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As 2009 draws to a close, it's time to look back at the year's successes and challenges. How did your practice fare in this tough economic environment? Were you able to adapt and discover new opportunities? Or were you playing “catch–up” for most of the year?
To correctly gauge the state of your practice, it is always good to compare your performance in key categories to that of your peers. The data in the second installment of the Dental Economics®/Levin Group 2009 Annual Survey will prove to be a useful benchmark for dentists as they prepare for the next 12 months.
As you may recall from the 2008 survey, the economy was a primary focus. In 2009, it is still front and center in everyone's mind. Dr. Roger P. Levin, chairman and CEO of Levin Group, says the effects of the economic downturn are readily observable.
“It's no big secret that the turbulent and unpredictable economy is affecting dentistry. In fact, Levin Group finds that many practices seeking our consulting services are down anywhere from 5% to 15% or sometimes more. There has been a noticeable increase in patients putting off dental treatment. Obviously, dentists are deeply concerned,” says Dr. Levin.
“However,” he continues, “the picture is going to change. Many economic experts are cautiously predicting a brighter economic picture in 2010. Dentists must be prepared to shake off lowered expectations and get ready to take full advantage of a better economy when it comes. Dentistry has actually fared far better than many industries in this economy. And dentistry will be at the forefront of businesses reaping the rewards of a better economy.”
One fallout from the economy has been the postponing of dentists' plans for retirement. This year, we posed a new question to help gauge the long–term impact of the economic slowdown: “Do you believe you will now have to work longer due to recent changes in the economy?”
For nearly 60% of responding dentists, the answer was “yes.” In 2008, doctors, on average, said they expected to retire at 61. This year, the expected retirement age jumped to 63. With 401(k)s almost universally suffering double–digit losses since the fall of 2008, it's not surprising that the majority of dentists expect to work longer.
“Dentistry has traditionally been viewed as relatively recession–proof,” says Dr. Levin. “While that illusion has been shattered this time around, you still have to keep it all in perspective and take a balanced approach.” He pointed out that nearly half of the surveyed doctors expect to increase their 2009 gross practice production over 2008.
In this month's article, we will examine the following survey categories:
- Procedure mix
- Practice overhead
- Staff wages
- Doctor satisfaction
Average annual need–based production was 80%, with elective production at 20%. Not surprisingly, the monthly figures were virtually identical. Dr. Joe Blaes, editor of Dental Economics®, was pleasantly surprised by the results.
“For dentists to generate one–fifth of their production from elective procedures in the current economic climate is extremely impressive,” Dr. Blaes said. “It's a testament to several things: the overall health of our profession, the commitment of dentists to esthetic procedures, and the high value the public places on cosmetic dentistry.”
As the economy tightened up, many specialists were concerned that dentists would refer less and/or perform more specialty procedures in–house. To measure the impact the economy was having on interdisciplinary treatment, we created an additional question this year: “Approximately how many times each month do you refer to the following specialists?”
According to this year's results, GPs, on average, referred to oral surgeons nine times a month, the highest for any specialist. Endodontists and orthodontists were next, respectively, with 7.29 and 6.93 average monthly referrals from GPs. Periodontists were in the middle of the pack with five monthly referrals, followed by pediatric dentists with 2.57 monthly referrals, and prosthodontists with 1.65 monthly referrals.
Controlling overhead is key to managing a successful dental practice. Average overhead for surveyed practices was 61% — a jump of four percentage points from last year's average overhead of 57%. If your annual revenue is $1 million and your overhead increased from 57% to 61%, your bottom line just took a $40,000 hit.
With annual production down 2.7% compared to 2008, it's not surprising that overhead has increased to 61%. Even had expenses remained the same dollar figure from last year, practices experiencing a drop in production would still have a higher overhead percentage, because those expenses would account for a larger percentage of the practice's declining revenue.
In overhead categories, supplies increased from 10% in 2008 to 12% in 2009. Lab fees also rose from 9.3% in 2008 to 11.4% in 2009, while staff salaries dropped from 33.2% in 2008 to 29% this year. “With patients postponing care, dentists are forced to reduce hours for both clinical and administrative staff,” said Dr. Levin.
This year, we looked at the hourly wages for five key staff members:
- Chairside assistants
- Office managers
- Front desk/administrative personnel
- Treatment coordinators
According to this year's results, hygienists were the top earners at $36.24 per hour, which is expected due to their clinical training. The next highest paid employee was office managers at $24.45 per hour, followed by treatment coordinators at $18.97, chairside assistants at $18.05 an hour, and front desk personnel at $17.37 per hour. These figures closely mirrored salary numbers from the 2008 survey.
While staff salaries remained relatively flat, doctor compensation dropped a troubling 7.8% from $245,424 in 2008 to $226,265 in 2009. “With flat production and increased overhead, doctor compensation was one of the first areas to be cut,” said Dr. Levin. “Finding ways to increase production will put doctor compensation back into an area of positive growth.”
Dentistry is not only about being a good dentist. It's also about enjoying what you do. Another year has rolled by with dentists feeling very stressed. An alarming 24.8% of responding dentists said they were experiencing high or extremely high stress compared to 22.5% in 2008. Too much stress simply makes a bad situation worse.
“Too many doctors feel that there is little they can do to build their practices in this economy,” says Dr. Levin. “They feel they're in a holding pattern and somewhat powerless to make much of a difference.”
Dr. Levin insists it is often the little things that count in practice growth. In the 2009 survey, for example, 40% of responding dentists reported that they use 15–minute time increments in their scheduling system.
“Having 15–minute units is a very inefficient way to schedule appointments,” says Dr. Levin. “Simply switching to 10–minute units will make an immediate difference in any practice's bottom line.”
“The one thing you don't want to do in a tough economy is lower your expectations to the point where you aren't in a good position to bounce back when the economic picture improves,” Dr. Levin continues. “The best course of action is to run the most efficient practice possible, which means having step–by–step, documented systems in place. That approach will minimize the impact of this economy.”
Another area of concern is that 59% of responding dentists believe they will have to work longer due to changes in the economy. When retirement is delayed for a majority of dentists, it's understandable why more doctors are experiencing high stress.
The use of appropriate advisors can reduce the amount of stress for many dentists. “The expertise of others can fill in knowledge gaps in critical areas for dentists,” said Dr. Blaes. According to this year's results, 93.5% of responding dentists used the services of accountants, 43.3% hired lawyers, 37.8% used certified financial planners, and 30.4% had practice–management consultants.
“Dentists already have enough on their plates being the practice's owner and main producer without taking on additional tasks,” says Dr. Levin. “Fortunately, there are resources available, so dentists don't have to go it alone.”
Summing it all up
This year's Dental Economics®/Levin Group Annual Practice Survey showed a very mixed picture. More dentists are experiencing higher stress and drawing less compensation than in previous years. While annual practice production dropped slightly, nearly half of surveyed dentists expect to increase production by year's end. This optimism may well carry into the new year.
“I think we will see a brighter picture in 2010,” said Dr. Blaes. “This survey shows practices weathering the storm and seeing the first specks of blue sky. I recommend using the information in this survey as a tool to benchmark performance, review policies and systems, and create a better practice in the coming year.”
We hope the Dental Economics®/Levin Group 2009 Annual Practice Survey has encouraged you to think about your own practice and sparked your interest in making positive changes. Thank you to everybody who participated in the survey. You made your voice heard, and we appreciate the time you took to complete the survey. We look forward to your participation in 2010. To view the complete survey results, visit www.dentaleconomics.com/resources and click “Download Center.” Click here to view survey