Dr. Dave Juliani talks about the economic and financial considerations you need to build a modern, technology-driven dental practice.
This was the question I struggled with for many years: If I invest the time, energy, and financial resources to build my dream practice, will it pay off?
Know your numbers
Luckily, dentistry can be profitable with a little understanding of just what it takes. When considering remodeling, at the very least monitor the profit and loss statement of your practice monthly. This helps you plan the costs, budget, and how the project will affect your bottom line.
I monitor the numbers of my practice daily.Thanks to modern technology, everything is at our fingertips. Before I leave the office every day, my office manager hands me a packet of reports that includes a summary of the day, month, and year. It gives me up-to-date collection, production, and provider summaries that allow me to monitor my collection percentage, expenses, and overhead.
Armed with these numbers, it’s easy to budget my project. We closed out 2015 with collections of $1,600,000 on $1,740,000 production (that’s 91.8% collections). Our 2015 overhead was very close to 62%, which left me $608,000 profit. The profit margin on a large practice is exponential when compared to a smaller practice. I could be comfortable at 75% overhead at completion of the project. By taking the difference between those two overhead percentages - 13% (75% at completion minus 62% currently) - I came up with what I wanted to budget and spend on the new space, which was $208,000 annually or about $17,000 per month in additional expenses (13% of collections). So, my budget was $17,000 per month for the new space, built out and equipped.
Location, location, location
The first decision I had to make was whether to lease or buy my new location. Rochester Hills, Michigan, is bordered by developed communities that are squeezed into every inch of available property. This location gave me options to either expand in my existing space, look for another space to lease, or buy.
The suite next to me was available, but my rent would increase to nearly $10,500 per month, or 8.4% of my expenses. To spend that much monthly over a five-year term made no sense to me, especially given an annual 3% increase. To ensure I was making the right decision, I took my average monthly rent during the past 20 years and multiplied it out. It was nearly $1,200,000. I could own my building with what I had paid in rent. I made the decision at that moment to buy.
After speaking with Patterson Dental and local real estate agents, $2,000,000 seemed to be the amount it would take to get the project done. I found two freestanding buildings and one condo unit that suited my needs. One of the buildings was rebuilt and would bring costs to $1,750,000. The other was a renovation that would cost about $1,450,000. Depending on the number of treatment rooms, that would leave me with approximately $250,000 to $550,000 to equip, decorate, and complete my project. The condo unit was listed at $670,000 for 4,200 square feet. A basic layout by Patterson gave us an estimate of $200,000 to build the space, for a total of $870,000. This option left me more room to complete the project and come in under $2,000,000. The condo made more sense financially, and I purchased the space for $850,000.
Equipment selection and build
The real estate financing guided my equipment allowance. Armed with that information, all I had to do was choose my treatment rooms. My existing equipment was very old, so I made the decision to bring absolutely nothing to the new space except my three CEREC units and my Orthophos XG 3D. In September 2015 during CEREC 30, Dentsply Sirona introduced its U.S. Treatment Centers, and I knew they were the solution. I was immediately sold on the CEREC integration options, specifically the Teneo and Intego Treatment Center models, as well as the implant, endo, and camera integrations. Patterson sent the plans, and I placed the first full U.S. Dentsply Sirona Treatment Center order.
I spent a day at Dentsply Sirona, and the equipment team discussed the efficiency advantages of a single-entry operatory. I found out that most dentists have no idea what is in their side cabinets and rarely use them. I learned about the inefficiencies that occur when assistants leave the operatory for supplies or products and how much time can be saved if everything they need is at their fingertips. My assistant was with me, and we became convinced that a single-entry operatory with treatment rooms designed to handle all procedures would be much more efficient than the traditional American design.
Our finalized order included two Teneo Treatment Centers with CEREC AI (Acquisition Integrated), implant, endo, and camera integration; two Intego Treatment Centers with CEREC AF (Acquisition Flexible), endo, and camera integration; and three Intego Hygiene Treatment Centers with ultrasonic and camera integration. We also ordered seven Kappler rear cabinet combinations and seven Heliodent radiograph units. The Treatment Centers and cabinets were well-thought-out with the future in mind, not just an esthetic upgrade of past models.
