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What Really Affects Your Profitability?

by John Meis

One of my favorite things to do, is to work with doctors to increase their profitability. So many want to increase profitability, yet so many don’t understand where profitability comes from. You have heard it from your accountant, maybe your CPA, maybe from numbers thrown around at dental meetings, but do you really know what effects the profitability of a dental practice?

Before we start, let me remind everyone that profit is delineated in dollars. And if your ONLY focus is dollars, you will have problems because your team and your patients can sense that your only focus is on dollars. If we are consistent at doing the right things for our patients, giving our patients the option to receive the highest level of care, we can be focused on profitability without being focused on dollars. I want to make sure that everyone sees the difference between the two.

I have created a formula that I have shared with our members, it’s the formula that my CEO Mastermind group uses to drive their decisions. And when you really dive into the formula you will see that it’s really only about how we can provide that higher level of care for patients, how we can do that consistently, how the entire team can do it, and how we can offer our patients the best care.

Let’s take a look at the formula… It is (visits) x (production per visit) x (collection percentage) – (overhead) = profit. Pretty simple formula, right? Five boxes and it’s really all you need to know. But, how do we affect each one of those numbers and what things should we work on first – these are the bigger questions.

I’ve made a list of the top things to improve each of those numbers, in the order that I work on them in my practices.

To Increase Visits:

  1. Call Answering – We know that on average, only about 60% of the incoming calls to practices get answered and 1 in every 10 calls is a new patient. This leaves great opportunity for every practice – and an easy way to increase new patients without any additional marketing.
  2. Call Conversion – Answering the calls is only half the battle. The other half of the battle, is getting them converted to an appointment. Do you regularly listen to the calls that come into your office? The ability to convert a call to an appointment doesn’t happen automatically, there has to be a system and training in place in your office to ensure that everyone who answers the phone is able to convert the call to a patient.
  3. Re-Appointment – We know that reappointment of patients is the ONE, of all the numbers, that we can measure in dentistry… the one that is the most highly correlated with profitability. The only reason that this is not the first thing on my list, is that profitability goes up proportionally and you won’t see the results of reappointment for 6 months – this is why I work on phones first and re-appointment second. One of the things that I do immediately is to review a list of people who left yesterday without making an appointment in each morning huddle.
  4. Case Acceptance – Behind re-appointments, this is the second leading indicator of your profitability.
  5. Teamwork Column – Formerly known as the ghost column. When this is mastered as a tool to manage canceled and failed appointments, profitability and visits go up.
  6. Reactivation
  7. New Patients
  8. Reduce Broken Appointments

To Increase Production Per Visit:

  1. Same Day Dentistry. The number one way to improve production per visit is with same day dentistry. Same day dentistry is dentistry done that wasn’t on the book at the beginning of the day. In many of our practices, this makes up 30%-40% of their production. It’s just serving the current patient base at a higher level. Patients love the convenience of being able to get it done today. So when you offer to do it today, case acceptance goes up.
  2. Increase Fees
  3. Diagnose Needed Treatment: This is related to diagnostic assertiveness. And all being on the same page with the doctors diagnostic assertiveness. When this is understood, case acceptance goes up.
  4. Increase Treatment Acceptance: Treatment acceptance and case acceptance are a little different. Treatment acceptance is when you have told a patient they need $1,000 worth of care, what percentage of the $1,000 did they accept? Is it $100 or $500 – this will make a big difference on your production per visit.
  5. Expand Treatment Procedures: Most dentists, if they’re doing bread and butter dentistry, start to top out at $800, $900, maybe a $1,000 an hour. But, there are other procedures that are much more productive than that. So if you’re able to do those procedures, your productivity per visit will go up. Your productivity per hour will go up.
  6. Reduce PPO Dependency: If this is your strategy. This will drive up production per visit, but it may drive down total number of visits. So there is some danger to this strategy (and why it’s last on my list). You have to make sure that you have an over abundance of demand if you are going to use this strategy. You will want to start this strategy slowly, starting with the PPO that has the lower number of patients or the ones that cause the biggest challenges for your practice.

To Increase Collection Percentage:

  1. Firm Financial Arrangements
  2. Clean Claims
  3. Clearinghouse Empty
  4. 15 Day Insurance Contacts
  5. Statements
  6. Collection Process

When you drive profitability and these numbers go up, there are a lot of good things that happen for you, your team, and your patients. I am a big proponent of having a system of sharing that with the entire team, a system where the entire team has an opportunity to earn more. That doesn’t mean that they make more, it means they have the opportunity to earn more – and that is good. The patients are served at a higher level – and that is good.

Having team members that are making more than they could make somewhere else, is better for your team retention. And if your team retention is better, your patient retention better.

Profitability creates a lot of good things. Now we have money to invest back in the practice, we can make sure that we have the highest technology, we can make sure that we keep everything updated, which is better for our patients.

When these numbers go up, we can support our community and the charities that we care for at a higher level – and that is good.

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