Welcome to the second installment of the Dental Economics®/Levin Group 2007 Annual Practice Survey report. Last month, we took a close look at the results in the areas of Practice Production, Collections and Billings, and the newest addition to the survey, Doctor Satisfaction. (For another look at the complete survey results and analysis from last month, visit www.dentaleconomics.com.) This month, find out how you rank against other practices in the important areas of Practice Overhead, Staff Wages, and Fringe Benefits.
As a quick review, this year’s Annual Practice Survey was done as a partnership between Dental Economics and Levin Group. For more than 22 years, Levin Group has worked with thousands of general dentists and specialists to enhance their practices through a range of practice management and marketing consulting programs.
This year, as in years past, practices were analyzed based on city size (Major Metro = 500,000+, Large City = 100,000-500,000, Medium-sized Town = 10,000-100,000, Small Town = less than 10,000). You can easily reference the survey findings to analyze your unique situation. The median (50th percentile) was used as the data point for analysis to minimize the impact of responses on the extreme ends of the scale and to allow us to compare this year’s data with that collected previously. If you are interested in reviewing the averages for the responses to each question, visit www.dentaleconomics.com,go to “Resource Center,” click on “Download Center,” and look for 2007 Dental Economics/Levin Group Practice Survey.
Take some time to explore the next few pages to learn more about yourself and your peers.
Practice overhead
Understanding how to manage the expense side of operating a practice is a key success factor for dentists. There is a certain amount of spending required to run a quality dental practice. Monies must be invested in purchasing supplies and services (including laboratory work), paying staff members, and performing comprehensive diagnosis and case presentations. Levin Group has found that a well-managed practice can deliver the best quality of care while maintaining a comfortable overhead level of 55-65 percent.
The median overhead reported by practices in the survey was 63 percent, which falls in the healthy range for general practices. However, when examining the five major overhead categories - dental supplies, lab fees and staff wages (hygiene, clinical and administrative) - overhead generally appears to have increased for the third consecutive year. For example, in Major Metro practices as well as those in Small Towns, the percentage of overhead represented by outside lab fees jumped significantly over the last two years, from 6.3 percent of practice overhead in 2005 to 10 percent in 2007. Remember, there are many survey variables that may affect the outcomes, so please regard these figures as a starting point when examining your own practice.
Staff wages
Given that the dental team is a practice’s single largest fixed expense category, comparing salary expenditures to others can be extremely helpful. While staff salaries accounted for a slightly larger slice of practice overhead in this year’s survey, new employees in surveyed practices are being paid less than they were in 2004. This could be fallout from high turnover experienced by dental practices. The downward salary trend may reflect the departure of experienced staff and the influx of less experienced staff that come in at a lower hourly wage. The data show that in some instances, the decrease is minimal, as in the case of new hygienists in a Major Metro area whose median salary dropped from $30.75 in 2004 to $30 in 2007.
For other employees especially in administrative areas, the drop has been more significant. The salaries reported for front desk people, office managers and business assistants are all modestly lower when compared with previous years. The decline was steepest in Major Metro markets and Large Cities. In fact, even experienced employees in both clinical and administrative categories are receiving less compensation now than two years ago. Not only were staff salaries down, compensation for doctors was flat to slightly lower than last year in each of the population categories.
Fringe benefits
Benefits play a huge role in staff satisfaction with their compensation package. Nearly half of the practices offer a 401(k) program, with simple or SEP (38.7 percent) and profit-sharing (37.3 percent) following close behind. Some practices offer multiple retirement programs, accounting for percentages totaling more than 100 percent. More than one-fifth of practices (22.5 percent) provide full health insurance for their practices. Partial coverage is offered by 40.8 percent of practices, with 36.6 percent providing no coverage.
