Real-world Insights from AADOM Authors: Raymond F. “Rick” Willeford

A successful dental office manager realizes that it is imperative to “know their numbers” if they are going to plug profit leaks and drive productivity.

But which numbers?

After 40 years as a Dental CPA/Practice Advisor, I’d like to highlight some facts and fallacies for you.

First, I’d like to emphasize that this article will focus on clinical/operational KPIs (key performance indicators or monitors) as opposed to financial/overhead KPIs. The latter will be discussed in a separate article explaining why many offices are not benchmarking their overhead items correctly.

Hopefully, every office is watching the traditional KPIs, like production, adjustments, collections, new patients, etc.

But did you ever stop to think that, in the world of cause and effect, things like production are actually secondary or effect KPIs?

You can’t just say, “Let’s increase production ten percent,” and then go about your day. Instead, there are essential underlying KPIs that drive changes in those secondary/effect KPIs.

Let’s look at a few of those KPIs.

Before diving into the details, note that – at the highest level – you could say there are four major “horsemen” that drive the success of a practice: production, collections, patients, and recare (assuming recare is an important factor in the practice).

A few of the actionable drivers in each area include:

PRODUCTION/EFFICIENCY:

  • Mix of procedures performed
  • Fees charged per procedure
  • Clinical speed of the provider—per day, hour and patient visit
  • Adjustments and write-offs

COLLECTIONS/AGING:

  • Net collections as a percent of net collectible production
  • Percentage of payments collected at time of service (over the counter)
  • Average amount of time to collect receivables
  • Health of the A/R aging and credit balances PATIENTS/SCHEDULING
  • Number of hours seeing patients vs. open time
  • Level of case presentation and acceptance
  • Number and source of new patients percentage broken and short-cancellations rescheduled

HYGIENE/RECARE:

  • Number of delinquent recare patients
  • Conversion, recare and retention rates
  • Number with future due dates but no appointment
  • Recare and perio as a percentage of office production

Let’s look at just a few in more detail. In fact, our clients automatically track over 40 potential profit leaks.

PRODUCTION EFFICIENCY

Many dental business managers track production per hour and/or per day, but I suggest that production per visit might be more reliable. Especially if you want to compare providers or offices.

Consider this case:

Dr. Associate produces $400/hr ($3,200/day), and Dr. Owner produces $800/hr ($6,400/day).

It looks like the associate is a slacker. But if we look closer, we find that the associate works out of one room and saw eight patients in the day or $400 per patient.

However, the owner works out of two rooms and saw 24 patients or $267 per patient visit! You might want to find the associate a second room, assuming you can fill it with patients.

Of course, it could be that a new GPR associate is placing implants, has a richer procedure mix than the owner, or somehow is on a better fee schedule.

COLLECTIONS/AGING

Suppose two offices both collect about $1,000,000 annually. Yet, Office 1 has $100,000 in A/R, and Office 2 has $200,000.

Interestingly, Office 1 collects 97.8% of its net collectible production, and Office 2 collects 98.3%.

Close enough for government work? Not quite.

Remember that the current collection percentage counts prior money coming in this month. That small leakage of .5% over 20 years for a $1,000,000 practice adds up to $100,000 cumulatively.

A traditional practice may still want to shoot for 1.2-1.5 times one-month net collectible production, but the heavy use of third-party financing could drop that dramatically.

We might also see that the over the counter (time of service) collections for Office 1 are 40% while Office 2 only collects 20%. The average time to collect an account is 30 days for Office 1 and 50 days for Office 2.

Those are two KPIs to track to see if you can better keep accounts out of A/R in the first place – or for a shorter time.

PATIENTS/SCHEDULING

Obviously, all the bullet points above are important, but one thing we encourage clients to do is specifically break appointments for failed or late notice cancellations.

In addition, do one more thing: be sure to add either a procedure or adjustment code (in Dentrix or Open Dental) to indicate whether it was a true broken appointment (BA/failed/no show/no call) versus a short notice/canceled appointment (CA).

Break the appointment even if the CA rescheduled. You may find that they canceled four times this year.

The distinction of BA vs. CA is important because you might have limited follow-up time. At least a CA loved you enough to call (vs. a BA), so I would focus your follow-up efforts on the CA first.

Often you can’t prevent BA/CA, but you can monitor how successful you are at rescheduling.

Low reschedule rates might say something about the quality of your team’s communication skills, or it might say something about the quality of your patients and their respect for your time.

You should strive for an 85% reschedule rate and shoot for fewer than eight percent of total appointments as BA/CA in the first place.

HYGIENE/RECARE

Everyone is excited about new patients, but who is watching the back door? And how do you measure that?

First, you should measure the conversion/enrollment rate of new patients into the hygiene program.

Along the same lines, we track how many emergencies came back for a D0150 comprehensive exam, but that is another story.

Depending on the nature of your new patient population, you should strive for 85% or more.

Once in the recare program, what is your retention rate?

Look to see how many new patients have returned for two recare visits in nine months. We allow a few months to get settled into the practice for their first recare visit.

Also, look back to see how many new patients had three recare visits in 18 months.

Again, depending on whether your practice is next to a military base (where people may leave frequently) versus in the suburbs (which is likely more stable), you would like to have at least 75% nine-month retention and 60% or more 18-month retention. Hopefully, those rates will be even higher.

Current recare rate is also important.

For instance, evaluate how many patients had due dates in June. Compare that to how many of those patients actually came in during June or have a recare appointment in July.

You should have a recare rate of at least 80%, but many offices do not (see the comments re BA/CA above).

As you can imagine, we have just scratched the surface. I hope you have found some of the metrics to be interesting, thought-provoking, and actionable. Let me know if you have any thoughts or would like to chat about other KPIs or dental management help.


 

Meet the Author

Rick Willeford, one of the first dental CPAsRaymond F. “Rick” Willeford, MBA, CPA was one of the first Dental CPAs 40 years ago.

He is a Georgia Tech engineer and developer of DentaMetrix – a professional strength data extraction and dashboard program.

Rick’s knowledge of cutting edge technologies, his deep business experience and understanding of practice management provide him the tools to enhance revenues and plug profit leaks.

 

 

Become an AADOM author!