

Monday, October 3, 2011

Trends: Matt, Shelly, Robyn and myself make over 600 onsite visits per year. Here is an informal list of trends that we are observing:

1) Multiple location group practices (e.g., Midwest,Heartland). See our previous newsletters on this. (They are online at www.AdvancedPracticeManagement.com under “Dental News.”)

2) More GP’s doing ortho. For example, about 22% of offices now offer Invisalign.

I remember my travels to Outstate MN over 20 years ago when lots of GPs did ortho but that faded. It’s coming back now with the new technology and approaches.

3) Technology in the Operatories: Over 60% of Dentists have digital x-rays and in-operatory computer monitors. Add to that Laser Caries Detection (45%), Intra-Oral Cameras (65%), Patient Education Technology and Lasers.

This technology can easily run $14,000+ per operatory and that’s in addition to your clinical delivery equipment (chairs, dental units, etc.). So, you have to get “Result Control.” See the article on this at www.AdvancedPracticeManagement.com.

4) More Delta Participation: In 2004, provider Delta Premier participation was down to about 81%. Nowadays, 87% of area practices are with Delta Premier. With Delta continuing it’s domination of the dental market, it can be quite challenging for Doctors to be outside the network.

Another 31% of Dentists are with a “Delta within a Delta” (Delta PPO). In our opinion, many practices with Delta PPO do not need to be with Delta PPO… and it costs them thousands. Essentially, their Delta write-offs are almost doubled and there isn’t enough gain (in our opinion) to make up for the write-offs. Likewise for Met Life.

Other PPOs such as the Premier Group, Health Partners, etc., pay fees more akin to regular Delta Premier and, if an office is running efficiently, the bottom line can be fine.

5) The Internet as a Source of New Patients: I’ve seen several instances this year where the Internet had overtaken the Yellow Pages and other sources (e.g., Direct Mail) in the number of new patients brought into offices. This is not universal. In some places Yellow Pages are still pulling. Visibility (signage) remains a very major factor. Of course, so are patient referrals which still account for 50+% of most office’s new patients.

6) Treatment Coordinators: A treatment coordinator is usually a hygienist or an assistant who presents treatment all the way from the x-rays through to the financial arrangements. The most ready model for this is orthodontic offices who have had treatment coordinators for years. The Doctor looks at the treatment plan, the treatment coordinator goes through it with the patients, holds their hands and works out the financial arrangements.

It’s easy to hire a hygienist and plug them into your operations. Developing a treatment coordinator is a little more tricky. It is a less defined job description. It takes a unique set of skills (a good dental background with good communication skills) and can be hard to work into your routine if you are not used to it. However, when we see offices with treatment coordinators, they do well.

This is by no means a comprehensive list but the trends mentioned are worth your attention.

Posted by Bill Rossi at 9:29 AM 0 comments
Labels: Advanced Practice Management, Bill Rossi, Delta Dental, dental office profitability, Economic news for midwest dentists, Group Practices, technology

Tuesday, January 17, 2012

Since I grew up as a farm kid, I’m big on being aware of the seasonable variations.*

For example, most of you already know that August is the single, biggest new patient month of the year (big on kiddie prophies with the back to school rush). May and September are typically lighter months in our area. Doctors, that’s a good time to plan your Continuing Ed or vacations. Beats sweating about the schedule.

We’re now coming up on the biggest crown and bridge months of the year: December, January and February. It’s the “Insurance Effect.” Anyone that’s putting off treatment now should be committed to an appointment next year. Don’t let it dangle with, “We’ll get back in touch with you later…” Some people use the Year End Insurance/Flex Letter. If you don’t mail these, these can at least be used as a handout. Some practices have good success with this and others not so much. If you haven’t tried it before, it’s worth a shot. Call our office for a copy, 952 921 3360.

Since more and more offices are using automatic confirmation, you can use the same service to blast out a notice about year-end benefits. I saw a practice do this with Demand Force. For very little cost, they stirred up some business.

So, light up those intra-oral cameras, get out the visual aids and get the staff and yourself psyched up! This is the time of year where more of your patients will choose to upgrade their dental health if you are on your game.

“Non-Covered” Services:

We still get a lot of questions on this topic so here are some key points.

Non-Covered Services such as cosmetic services: If an office places an anterior crown (such as all porcelain) for aesthetic/cosmetic purposes, this is a non-covered service and should not be submitted to the insurance company. Submitting it could imply that it is not cosmetic and is likely that you would be required to reduce your fee to the allowable amount by the insurance plan. Not submitting to the insurance company allows you to bill and collect your whole fee.

Maximums: Anything submitted beyond the maximum is still subject to the “allowable amount.” For example,

The Dentist completes two restorative crowns at $1,000 each. The patient’s maximum is $1,000. The allowable amount is $900 per crown. Even though the insurance plan only covers $1,000 of the $2,000 treatment plan, the dentist is still required to reduce the fee on both crowns after the maximum is reached. In this situation the Doctor would write off $100 per crown.

This logic also holds true for things like “waiting periods,” “prior conditions” and “frequency limitations.”

Alternate Benefit (Covered Services): This is when the insurance plan alternates a “covered service” to support the lowest reimbursement or another similar service. For example, The dentist completes a Posterior Composite at $250. The insurance plan alternates the benefit to an amalgam with an “allowable amount” of $120. The dentist collects the difference of $130 from the patient.
Posted by Bill Rossi at 2:03 PM
Labels: Advanced Practice Management, Bill Rossi, Dental Consultant, Insurance, Non-Covered Services

Tuesday, February 21, 2012

Shea Practice Transitions reports that practice values continue to stay steady if not increased slightly from 2010 through 2011. Shea Practice Transitions reports over 50 practice sales during that period of time, with some interesting statistics. Of these, the average practice collections were over $775,000. The average patients per practice equaled 2,005. Over 95% of the practice sales were sold in cash transactions. The average price per patient record was over $180. The practices sold from a range of 31% of annual gross collections to 78% of annual gross collections. Over half of these practices sold for over 60% of their gross, and over 10% of the practices sold for over 70% of gross. The average practice took approximately 8 months to sell.

The above are simply averages; however, somewhat enlightening. Naturally all of these practices are in different geographic locations, facilities, patient compositions, overhead structure, as well as many other fluctuating variables. Nevertheless, what these statistics do point out is that there is still an excellent market for practice sales (including practice buy-ins). So, don’t sell yourself short. Make sure you get proper value for your practice. Contact Kevin Shea at: www.sheatransitions.com or sheainfo@sheatransitions.com

Posted by Bill Rossi at 2:15 PM
Labels: Advanced Practice Management, Bill Rossi, dental practice values, Economic news for midwest dentists