Tamara’s Pearls of Wisdom: Dental Practice Management Tips

Tamara Whitley, DAADOM - Pearls of Wisdom - 2024 Office Manager of the Year - Single-Location Practice.

Dental Management Tips from AADOM’s 2024 Office Manager of the Year – Single-Location Practice

The year was 1995 when Tamara Whitley, the 2024 Office Manager of the Year for a single location, told her dental school husband that she dreamed of a day when they would work together in his dental office. He said, “Over my dead body will you ever work in my dental office.” With her dream dashed, she began to climb the corporate America ladder with Medco Health Solutions, Cigna, CVS & ADP.

Fast forward 27 years when Dr. Bill asked Tamara to use her years of business experience to find out why he had not received a paycheck for 9 1/2 years as the owner of Whitley Family Dental in Dallas, Texas.

In her quest to understand why their practice was inefficient and unprofitable, Tamara quickly learned that an old adage is true. “You don’t know what you don’t know until you know you don’t know it.”

She sums up her hard-earned knowledge as “How To Avoid the Iceberg When Your Dental Office is the Titanic.” Tamara’s icebergs have become pearls of wisdom, and it is these pearls of wisdom that now have Dr. Bill saying, “Over my dead body will you leave our dental office.”

Tamara often says, “Knowledge is power…but only when shared.” She shares these pearls of wisdom for 2 reasons: 1) to prevent others from having an unprofitable and inefficient dental office, and 2) so you will be “IN THE KNOW”!

Pearl #1) Know Your Numbers

There are lots of numbers that are tracked in a dental office, but none more important than the breakeven cost to do business. It is more important than production, collections, insurance write-offs, etc., but most offices have no clue how to calculate this critical number.

When I started to look under the covers as to why we were unprofitable, one of the first things I found was we were in 52 upside-down PPO fee schedules—34 direct contracts and 18 indirect. Upside-down means the fee schedule reimbursements were $50.00 – $250.00 BELOW our per hour breakeven cost to do business.

NO WONDER I was shoveling my salary, bonus and stock options to keep the practice running and meet payroll! NO WONDER Dr. Bill had not received a paycheck in 9 1/2 YEARS!

Dental school teaches our dentists how to be great clinicians, but they are not taught the basics of running a business. Your breakeven cost to do business is CRITICAL in every decision you make in the dental office.

  • Knowing this number will help you decide if a fee schedule is profitable BEFORE you sign on the dotted line.
  • Knowing this number will help you when communicating to patients why you must exit an unprofitable network.
  • Knowing this number will help you evaluate if you can afford a new piece of equipment and how the monthly payment will impact the bottom-line.
  • Knowing this number will help you with transparent conversations with the team that motivate them to surpass this critical number.
  • Knowing this number will help you determine if raises and increases to bonus structure are warranted for the team.

We sometimes make things harder than they need to be, but the good news is calculating this number doesn’t have to be hard!

  • Add each month (12) of TOTAL expenses found on the Profit & Loss Statement (P&L) – rent, mortgage, utilities, payroll including dentist’s salary, taxes, supplies, instruments, maintenance, office supplies, medical & life insurance, postage… EVERYTHING! Divide the total by 12 to obtain the monthly average.
  • Divide the total expenses for the year by the number of hours the dental office works – this gives you the breakeven cost to do business per hour.
  • Divide the per-hour cost to run your business by the number of operatories you have, and voilà – you have your per-hour per chair cost to keep your doors open.

Example Using Equation:

  • The P&L expense line for the year = $840,000.00 – divided by 12 months = monthly average breakeven cost is $70,000.00
  • Divide $840,000.00 by the hours worked in a year. If the office works 4 days per week, that equals 1664 hours per year
  • In this example, the per-hour cost to run the office is $504.81 to break even. You must make this number per hour to keep your doors open
  • Per operatory – divide your per-hour cost by the number of operatories you have – in this example, we have 4 operatories – this is your per-hour cost that each chair must meet to reach the practice per-hour goal of $504.81 = $126.20

I understand that many office managers may not have access to the profit & loss statement for the office. If you do not have access to the P&L, show this pearl to your dentist and have them give you the total annual expense line. I promise the dentist will be impressed that you are trying to partner with them to ensure you have a profitable practice AND to help them make educated and informed financial decisions for the office!

Stay Tuned for Next Month’s Dental Management Tip for Single Practices

 


Is Your Dental Office Manager Our Next Practice Administrator of the Year?

Each year, AADOM recognizes two members as Office Managers of the Year (single-location practice and multi-location practice) who exemplify leadership, actively pursue professional development, education, and community service, and have demonstrated the ability to increase practice efficiency and profitability through the implementation of systems, technology, and marketing strategies. Does this sound like you or the office manager of your dental practice?

Nominations for 2025 will open soon! Your candidate could be recognized at the 2025 AADOM Conference this September.

 

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