Dr. Blair’s nationally-acclaimed Profits Plus program computes over 100 different statistics for each participating doctor’s dental practice and provides industry benchmarks for comparison purposes. Having reviewed over 200 practices to date, he lists the following benchmark ratios as those that provide the greatest keys to improving profitability in most practices.

Fee Profile – Most doctors have no idea where their fee schedule stands in relation to other dentists in their local area, says Blair. His experience shows that most dentists operate with a schizophrenic fee schedule, with some fees below the 50^th percentile (managed care), some fees above the 95^th percentile, and the remaining fees all across the board. Using zip code specific fee data for each participating practice, Dr. Blair provides an analysis setting forth the fees for each ADA code at the 50^th, 75^th, 85^th, 90^th, and 95^th percentiles for that doctor’s zip code.

The first step doctors should take in order to improve their profitability is to simply set their fees in a rational manner, says Blair. He recommends that doctors select a fee percentile appropriate to their practice and the quality of care they are providing; once selected, all fees below that percentile should be moved immediately to that specific percentile. Any fees that are already above the selected fee percentile would remain at their current level. This results in a fee schedule that is fairer to the doctor, patient, and insurance company alike, says Blair. This fee analysis, and related procedure mix consulting, has produced dramatic results for his Revenue Enhancement Program participants, with an average increase in practice profitability of over $66,000 annually.

1. Collection Rate – This practice ratio is simply the percentage of collectible production actually collected by the practice. Most practices report a collection rate of 96-98%, with 97% being the most common percentage. Practices with a below-average collection rate should examine their over-the-counter (at time service is rendered) collection rate, increase use of credit cards and third party payment options, and review and enforce their collection policies, says Blair.

2. Conversion Rate – This ratio measures the doctor’s ability to persuade patients to accept treatment where treatment is recommended. This is simply the actual production divided by the total production recommended. In general dentistry, pedodontics, and endodontics, the conversion rate averages over 90%, says Blair. In other specialties such as periodontics, oral surgery, and orthodontics, the average conversion rate is lower, with orthodontics being the lowest, around 70%. Doctors should track not only their performance against the industry benchmark, but also their practice’s progress over time to see if they are improving. Adequate training for the doctor and staff in case presentation, and providing flexible patient financing are the keys to improving a below-average conversion rate, says Blair.

3. Revenue Per Full-Time Employee – This benchmark measures the practice’s labor efficiency. It is determined by dividing the annual practice collections by the number of full-time staff, excluding lab employees and doctors. Blair says that most practices’ annual revenue per full-time employee falls in the $90,000-$130,000 range, with $110,000 being the average. Doctors below the industry benchmark may be suffereing from overstaffing, an underproducing staff and/or doctor, and/or a low fee schedule.

4. Revenue Per Full-Time Business Employee – If the prior benchmark indicates a labor problem, it’s important to look closer into each of the three component areas (clerical, chairside, and hygiene). This ratio is determined by dividing the average monthly revenues for the past twelve months be the number of full-time employees in the clerical (front desk) area. Blair says that most practices are in the range of $25,000-$35,000 of revenue per month per full-time clerical employee, with an average of $30,000. Practices below the industry benchmark may be overstaffed in the business area, have underproductive employees, or inadequate revenues due to low fees or production, says Blair.

5. Monthly Revenues Per Chairside Employee – This benchmark determines the labor efficiency of chairside employees and is calculated by dividing the monthly practice revenues by the number of full-time chairside employees. The average revenues per full-time chairside fall in the range of $15,000-$20,000 for most practices, with an average around $17,500. Below-average practices may have overstaffing, low fees, poor production mix, and/or inadequate doctor clinical speed.

Blair says that most practices with labor problems can trace them to the hygiene department. Accordingly, he places greatest emphasis on statistical measurements of labor efficiency in this area of practice, using the following three benchmarks:

6. Annual Revenues Per Full-Time Hygienist – This ratio determines the overall productivity of the hygiene department and is calculated by dividing the annual hygiene revenues by the total number of full-time hygienists. Most practices fall within the range of $90,000 - $110,000 of revenue per full-time hygienist, with the average being $100,000. Below-average production can result from poor scheduling, inadequate procedure mix, excessive broken appointments, or slow clinical speed.

7. Adult Propy to Perio Procedure Mix – This statistic measures the percentage of total hygiene department production from adult prophys and perio related procedures. Most general practices are reporting a mix of 75% adult prophy revenue and 25% perio procedures from their hygiene department. A lower percentage of perio procedures usually indicates insufficient soft tissue management production due to lack of training, proper scheduling, coding errors, or inadequate diagnostic abilities.

8. Ratio of Hygiene Production to Total Compensation – This is the most accurate measure of the hygienist’s worth to the practice, and is calculated by dividing the total production of each hygienist (excluding doctor exam fees) by that hygienist’s total compensation (includes salary, bonuses, payroll taxes, and fringe benefits). Blair says that while most practices desire a 3:1 ratio here, the average ratio is around 2.5:1. The problem here can be either underproduction or overcompensation. This can be attacked on either front by revising the compensation formula to a percentage of total production, or increasing production through better scheduling, expanded hours, or increasing the mix of soft tissue management procedures.

Using over 100 statistical parameters to analyze each doctor’s practice, Dr. Blair has determined that the average practice is losing over $100,000 in profitability annually to management errors that are fairly easy to correct. So take time to analyze your practice – it will be one of the best investments that you ever make!

Reprinted with permission from the Blair McGill Advisory. The Blair McGill & Hill Group, LLC specializes in financial consulting for the dental profession. For information on subscriptions or consulting, call (704) 424-9780.