Monday, June 20, 2016

UNDERSTAND YOUR MELTDOWN - COLLECTION GOAL. PRODUCTION GOAL. SCHEDULING GOAL.

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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