There is undeniable synergism between these
three that can make or break the financial success of your practice. Stick with me through this calculation
process; and, I think, you will be amazed at the “meltdown” your practice
suffers between dentistry scheduled vs dentistry
produced vs fees collected.
The ANNUAL COLLECTION GOAL is the sum of four financial
demands your practice bears each year:
·
Overhead
·
Dr. compensation
·
Debt service
·
ROI (Return on Investment) – Profit
The DAILY COLLECTION GOAL is the sum of these four expenses
divided by the number of days worked in a year, typically 185 – 195 days.
The ANNUAL PRODUCTION GOAL is the amount of dentistry that
must be delivered to assure the COLLECTION GOAL is met. Divide the ANNUAL PRODUCTION GOAL by the
number of days worked to determine a DAILY PODUCTION GOAL. Since few practices collect 100% of fees, the
COLLECTION PERCENTAGE must be calculated; i.e., what percentage of produced
fees is collected in your office? The
COLLECTION PERCENTAGE is
determined by dividing the collections for a year by the treatment delivered
(production) for that same year. Then
adjust the DAILY PRODUCTION GOAL by the collection percentage rate.
The DAILY SCHEDULING GOAL is based on the DAILY PRODUCTION GOAL. Since few practices can say that 100% of
patients keep appointments as scheduled each day, the SCHEDULING GOAL must be
adjusted by your average SHOW RATE (the percentage of patients who keep
appointments as scheduled, not counting single visit emergencies or last minute
fill-ins). The average SHOW RATE is
calculated by dividing the number of patients seen in a day, week, month, or
year by the number scheduled for that same period. Three months’ patient count will provide
adequate data to calculate an average SHOW RATE; a year’s average SHOW RATE is
an even better figure to use in calculations.
An example of the calculating the “meltdown” figure using
195 work days/year, an average collection rate of 95%, and an average show rate
of 85%:
$900,000
annual collection goal
$900,000/190 work days = $4,737/day collection goal
$4,737/day
collections @ 95% average collection rate = $4,986/day production goal
$4,986/day
production @ 85% show rate = $5,866/day scheduling
goal
MELTDOWN:
$5,866/day
scheduling goal
- 4,737/day collection goal
$1,129/day meltdown between treatment
scheduled vs production vs collections
The WOW! Factor here: The meltdown
in your practice may be one of the main reasons your practice does not meet
the financial goals you set. Calculate
your own daily meltdown number to
find out.
My disclaimer: although these calculations focus on money;
for example, scheduling $xx per day rather than simply putting names in the
schedule with no regard whatsoever for production, my advice is steeped first
in SERVICE TO PATIENTS. Service Beyond Patients’ Expectations is
today’s mantra for success in a fee-for-service dental practice. So please understand that when I write very
specifically about money, production, collections, budgeting, financial goals,
etc., I do not imply that you should turn your patients into dollars. Absolute focus on superb care for patients
MUST underlie any successful practice and its business systems. However, my years of work as a practice
management consultant have convinced me that with skillful planning a practice
can focus on world class service and financial goals simultaneously.
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