Moreover, all software updates for the implant and endo systems are digitally downloaded. Any issues or problems can be handled from Dentsply Sirona’s US location in Charlotte, North Carolina, by logging in and making the necessary changes. The Treatment Centers are viable for future technological advances and upgrades for decades to come.
Next, plans went through a final revision to ensure that treatment rooms were the correct size for the equipment we had selected and that all of the electrical, water, and air systems were precisely positioned. Then, an architect finalized the construction drawings and ensured that all local building codes and ordinances were being met. Patterson recommended a few builders, and I interviewed three of them with my Patterson equipment specialist. It is important to have a close working relationship with your equipment specialist throughout the process to minimize mistakes.
Once I had selected a general contractor, we negotiated the financial and timeline portions of the agreement. In many cases, building costs are standard across geographical areas, so we knew our cost would fall in the $200,000 range.
Throughout the project I would walk through the space at least twice each week, and my Patterson team would do the same. This access to the site kept the contractor up-to-date with all equipment requirements and allowed us to see the space as it was progressing.
Move and transition into the new space
Since I was not bringing any of my old equipment to the new location, Patterson moved the Orthophos XG 3D and CEREC units. We sold the old equipment and some instruments for about $20,000 total. We donated the rest.
So, how has it worked for us?
Obviously, there has been a training period and learning curve. We not only switched out all of our units and chairs for high-tech Treatment Centers, but we also upgraded our sterilization to a cassette-based system.
The numbers have been the real surprise for me. I had not planned on production or collection increases for 2016. I compared the January through April 2015 numbers with those of the same time period in 2016. As predicted, we were relatively flat with minimal growth (about 1.8%). We have grown annually from 5% to 7%. We were up 10.6% in our new space compared to the 2015 numbers. Additionally, we are up 12.4% in 2016 compared to 2015. That number tracks us to nearly $2,030,000, or $230,000 beyond our goal (coincidentally offsetting my $208,000 increased budget for 2016).
Two things made this possible. First, the two extra treatment rooms allow more access and treatment. Second, the Treatment Center integration of endo, implant, CEREC, and our intraoral camera allows efficiency beyond what was imagined. For example, endodontic exposure during a crown preparation or filling can be taken care of during one appointment. In the past, that would have required a room breakdown and setup, or possibly a referral or reschedule. With the new Treatment Centers, it is simply a matter of adding a handpiece and allowing seamless flow of the procedure while the patient is still numb. The same is true for implant integration. If a fracture is noted during a procedure that requires extraction, the implant and graft are done at the same time. All it takes is snapping on an implant handpiece, bringing up a 3-D image, and moving forward.
In addition, the CEREC AI on the Teneo Treatment Centers and the CEREC AF on the Intego Treatment Centers allow for continued use of our CEREC technology throughout the day. The integrated AI and AF units give us the freedom to have multiple CEREC procedures going simultaneously, thus increasing daily production and efficiency.
So, was it worth it?
Has it been worth the time, money, and distraction of it all? The answer is definitely yes! My staff is thrilled and actually excited to come to work. Patient referrals have increased by nearly 30%. We don’t struggle with procedures that require timely setup, thanks to the integration of those systems into our Treatment Centers. The layout and design create a relaxed atmosphere that decreases chaos on busy days. Best of all, after 23 years in practice, I am reenergized to keep practicing another 10 years. Finally, the eventual transition and sale will be much easier and financially rewarding due to the technology. If you build it, yes, they will come.
Dave Juliani, DDS, a 1993 graduate of the University of Detroit Mercy School of Dentistry, is a national educator on the use of dental CAD/CAM technology and practice technology integration. A CEREC user since 2003, he is a CEREC basic and advanced trainer, Dentsply Sirona beta tester, and Spear Education faculty member in the CAD/CAM Department. He maintains a private practice in Rochester Hills, Michigan.