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Inside Dentistry
October 2015
Volume 11, Issue 10

Learn to Manage Better with Metrics

10 indicators you can use right now to assess your practice’s health

Roger P. Levin, DDS

As soon as you decide it’s time to rethink your approach to practice management, you’re ready to get serious about using metrics.

If you’re like most dentists, you already know that performance statistics can provide critical insight into practice operations. You may even track some key numbers, such as total production, overhead, and income. But unless you look at data the way a corporate CEO does—unless you understand that metrics not only document current status but can also drive growth—you can’t take full advantage of this powerful management tool.

The Statistical Sweet Spot

Most practice management software has the capability of tracking, correlating, and reporting a wide range of numerical values. You need to decide exactly which figures to monitor based on what they can tell you about how to improve performance. Try to actively watch too many data points and you’ll probably end up overwhelmed and confused. Track too few and you’ll risk overlooking fundamental problems and great opportunities.

For every business, at any stage of its development, there will be an optimal combination of metrics that should be monitored. It takes considerable expertise to define this “sweet spot.” To avoid a cookie-cutter approach, Levin Group begins consulting engagements with clients by establishing a list of what we call Key Production Indicators, or KPIs, that will be benchmarked and then tracked to measure progress and growth. There are literally dozens of KPIs that can come into play. For most practices, the initial checklist includes approximately 20 KPIs.

Determining Where You Stand by the Numbers

The first order of business when you begin using KPIs is to create a comprehensive, accurate, and actionable picture of your current business status. This must be numerical, not merely an impression of how you’re doing. Solid statistics help ensure an objective view, though for true objectivity you should bring in an expert, dental-knowledgeable business analyst to extract and interpret the data for you. Short of that, however, you can still gain insight about the status quo and the potential for the future.

As a preliminary step that will give you a sense of how to evaluate your practice with metrics, begin looking at the following KPIs.

1. Production

Perhaps the most common measure of a dental practice’s size and business health, production belongs at the top of your list. For tracking purposes, you’ll want to express this number as annual, quarterly, monthly, weekly, and daily totals, comparing current with past levels. As part of a growth strategy, you would target a minimum increase of 15% annually.

2. Collections

Some dentists who think that all they need to do is increase production are suffering just as much from a low collection rate. Even if you manage to fill your schedule, what you earn by performing dentistry counts for nothing if you don’t collect. The collections KPI represents the percentage of money collected within 60 days (because the likelihood of collecting beyond that point is extremely low). In a recent national survey, dentists reported a collection rate of 94.2%. Levin Group works with clients to bring their rate up to 99%.

3. Profit

Profit is what’s left when all expenses are subtracted from practice revenues. It’s important not only as it relates to potential doctor income but also because it serves as a good measure of how efficiently your office operates. If you hold overhead to the recommended 59%, your profit KPI should be 41%.

4. Overhead

Most general practices will do best if they can maintain their overhead at about 59%. If it’s more than this, there’s probably some fat that can be trimmed. If it falls too far below this level, you may be hampering your ability to work efficiently and generate growth.

5. New Patients

New patients compensate for attrition of your patient base and also typically need more care on a per-patient basis. Monitor this KPI monthly as well as annually so that any decline can be detected and corrected quickly. One of the best corrective measures is patient referrals, which you should also track. With the right strategies, practices can get new patient referrals from 40% or more of current patients every year.

6. Case Acceptance Rate

This KPI is a numerical reflection of patient trust in you and your practice. It also measures your ability to present treatment recommendations effectively. Whatever your current rate of acceptance, bear in mind that with excellent scripts, training, and payment options, you should be able to close 90% of cases (with no more than 60% of them being single-tooth cases).

7. Doctor–Hygiene Production Ratio

A subdivision of the total production KPI, this measurement tells you if you have the right balance between what you produce and what your hygiene department produces. Based on observations of thousands of successful practices, the ideal ratio is 3:1—in other words, 75% of production by the dentist, 25% from hygiene.

8. Average Production Per New Patient

By changing the way your practice works with new patients—upgrading the new patient experience, using a comprehensive-exam-and-treatment-plan approach, and improving case presentation—you increase this KPI.

9. Average Production Per Established Patient

A patient you’ve been seeing for some time may have less production potential than a new patient, but tracking this KPI will motivate you to keep more patients active and scheduled, conduct yearly comprehensive exams for them, and promote their awareness of elective services.

10. Proportion of Fee-for-Service vs. Insurance Production

With insurance reimbursements low and trending lower, this KPI is an important barometer of your practice’s financial health and income potential. If you see a growing dominance of insurance cases, you’ll become more attuned to finding new ways to deliver elective and other non-covered services.

From Evaluation to Growth Strategies

If you have not consistently tracked metrics like these KPIs, you’re in for a revelation. It’s one thing to have a general sense that your practice has slowed down or slipped into decline—and quite another to see the statistical evidence of exactly what’s holding back your practice. It is the first step on the road to recovery toward a new, more businesslike, and more rewarding approach to managing your practice.

Start with these 10 KPIs. If they reveal areas where you seem to be having more difficulty, probe deeper with very specific KPIs. You’ll soon become comfortable with using metrics to guide your practice management decisions. What’s more, when you see how these decisions pay off, you may learn to love this management-by-the-numbers approach almost as much as you love dentistry.

About the Author

Roger P. Levin, DDS, is a third-generation general dentist and the founder and chief executive officer of Levin Group, Inc. If you like Dr. Levin’s articles, attend one of his upcoming, all-new seminars at www.levingroup.com/gpseminars. You can also connect with Levin Group on Facebook and Twitter (@Levin_Group) to learn strategies and share ideas.

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