Attracting and retaining quality team members is a goal for every practice. In addition to a quality compensation package, a training program can also help keep staff members satisfied with their work environment and professional development. An effective training program requires written job descriptions for every position in the practice. Unfortunately, more than a third (35 percent) of responding doctors said their practices did NOT have written job descriptions for every position. If a practice is experiencing a high rate of turnover, the lack of written job descriptions is often a contributing cause. “To perform their duties well, employees need to be informed of what their responsibilities are. Written job descriptions are a must,” says Dr. Roger Levin, founder and CEO of Levin Group.
A majority of practices (61.6 percent) offer a staff bonus plan, which, when done properly, is an excellent way to build staff loyalty, commitment and excitement. In working with clients, Levin Group strongly encourages practices to develop and implement a staff bonus plan. Almost half (48 percent) of responding doctors said their bonus program was based on collections, with 32.3 percent citing production as the main basis for awarding bonuses. “The best bonus programs are based on collections. If you increase production but don’t collect the fees, it is unlikely the practice will have funds to pay for the bonus program,” says Dr. Levin.
So what does it all mean?
“It’s a good time to be a dentist,” would be one conclusion to be drawn from this year’s survey. Overall, dentistry is experiencing steady and healthy growth. Practice production increased 7 percent compared to last year, with median gross practice production reaching $800,000. Over the past three years, dentists have experienced double-digit growth in daily production. And doctors reported seeing about 20 new patients per month this year, well above the numbers reported in the past three annual surveys. These indicators bode well for the success of dental practices in 2008 and beyond.
While practice production experienced steady growth, doctors’ salaries were flat in comparison to the last few years. Furthermore, one fifth of responding dentists reported high stress. Although a certain amount of stress comes with juggling the responsibilities of being both a dentist and a practice owner, high stress can only be tolerated for a short time before it wreaks havoc on the doctor, the team and the practice. “Practice success shouldn’t go hand-in-hand with high stress,” says Dr. Levin. “Solutions include establishing documented systems, training, and team building. With the right systems, practices can increase production and profitability, while significantly reducing stress.”
Another area to watch is elective treatment. According to the data, the percentage of cosmetic services such as veneers, inlays and whitening as well as the number of implant placements and restorations was relatively low compared to more traditional services. Performing a high volume of single-tooth treatment can drive production higher, but that type of dentistry can also be stressful over the long-term.
Based on this year’s data, some action steps you may want to consider include:
- Develop mission and vision statements and share them with the team
- Monitor overhead especially lab fees, which are taking a larger percentage of total expenses than previously reported
- Create or update written job descriptions for team members - a management tool many practices (35 percent) are currently lacking
- Review existing systems (i.e., scheduling, collections, patient communication) to determine whether improvements are necessary
- Analyze your service mix for opportunities to increase elective treatment
- Determine what practice areas can benefit from the use of advisors
Final thoughts
We hope the Dental Economics/Levin Group 2007 Annual Practice Survey published in this and last month’s issue has encouraged you to think about your own practice and sparked your interest in making positive changes. Look for some exciting additions and changes to next year’s survey. Any suggestions or ideas for ways to make the survey more useful are always welcome. Please send those suggestions to [email protected].
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 2008. Congratulations to the 10 winners of our drawing for $100 American Express gift cards. Winners were drawn from those who responded to the survey.
Survey development, implementation and analysis by Levin Group with special assistance from Michael Anthony, Consulting Project Manager. Levin Group, a 22-year-old dental consulting firm founded by Dr. Roger P. Levin, is one of the country’s most experienced practice management resources. Headquartered in Baltimore, the company opened an office and second Levin Advanced Learning Institute in Phoenix in December 2006. The company has nine consulting divisions including general dentistry, orthodontics, endodontics, periodontics, oral and maxillofacial surgery, prosthodontics, implants, pediatric dentistry and large group practice. In addition to practice management consulting, Levin Group offers financial planning, doctor and staff recruitment and practice transition services geared specifically for dentists. Since the company’s founding in 1985, it has embraced a single mission: to improve the lives of dentists.
