Is your practice “successful?” Are you certain? How do you know? What do you measure? How do you measure it? Do you measure your practice health by your net income? Do you measure your delinquency by the percentage of dollars that are delinquent? Many doctors do both yet net income is not a measure of practice health and the amount of dollars delinquent is not a useful measure of true delinquency.
The thought, “If I collect well, pay all my bills and have enough left over to meet my personal requirements, then I am successful and have a healthy practice” is common in the profession. Many doctors make that statement, but each year they have 50% more W-2’s than they have employees. They operate with a 15%+ rate of failed or canceled appointments and 40% or more of their new patient exams never end up in treatment. Are those the signs of a healthy practice? We don’t think so!
We believe that the greatest accomplishment a practice can achieve, and the greatest definition of a successful practice, is to have an impeccable quality of life within their practice, along with an outstanding level of net income. To accomplish that result, our experience has been that an orthodontic practice must consistently be in statistical “balance.” Many practices, actually most practices, have a great collection rate. Many practices have low and healthy receivables. Some have very low delinquency. Others have a wonderful rate of case acceptance. Having great results in all of these areas, at the same time, and accomplishing that balance year after year after year, is the level of performance we seek for our clients and is indicative of a truly healthy practice.
Here are the numbers we ask our clients to track, followed by the goals we expect our clients to reach.
Production (before discounts) The size of the practice is not important to us but the gross, before discounts, courtesies, etc., production number, representing total new case/treatment fees posted, is an excellent measure of practice performance and trends.
Goal – In our world practice size does not matter as long as the doctor’s production goal is being met!
Collections As with the production, how much a client collects is not important but the collection rate, the percentage of gross production that is collected, is always important and says a lot about the health of a practice.
Goal – 95%-96% of gross (as defined above) production
Adjustments We track the discounts, courtesies write-offs, etc., in order to identify problems with excessive discounts, loss, staff errors, embezzlement, etc.
Goal – 4%-5% of gross production
Accounts Receivable We track the receivables (total money owed the practice) and the ratio of those receivables to average monthly production. That number tells us if financial arrangements are appropriate, if too many, or too few, patients are paying in full, if average down payments are too large or too small, and if contract (payment plan) lengths relative to treatment time are healthy.
Goal – 5.0 to 6.0 times average gross production
Open Accounts We track the number of people who have an active account. When compared to the size of the practice and the size of the accounts receivable, the number of open accounts tells us a great deal about office procedures, financial policies, and the practice’s flexibility with respect to their credit granting.
Patient Delinquency Would you rather have 50 patient accounts delinquent $100 each or 100 accounts delinquent $50 each? Both result in $5000 in delinquency, and if you understand what is behind that question you will understand why tracking dollars delinquent is a virtually useless exercise. We do not track the dollar value of the delinquency. Rather, we track the number of people (accounts) who are delinquent. Patient delinquency rarely causes cash flow problems, but it does cause serious damage to the practice because it causes problems with patient relationships! Dollars do not no show, cancel, have emergencies, or file lawsuits. People who are delinquent do these things most often, so that is what we track.
Goal – Patients delinquent 30 days or more should be no greater than 3% of total open accounts.
Insurance Delinquency Unlike patient delinquency, insurance delinquency can easily cause problems with cash flow. The problem of course is that you have far less control over an insurance company than you have with a patient, so our focus is to teach how to properly handle insurance filing and follow-up so delinquency does not become a problem.
Goal – No more than 8% of open insurance accounts should ever become 30+ days delinquent.
New Patient Flow By comparing current performance to historical numbers we can spot trends, marketing failures and successes, etc. We also track the quality of the new patients so we can help to steer our clients to the most appropriate practice marketing techniques. For instance, new patients coming to the practice as referrals from existing patients are overwhelmingly “A” category patients and have a case acceptance rate of 80%+. New patients coming from referring dentists have a much lower percentage of “A” type patients and have a rate of case acceptance of under 60%. So where should you focus your marketing?
Goal – Whatever it takes to meet personal production goals but total new patient flow in a healthy practice will be made up of 75%-80% “A” patients.
Case Starts and Case Acceptance % By dividing the number of new (Phase II starts do not count as a new start!) case starts (including Limited, Partial, Phase I, and Full starts) for the year by the number of new exams for the year we can come up with a Case Acceptance percentage. That statistic tells us if a practice has healthy patient flow procedures, good verbal skills, good Pending and Recall follow-up procedures, etc.
Goal – 75% to 85% (again, new starts divided by new exams)! No practice should have case acceptance below an absolute minimum of 70%.
Average Case Fee (also called Production Per Patient PPP) By dividing gross monthly production by the number of new (first time) case starts we can determine the average case fee charged per new patient. From that we can determine diverse items such as staffing requirements, poor conversions of Phase II starts, and of course, when it is time to raise fees.
Goal – If 15% or more of new starts are PH I starts the goal for PPP is 110% of the most commonly charged full start adolescent case fee. Orthodontists who do not enjoy doing phased treatment will have PPP far less than this goal.
From time to time we like to show off a bit while also acknowledging what we call our “Gold Star” practices. For this most recent 12-month period (June 1, 2017 through May 31, 2018), we have chosen five of our clients who have accomplished outstanding and balanced performance. By “balanced” we mean that these practices achieved all of the following improvements over the previous year ending May 2017:
- Substantial increase in New Patient Exams
- Excellent case acceptance rates
- Solid increases in production and income
- Virtually perfect control over both patient and insurance delinquency
While not being able to discuss the individual performance of each office, the average per practice (not per doctor) production for this 12-month period has been $372,958 per month. The average patient delinquency, measured as a percentage of all patients with accounts (not dollars!) who are 30 days or more past due, was 1.2%. Insurance delinquency, the percentage of all insurance accounts that are 30+ days delinquent, was 5.5%
“Big deal?” It depends on your point of view, I suppose, but the doctors and staff on this list rate their practice statistical performance and their quality of life within the practice as a very big deal.
Accorde Orthodontists (Drs. Helmich, Hobday & Dale)
Champlin, MN
Drs. Hanrahan, Stanton, Ton & Ong
Townsville, Australia
Drs. Hime & Salome
Austin, TX
Dr. Timothy J. McReath
Baraboo, WI
Dr. Nadene J. Tipton
Lubbock, TX
