Part two: The details
Roger G. Sanger, DDS, MS
Editor’s note:This is the second of a two-part article on pedometrics. Part one appeared in our May issue. To read it, search “pedometrics” on dentaleconomics.com.
Pedometrics is a term we coined to refer to the collection and analysis of the clinical and business metrics for practices that exclusively or primarily treat children. Mastering the details of pedometrics is key for practices to exploit the paradigm shift happening with pediatric dentistry.
Mastering clinical metrics
Clinical metrics are related to recruiting, treating, and interacting with patients and parents. There are five main categories of clinical metrics: marketing, sales, scheduling, production, and collection. These metrics should be computed on daily, monthly, quarterly, and yearly bases.
New patients per month/year and by amount of revenue produced—These metrics are influenced by the caries rate (high, medium, low, none) of the new patient and the funding source for care (private pay, indemnity insurance, PPO, government program). Target marketing to parents of children with higher needs. Greater funding may require smaller numbers in this metric. Both external and internal metrics for sourcing new patients should be calculated.
Set your new-patient goals based on your desired mix for caries rates and funding sources with profitability in mind. For instance, one in three children today is covered by a governmental dental plan. These children tend to have higher caries rates.
A pediatric practice may accept children on these state or federal plans, but regular analyses should be performed to ensure the practice’s patient profile does not become too skewed toward this patient population.
Recall patients per month/year with amount and percentage of total patients—This metric is influenced by customer satisfaction. Parents who like the way they and their children were cared for will often schedule an appointment to return (six-month recall). Even parents who like the way they and their children were cared for but decide to delay recommended care will schedule a return care evaluation. Pediatric practices must respect parents’ time for customer satisfaction today. For example, the “waiting room” should now be the “reception experience,” with a minimal amount of time spent waiting.
New or returning emergency patients, urgent-care patients, and episodic-care patients—These metrics, while sometimes involving patients with problematic behaviors, are useful in filling up the schedule, increasing production and collected revenue, gaining new patients, etc. Never consider these patients undesirable. If this metric is high, buffer capacity should be built into the schedule to accommodate these patients.
Case acceptance rate and average dollar amount of case per new and returning patient—This metric is influenced by the caries rate and funding source, plus the ability of the doctor and staff to diagnose, plan treatment, and get acceptance for both care and payment. You should not aim for higher new-patient numbers with high caries rates if case acceptance is low; your focus should be on increasing your case acceptance rates. If your case acceptance metric is low for new patients, it is probably lower than it should be for recall patients, as well.
Same-day treatment sales and production—This is a new metric for most practices. Same-day care, although demanding of all, can remedy scheduling upsets and enhance profitability if the entire staff is committed to work as a team. Millennial parents like same-day care.
Alternative care choice, cancellation, and/or failure rate—These metrics are influenced by the behavior of parents and children and such considerations as need, time, convenience, fear, and finances. A cancellation and/or failure rate above 10% may indicate a poor or nonexistent scheduling policy.
Billable revenue generated over a period of time (hour, day, month, quarter, year) by dental provider (dentist, dental hygienist, dental auxiliary)—These metrics are influenced by state regulatory compliance (who can legally do what) and by the treatment plans that are presented to and accepted by both new and returning patients. These metrics are also influenced by the owner/doctor’s decision regarding what constitutes a “workweek” or a “workday”—four days a week, seven hours a day, etc. Fee analysis also plays a role here. The most-used procedural codes and their fees should be evaluated and adjusted for inflation and/or community provider comparison every six months.
Collection metrics include the following:
• Revenue collected as amount and as percentage of billed production by third-party entity (check and/or direct-wire transfer), patient direct pay at visit, patient pay from billing, or patient use of credit services
• Percentage and aging of accounts receivable by time periods (under 30, 60, or 90 days; over 90 days; collection service, etc.)
• Write-off amounts and percentage from patient direct discounting, PPO contracting, or governmental program contracting
In general, adjusted collections should be at least 96%, and accounts receivable should be no greater than an average of one month’s adjusted production. (Adjustments take write-offs, etc., into account.)
This myriad of clinical metrics is influenced by the doctor’s decisions on the practice’s patient payment policies, contracting into PPO and governmental program provider networks for the practice, etc. As PPO and governmental plans outpace indemnity insurance and private pay plans, these metrics need significant attention.
Mastering business metrics
These are segmented more by facility, human resources, technology, external services contractors, specialized consultants, etc., and generally are reported by historical accountancy on monthly, quarterly, and yearly bases. Multidoctor and multioffice groups may have different ranges as consolidation of services is achieved.
Facility and equipment metrics
Lease or mortgage payments, maintenance, janitorial, utilities, telephone, cable, taxes, etc.—The normal range is 5%–10% of collections, depending on ownership status and size of building.
Equipment lease or debt, tenant improvements lease or debt—This variable expense depends on the age and growth curve of the practice. Newer or expanding practices will have a higher range, and the amount and length of the lease or debt will also influence this metric.
Marketing, website and social media, advertising, promotions—The normal range is 3%–4% of collections, but with aggressive and diversified technology, the metric can be higher.
Human resources metrics
Staff salaries, benefits, taxes (excluding associate doctors)—The normal range is 19%–27% of collections, depending on the size of the staff and their qualifications (dental hygienists versus dental assistants, office management versus clerical) and the types of benefits (insurance, retirement plans, etc.).
Dental supplies—This variable expense has a normal range of 4%–6% of collections, depending on the complexities of orthodontic, pulpal, and restorative care delivered.
Office supplies, bank, credit card, postal, computer, printings, and fees—This variable expense has a normal range of 2%–5% of collections, depending on the complexities of computer and credit usage.
Contracted service metrics
Contracted laboratory services—This variable expense is usually below 2% of collections unless orthodontic services are delivered.
Contracted service consultants (accounting, legal, insurance, business)—This variable expense has a normal range of 2%–5% of collections, depending on associates, partners, number of offices, network contracts, etc.
The breakeven point: The best motivator
One of the most motivating metrics for any practice is knowing the point during the month when the month-to-date collections equal the month’s total fixed expenses plus month-to-date variable expenses. After that point, the only expenses that will need to be covered before profit is declared are month-to-go variable expenses, which are far lower than fixed expenses. This point is called the breakeven point—the sooner it comes in the month, the more profitable the practice will be in that month. The same is true on a quarterly and yearly basis.
Of course, you can make your breakeven point arrive earlier simply by reducing expenses. Better yet, by embracing pedometrics, you can combine controlling expenses with incorporating game-changing technologies and techniques that allow you to work better, faster, and more easily and achieve greater profitability. We want you to choose the latter.
Roger G. Sanger, DDS, MS, a pediatric dentist, cofounded one of the largest private multidoctor, multioffice pediatric dental groups, featuring two surgicenters, in California. He founded the Sanger Group, a pediatric strategic practice-planning consulting company. He is also the course director of NuSmile’s “Game Changers in Pediatric Dentistry” course.
Scott Lauer, a pediatric dental consultant, founded Simply Kids Dental Consultants, which helps pediatric dentists become more successful by creating solutions through practice metrics analysis and executing successful marketing plans. He was formerly the director of business development at Pacific Dental Services, a multistate DSO with more than 80 standalone pediatric offices. He is also the instructor of NuSmile’s “Strategies for Practice Growth” course.