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by Roger P. Levin, DDS
How do you define practice success? Is it a full schedule? You could be extremely busy performing single-tooth treatment, yet not have much profit to show for your efforts. Is profit then the definition of success? You could have a very profitable practice, but be very unhappy due to high practice stress.
Your definition of success should be directly related to your practice vision. What is vision? It means having a clear understanding of what you want to accomplish and where you want your practice to go in a specific time.
Unfortunately, due to the hectic pace of most dental practices, many dentists have not taken time to think about the future of their practices beyond the next month, quarter, or year. Creating a vision statement can help a dentist determine where the practice is going and provide a road map for long-term growth.
A vision statement is a motivational tool that will help you create your ideal practice. Without a vision statement, it is often difficult to see where the practice is going. A vision statement is usually a few sentences describing where the practice will be in the next three to five years. An example would be:
We will be a high-production, low-stress practice. We will generate more than $1 million in production within five years. More than one-third of our production will come from cosmetic and elective services. Our practice will become known in the area for cosmetic dentistry.
Effective leaders share the practice vision with the dental team. Explaining the vision helps staff become active participants in building the practice and achieving all goals. Nothing contributes to the development of a high-powered team more than a powerful vision constantly reinforced by the doctor. Operating a successful dental practice is about more than just practicing dentistry. It is about leading a group of people on a journey toward reaching your vision of success.
Defining your vision
Once a dentist has created a practice vision, the next step is to set annual goals. To be considered a goal, objectives must be:
- Written in clear, specific language
- Deadline-driven
- Measurable
Goals provide a step-by-step blueprint for achieving the vision. A vision without goals is merely an idea. By setting specific, measurable, realistic, and time-specific goals, you can achieve your vision and reach your practice potential.
Measuring your success
Levin Group recommends that clients use Key Performance Indicators (KPIs) as tools to measure goal achievement. All practices have 12 to 15 KPIs that accurately reflect the practice"s health. KPIs provide a statistical snapshot of practices during a set period and allow dentists to accurately track daily, weekly, and yearly production goals. Using this data, doctors can make adjustments to potential problem areas. Here are eight of the most critical areas that KPIs measure:
- Production
- Collections
- Overhead
- Number of new patients
- Average production per new patient
- Average production per patient
- Case acceptance ratio
- Profitability
Production
Increasing production is critical to the practice"s long-term financial health, but high production does not necessarily result in high profitability. Examining KPIs will reveal potential opportunities to increase production. For example, if the majority of practice production is single-tooth treatment, the doctor should emphasize the benefits of comprehensive dentistry through a variety of internal marketing and case presentation strategies. In addition, unmanaged production can create numerous problems that have a negative effect on profitability, including scheduling overruns, stress, and poor patient care.
Collections
Many practices feel uncomfortable requesting payment at the time of service. Dentists have to instill a payment mentality in patients. Signs, brochures, and employee scripting are all part of an efficient collections system. Levin Group recommends practices collect more than 90 percent of payments at the time of service and 8.5 percent within the next 30 days. All other monies due should be collected within 60 days. Practices need to get paid for the work they perform. It"s a simple concept but one that some practices have trouble implementing successfully.
When you schedule a patient for treatment, you block out a set amount of time, be it 20, 40, or 80 minutes, for that patient. At the time of service, the practice incurs all the labor and overhead costs associated with treatment. When the fee goes uncollected, you lose the revenue for that procedure, the costs of providing the service, plus the revenue you could have made by delivering dental services to a paying patient. In essence, the loss of revenue from dentistry that goes uncollected is far more detrimental to the practice than simply the amount of the lost fee. When a patient does not pay all or part of a fee for dentistry performed, there are collection efforts required, which limits practice profitability.
Overhead
Overhead is a necessary part of running a practice, but eliminating unnecessary expenses can ensure the financial health of the practice. Many dentists and their teams fail to look at overhead as an opportunity to reduce costs and improve financial performance. As the practice owner, the dentist should know how much it costs to turn on the lights every day. Does the current budget accurately reflect practice expenses? Does the production schedule take into account the operational costs of the practice? Without an accurate financial picture, the doctor could be incorrectly setting fees. If a practice underprices its services, the dentist will be working harder for diminishing returns. If the fees are overpriced, the practice will end up driving away existing patients and turning away new patients.
