All dentists want to have profitable practices. After all, the more profitable the practice, the more money there is to go around. Typically, more money equals a happier, more productive, and committed team, a happier dentist, and in turn, happier patients. It’s a win-win-win. But profit doesn’t happen accidentally. To manage a profitable dental practice, it is vital that you understand and meticulously keep track of a few key metrics: your overall production per day, your production by provider, the percentage of collections that you acquire, and the amount of time it takes to collect payment after a completed procedure.
If you can train yourself and your team to track and analyze your production and collection numbers as well as learn how they affect your bottom line, you are better equipped to make an actionable plan to stop floundering and start growing your practice.
Measuring and Managing Production
Production numbers can vary day by day and are affected by many different variables in your practice, including your schedule and the efficiency of your team member. These two factors can mean the difference between making or losing thousands of dollars. Therefore, its crucial to evaluate the efficacy of your staff and how well you utilize each time slot in your schedule.
A vital way to measure your production is to break it down by each provider. Doing this allows you to see how much revenue is generated by each doctor and each dental hygienist. These specific numbers help you plan your schedule more effectively, rather than filling the calendar with whatever you can, wherever you can. For example, a schedule full of cleanings may keep your hygienist busy, but those cleanings alone are not going to produce enough to reach your daily target. Instead, you need to manage your schedule effectively so that your hygienists are performing cleanings at the same time you, the dentist, are performing more complex, and often more profitable, procedures.
Knowing what your practice’s per day production goals are and where the revenue is being generated from is vital to bringing in and maintaining a consistent stream of production. Without regular production, you can’t collect. Which brings us to the next set of critical metrics: the percentage of paid collections and how much time passes between the time of procedure and getting money in hand.
Coming to Terms with Collections
When running a private practice, especially a new start-up, you don’t have the cushion of an established accounts receivable department. Private practice dentists often opt to preserve a patient relationship and avoid conflict rather than chase down payment for their services. However, even though collecting payments may be challenging or even uncomfortable, avoiding it will be a death sentence for your practice.
If you are not working with an insurance provider, the recommendation is to collect 97% or more of the payments for procedures done in your practice. This number ensures that you have a healthy base income to keep your business profitable. If you understand the production per day requirements outlined above, you can calculate the amount of money you are willing to write-off to achieve the goals of your practice.
There are a couple of things that you can do to avoid the hassle of chasing down a patient for payment and make the collection task easier. The first, and arguably the most important thing to do is be upfront about your practice’s costs and financial policies. Be sure your patient thoroughly reviews these policies and signs a financial agreement that outlines how much a patient is expected to pay and when they are required to pay it. Minimizing financial surprises not only reduces the risk of non-payment, but it also fosters a trusting relationship between the patient and your practice. If your patient trusts your practice, they are more likely to return for future procedures.
Another strategy you can try is to regularly generate statements for patients with an outstanding balance. We have all forgotten an obligation in our lives, but sending consistent, accurate reminders detailing your patient’s account balance and financial arrangements will aid in minimizing the risk that their responsibility to your practice is the one that gets forgotten.
Equally important to the amount of money you can collect is the time that passes between the date of the procedure and when you receive payment. Knowing this base number can allow you to identify clerical or patient errors. You can use your average to check for large jumps in the amount of time it takes to be paid or recognize when there is a consistent pattern of too many days between procedure and payment. It can also alert you to accounts that are far beyond the average and are therefore at high risk for not being paid at all. It is crucial to pay attention to the total number of collection accounts you have each year.
If you are working with an insurance provider, then you need to monitor the number of collections that you have each year. This number should either remain the same or decrease over time. If it ever increases, it should be regarded as a big red flag and investigated immediately.
The Metrics Matter
It is crucial to the success of your practice that you understand the relationship between your production and collections. Focusing on production alone and leaving the rest up to your office staff is not going to help your practice thrive. You must familiarize yourself with the details of the revenue cycle and make informed, actionable plans to improve your collections percentage. Once you have done this, you will be one step closer to the profitable dental practice that you first imagined when you started dental school.
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And when you are ready to dig into all things metrics for your dental practice, download our free guide, Transform Your Dental Practice by Tracking These 8 KPIs, today.