Key Performance Indicators: Track Your Numbers to Grow Your Business
Roger P. Levin, DDS
Dental practices are businesses, and good businesses have a method of tracking their performance. This can best be accomplished by establishing-and understanding the implications of-key performance indicators (KPIs). By properly monitoring the right KPIs, the practice can become better aware of its strengths, weaknesses, opportunities, and even potential pitfalls. Strategies can then be implemented to improve the practice and maintain high levels of success and growth.
Practice success is directly proportional to the quality of the systems by which the practice operates day in and day out. These systems should be documented, proven, and designed in a step-by-step manner that makes it clear to the entire team exactly what, when, and how things are to be done. KPIs allow continual analysis of practice performance, including identifying areas that need improvement and actions necessary for continued growth. KPIs can function as both an indicator and an early warning system. For example, the first stage of practice slowdown is not when production declines, but when the growth in production begins to wane. The following six KPIs-and keys to improving each one-are vital to the success of a dental practice business.
KPI No. 1: Production
Production is the most important KPI for dental practices. By understanding practice production and relating it to other KPIs in the practice, the level of practice performance and success can be quickly understood.
Reactivate any patient without a next appointment. Many practices lose about 15% of their patients each year and some of these losses are simply patients who did not reschedule and "got away" from the practice. Reactivating these patients is a fast way to increase production. To do this, allocate time every day to contact or follow-up with patients who are without their next appointment until they are reached and scheduled. Otherwise, this activity will likely fall into the "when I have time" scenario and become extremely erratic, allowing patients to be lost to the practice.
Increase the speed at which new patients are scheduled. The sooner after a new patient contacts the practice that the patient is scheduled, the more likely it is that the patient will show up. According to data from the author's company, new patients have a 200%-300% higher financial value to the practice in their first 12 months. Thus, the sooner new patients are scheduled, the sooner that higher level of production per patient will manifest, resulting in higher overall practice production.
KPI No. 1 target:Increase production 18% per year, a percentage increase that most practices the author's company has observed have the initial capacity to achieve.
KPI No. 2: Collections
Collections are a critical KPI for several reasons. First, chasing patients for overdue payments wastes time that could be spent on more productive activities (such as reactivating patients, as described above). Second, patients who owe money often become disenchanted with the practice. A third less obvious factor is that while focusing on the money that the patient owes, the practice is overlooking the likelihood that patients who owe money often don't come back. This means that every year practices lose a certain number of patients (and their families) simply because those patients are overdue for payment. Thus, a collection system needs to be designed where very few patients ever have outstanding balances.
First, develop a system to receive payment at the time of service. This alleviates tension between the patient and the practice and curtails any opportunity for a lost patient and family.
Second, have good financial options available, including patient financing. Every patient should be aware of all financial options so they can select one that is convenient for them. This will make it more likely that all payments are made on time, and with patient financing the practice will be paid in full by the finance company for the amount due.
KPI No. 2 target:Collect 98% of all money due to the practice every year.
KPI No. 3: Overhead
While all businesses have overhead, the question is, how much is the right amount? Controlling overhead is critical to success and requires appropriate analytics. For example, it is essential to divide overhead expenses into categories, evaluate the profit and loss statement, and understand where expenses are high or low to improve profitability. Bear in mind that a 1% decrease in overhead is the same as a 1% increase in profit.
Analyze where the practice has waste. Often, expenditures are unnecessary (or are higher than they should be) because the practice systems are inefficient.
Periodically evaluate the pricing from vendors and outside resources on the practice's top ten expenses. This is not to suggest that the practice leave the companies it likes, but it is important to know that you are receiving competitive pricing. This may elicit a positive conversation with the sales representative to evaluate purchasing options, such as volume discounts or longer-term commitments, that might result in lower pricing.
Conduct a 90-day line-item review. Every 90 days the doctor should confer with the staff member who pays bills and review every expenditure for the past 30 days. This may reveal expenses that are no longer needed, such as subscriptions that are not being used.
KPI No. 3 target:Compare your practice to the following overhead targets and work to achieve them: general practice - 59%, oral and maxillofacial surgery - 50%, periodontics - 51%, endodontics - 42%, orthodontics - 49%, pediatric dentistry - 49%, prosthodontics - 64%.
KPI No. 4: New Patients
New patients are vital to practice success and greatly impact annual revenue generation. New patients have high value to practices because, as alluded to earlier, the average production per new patient during their first 12 months is 200%-300% higher than current active patients. Bringing new patients in as quickly as possible raises production. The faster new patients are scheduled the more likely they will keep the appointment and begin their 12-month period of higher financial revenue.
Create a mathematically designed schedule that allows new patients to be seen within 7 to 10 days. This timeframe should increase the number of new patients who keep the appointment.
Design a new patient experience system, beginning with the initial phone call, which should include scripting to communicate high levels of value to each new patient. Practices should track how many new patients call the practice but do not schedule appointments. If it is higher than 10%, this means that one out of every 10 new patient callers does not schedule. Although the entire team participates in the new patient experience, it starts with that first phone call.
KPI No. 4 target:Increase the number of new patients within the next 12 months by 20%, and schedule as many new patients as possible within a 7-to-10-day timeframe.
KPI No. 5 : No-shows
Think about the potential impact of no-shows: As an example, a practice with annual revenue of $900,000 experiencing a 6% no-show rate over 40 years can lose more than $2 million in lost time. In practices with a 5% or 6% no-show rate this can add years of practice before doctors will reach financial independence and harm practice performance along the way. The unfilled chairtime of a no-show is lost forever, and these patients often fail to reschedule and may become lost to the practice. A patient who "no-shows" becomes an overdue patient who needs to be reactivated as quickly as possible.
Create value for every appointment. Be sure patients understand why they are scheduling their next appointment. The whole team all should emphasize the benefits of the appointment.
Ask every patient to give at least 48 hours' notice if they cannot keep their appointment.
KPI No. 5 target:Keep the no-show rate under 1%.
KPI No. 6: Doctor Production Per Hour
Given that production is the single most important factor in the success of a practice, and that doctors are the primary contributors to production, the doctor's production should be measured. This can be an immensely powerful statistic that helps the practice understand the opportunities it has to increase production. Doctors, like anyone else, fall into habits, which is why practices eventually hit a plateau and tend to stay in that production range. An axiom in business states, "What gets measured gets improved." By monitoring doctor production per hour, the practice can identify ways to improve this KPI and facilitate practice growth.
Doctors should evaluate their workflow style with input from their office manager and clinical team members. Concepts like accelerated scheduling where doctors work multiple rooms with highly trained assistants who can accept high levels of delegation and take responsibility to move the doctor back-and-forth between rooms can increase the doctor's daily production.
Train the team to handle all allowable functions, freeing the doctors up to focus on their core tasks and increasing the amount of available doctor time.
KPI No. 6 target:Although it varies depending on the type of practice or specialty, aim to increase doctor production per hour every year.
While there are other statistics and KPIs that also can be evaluated, the six identified in this article are the most important for understanding the strengths, weaknesses, opportunities, and threats of the practice. Focusing on the measurement of each of these indicators on a daily, weekly, and monthly basis will give the practice a true indication of how it is performing and where changes are needed. The dental team should also understand the statistics, so everyone has a broad view of practice success and their role in it. Practices that track their measurements carefully can achieve and maintain high levels of success.
About the Author
Roger P. Levin, DDS
CEO and Founder, Levin Group, Inc. (levingroup.com), a dental management consulting firm that has worked with more than 30,000 dental practices