Number of new patients
Practices need new patients to achieve growth. Dentists lose a certain amount of patients each year due to relocation. On the other hand, people are also moving into your area. How do you track patient turnover? Does the practice have a system in place to boost the percentage of new patients? When new patients come in for treatment, does the staff ask them how they were referred to the practice? What is your practice doing to actively increase its patient base?
A strong patient referral program can boost the number of new patients. For frequent referrers, small gifts and reduced fees for select services are excellent ways to say thank you and encourage continued referrals.
Average production per new patient
When a new patient becomes part of the practice, a new patient profile needs to be completed. This information, along with a medical and dental history, will be helpful in creating a long-term treatment plan. Your team should introduce patients to the full array of products and services the practice offers. Comprehensive care — not single-tooth treatment — should be your goal for new patients.
Average production per patient
Long-time patients present unique opportunities for boosting production. If the practice has added new services such as cosmetic dentistry, do team members promote these procedures to all patients? Even a small increase in production per patient can lead to a big increase in profitability.
Educating patients about all of your products and services is the first step in boosting production per patient. A hectic pace does not always indicate a productive practice. A dentist who sees a full schedule of patients from open to close may feel successful because it seems the practice cannot handle any more patients. But if the practice does not track average production per patient, it is difficult for the dentist to determine whether the practice is as profitable as it could be.
An effective practice maximizes opportunities by presenting comprehensive dentistry. A practice that sees 30 patients per day and averages only $125 of production per patient ($3,750) is not nearly as profitable as a practice that sees 20 patients a day, but averages $325 of production per patient ($6,500).
Consider for a moment that a daily difference such as this ($2,750) can mean an additional $550,000 per year for a practice operating four days a week. The dramatic difference in revenue and profit occurs because the "slower" practice has the time to present, sell, and deliver more comprehensive dental care.
Case acceptance ratio
Often the biggest hurdle to case acceptance is cost. If patients perceive the procedure is out of their price range, then they will reject treatment. By building value for treatment and presenting a variety of financial options, practices can change patient perceptions of affordability. To maximize case acceptance opportunities, practices should present patients with these financial options:
- Offer a 5 percent courtesy to patients who pay in full before the first appointment begins.
- Accept credit cards. Very few patients have the ability to pay out-of-pocket for significant dental procedures, but credit cards allow them to pay in full up front.
- Require half up front and half before the treatment is completed.
- Offer outside financing. A patient financing company that offers no-interest and flexible payment options makes treatment affordable for patients.
The more financial options practices give patients, the greater the opportunity to increase case acceptance, especially for cosmetic and elective services. In today"s image-conscious society, many patients are interested in improving their appearance.
The right financial options, combined with other case presentation strategies, can help make a more beautiful smile and an enhanced appearance a reality for more patients.
Profitability
All measured goals should be geared toward boosting profitability. The more new patients the practice gains, the more profitable the practice should become. The more the average production per patient increases, the more profitability the practice should achieve. Of course, every KPI comes with its own challenges.
Boosting production will not increase profitability if the service mix does not contain enough high-profit services. Also, if the dentist attempts to increase production without having proper staffing in place, the practice could drive patients away and increase staff turnover due to poor planning.
A systemized approach works best to achieve practice growth and the doctor"s vision, especially when systems are regularly monitored using KPIs.
To assess your performance and progress toward goals, it is critical to track each KPI on a monthly, weekly, and even daily basis. Possessing this kind of information will allow you to take immediate corrective steps if your actual performance falls short of your goals.
By evaluating your KPIs, you can also readjust your goals over time to reach your vision.
Conclusion
Your career is a journey, with success being your ultimate destination. Your vision and goals act as a map on the road to success.
KPIs are tools that can help you measure your progress. You will face challenges and obstacles along the way, but you have the power to make your dream practice a reality. Follow your vision, and it will lead you to ultimate success.
Dental Economics® readers are entitled to receive a 50 percent courtesy on a Levin Group Practice Analysis Program, an in-office analysis and report of your unique situation conducted by a Levin Practice Development Specialist. To schedule the next available appointment, call (888) 973-0000 and mention "Dental Economics" or e-mail [email protected] with "Dental Economics" in the subject line.
Roger P. Levin, DDS, is founder and CEO of Levin Group, a leading dental management consulting firm that is dedicated to improving the lives of dentists through a diverse portfolio of lifetime services and solutions. Since the company"s inception in 1985, Dr. Levin has worked to bring the business world to dentistry. The Levin Group may be reached at (888) 973-0000, or at www.levingroup.com.
