There are two sides to every practice - clinical and business. This article will take a detailed look at the fiscal interdependence between the two, down to every last clinical minute and every last cent.
With the proliferation of “extreme makeovers” in virtually every popular media, dentistry has undergone a paradigm shift. Dental practices not only actively pursue patients with recall cards and follow-up calls, but the tables have turned and patients are proactively requesting dentistry. That’s right - patients are reaching out to their dentists for procedures such as tooth whitening, bonding, veneers, and even total makeovers.
This is fine for the profession, but here is the caveat. After they ask for that Hollywood smile, patients settle back into reality and put their requests into financial perspective with two final questions: “What is it going to cost me?” and “What will my insurance cover?”
Here is the challenge. Is it sensible to perform cosmetic dentistry on a patient who has a PPO insurance plan, or heaven forbid, an HMO or DMO? The answer is yes. It’s not only sensible, but it can be profitable for the practitioner and affordable for the patient. And yes, we’re taking into account that most PPO insurance plans offer reduced fees at a level nearly 50 percent less than standard fee schedules. If the patient opts for “tooth-colored” restorations, he or she is responsible for the cost differential between the amalgam and composite.
Class I composite: a cost overview
Let’s walk through a typical procedure and compare the cost per unit to perform the services to the insurance reimbursement. We will begin our cost analysis with a simple and basic dental procedure - a Class I occlusal composite filling (code D2391). We will use an average national fee schedule for the fee-for-service cost, which is $110, and we will use the average of 11 PPO insurance plans for the comparison (Figure 2). Additionally, we will calculate the average cost to keep the dental office open per hour based upon a national average of rural and urban areas.
To calculate how much hourly income it takes to turn a profit, we need to know how much it costs to keep the office running profitably per hour, based on the national average. The average revenue generated by a general practice nationally is approximately $525,000, and the average income for that office is $175,000. $175,000/$525,000 =.3333. Therefore, one-third of gross income equals net annual income.
The average annual overhead for a dental office (not including the dentist’s salary) is $350,000. The average clinician works 33 hours per week for 48 weeks, which is 1,600 hours per year. By taking the $525,000 average annual revenue and dividing it by 1,600 hours, we get $312 an hour to keep the office operating profitably. In other words, if a dental office can net $312 an hour after all expenses, that office should fall into the $525,000 average yearly revenue bracket.
Here is the clinical technique we will use to illustrate completing a Class I restoration. Step by step, the patient is seated, anesthetized, and readied for dental restoration. Under a rubber dam (Ivory Rubber Dam, Heraeus Kulzer), the tooth is prepared with an Axis diamond 845-KR-016 (Figure A). Self-etching bonding agent (iBond, Heraeus Kulzer) is applied to the tooth and light-cured (Figure B). Self-etching bonding systems that are dispensed out of one bottle require light-curing before application of composite resin restorative materials. Flowable composite resin is placed on the floor of the preparation and cured (Figure C). Finally, the composite resin (Venus, Heraeus Kulzer) restorative is placed, sculpted, and cured. The restoration is complete when the rubber dam is removed, the occlusion is checked, and the tooth is polished (Figure D).
When done correctly, a Class I composite restoration takes approximately 20 minutes. Based on the $312 per hour net income required, the procedure costs $104, which is $312 divided by three. At 20 minutes per procedure, a practitioner should be able to complete about three restorations per hour. To be profitable, a practitioner’s fee should be no less than $104 on that restoration.
Factoring insurance into the mix
How much do the insurance companies allow (Figure 3)? Some insurance programs pay Least Expensive Alternative Treatment (LEAT). This is a fee usually negotiated between the insurance company and employer, and is based upon using dental amalgam as the restorative material. This is about 30 percent less than the fee for a composite.
Now that we know all the numbers for a Class I composite, let’s put them to work and see where we end up. In the expense-analysis chart (Figure 1), it costs the practice $15.41 in materials to complete the Class I composite restoration. Add $94.59, which represents all associated costs of running a practice as shown in Figure 2, and we’ve arrived at the national average of $110 to complete a Class I composite. Insurance covers $78, leaving the practice $32 below the average.
Because of the fee constraints set by insurance companies, the clinician may not collect the difference. Uh-oh. Do we have a problem here? Not at all. Then how do we make up for discount revenue?
By employing the principles of volume and efficiency. Our example is based on one dentist working in a single operatory. Four cases per hour can be completed by simply adding another patient in a second operatory and switching between the two. As mentioned earlier, insurance pays $78, and $78 multiplied by four cases is $312 net revenue - the exact amount required to become a $525,000 practice!
Of course, these examples are averages in ideal situations, but they’re not out of reach. A typical practice isn’t going to see only patients who need 20-minute single-surface composite restorations. But I used this as an example because it’s typically one of the lowest fee procedures on the books.
The same cost-per-procedure formula described here can be applied to other dental procedures, and the per-procedure cost of certain materials may surprise you. However, it should be no surprise that payroll and rent are the highest expenses, followed closely by capital equipment and materials costs.
Doing a procedure for yourself is a learning experience, and a real eye-opener to see exactly where your money is going. But once you’ve done this for one procedure, you’ll want to run the numbers for other procedures and facets of your office operations. The results may compel you to look at things differently when you know the real cost of doing dentistry for your practice.”
References available upon request.
Dr. Martin G. Abel is an accredited member of the American Academy of Cosmetic Dentistry, a member of the American Society for Dental Aesthetics, a fellow in the Academy of General Dentistry, and a fellow in the International Society for Dental and Facial Aesthetics. Dr. Abel maintains a general and cosmetic dental practice in Rockville, Md. He can be reached by e-mail at firstname.lastname@example.org.