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2022 Q3 Practice Health Check: Practice Management

July 05, 2022 1102

With inevitable rising costs and continued staff shortages, it is critical to have a system for managing your practice’s overhead expenses to help offset the impact inflation has on your practice.

1. Have you evaluated the practice’s spending and analyzed your overhead costs?

Overhead is one of the most important key performance indicators to monitor in the dental practice. CDA Practice Support recommends evaluating overhead costs on a monthly, quarterly and annual basis.

Industry data for overhead percentages vary significantly by region and state. Recent data from industry experts shows the following ranges to reflect typical costs of a general practice:

• Staff salaries (including benefits and government required Payroll expenses) = 30-34%
• Clinical supplies = 6-7%
• Lab fees (all) = 7-8%
• Rent or lease payment = 4-5%
• Equipment leasing/purchases = 2-3%
• Office supplies (includes postage and electronic billing and filing charges) = 2-3%
• Utilities, telephone, accounting, legal, marketing, professional fees and dues = 9-10%

2. Have you analyzed your practice’s collection rate?

Dentists often track production as a measure of the business’s financial health. While production is an important indicator of the volume of services being produced, the practice’s collections are a much better indicator of the practice’s financial strength.

The national industry benchmark for dental practice collections is 98% of adjusted production (after all adjustments or “write-offs”). Ensuring your practice is collecting all that it is owed from both patients and dental benefit plans is critical to reducing the practice’s overhead percentage, leaving the practice with a larger margin between overhead and revenue. Achieving 98% collections requires constant attention and focus on billing and collections. Setting patient expectations through financial policies offers a strong foundation for collections.

For those dental practice owners who do not have the staff time or knowledge to maximize billing and collections, CDA offers several Endorsed Services, which specialize in revenue cycle management, billing and collections.

CDA resources for collections:

Patient Financial Protocols: Determining the Practice's Patient Financial Options

Financial Agreement and Consent Form

Cosentus Business Services

eAssist Dental Solutions

3. Have you reviewed the practice’s variable expenses and evaluated ways to reduce costs?

Dental practice expenses are often difficult to reduce because many of the expenses are “fixed” costs, such as facility and staff costs, or because a change in the expense would adversely impact the patient care. However, many “variable” expenses that fluctuate can be evaluated. Variable costs include dental and office supplies, lab expenses and outside professional services.

The key to managing the dental practice’s variable expenses is to have a designated team member who is responsible for tracking these expenses on a monthly basis. One of the main reasons variable expenses spiral out of control is lack of tracking and insufficient management of prices and purchases. Often this designated team member is also responsible for supply inventory as it’s important that purchases be made in sync with the practice’s inventory management protocol.

Additionally, CDA’s vetted partners offer special pricing and incentives exclusive to CDA members:

The Dentists Supply Company (TDSC)

ADA Visa® Credit Card program

Staples

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