Commentary

Trend Indicators: The Vital Signs of Your Practice

James R. Pride, DDS

Copyright 2002 Journal of the California Dental Association.

After having a successful practice for many years, Dr. C dropped 10 percent in production one year. The next year, he dropped another 10 percent. What was happening? Dr. C was baffled. He uncovered the cause of the problem only when he checked the "vital signs" of his practice.

We know whether a patient is stable or in danger by checking the vital signs. A dental practice, too, has vital signs, called trend indicators, that pinpoint its health. After testing these trend indicators in thousands of dental offices, we at Pride Institute say unequivocally that a practice monitoring its vital signs and correcting problems when they first occur will lead a long and healthy life. A practice not tracking its vital signs is like a person never going for a checkup -- both could develop problems, ignore the warning signs, and become seriously ill.

There are 10 basic trend indicators that need to be tracked regularly by the office team, then reviewed monthly by the dentist and staff and compared to established goals. Four indicators pertain to production:

* Total office production;

* Total dentist production;

* Dentist production per hour; and

* Hygiene production per day.

If any of these indicators falls short of daily and monthly goals, the dentist and staff need to discover the reasons and remedies. Questions to ask include:

* If total office production is down, is dentist production or hygiene production down? This tells you where to look for the problem.

* Is production per day or per hour down? If production per day is low, look at the schedule to see if appointments are sufficiently compact, with all slots filled. If production per hour is low, examine the kind of procedures and groups of them being done and if tasks can be delegated to the staff.

* Are the number of days worked down? If so, can they be made up next month?

* Were there unfilled hours? If so did they stem from open time, or from no-shows and cancellations? If from open time, are 90 percent of continuing care patients pre-appointing and keeping their appointments? If no-shows and cancellations are the cause of the low production, are systems in place to influence patients to keep appointments? Is the team filling canceled appointments with pending cases and by activating delayed treatment cases? And so on.

In the case of Dr. C, although his overall production was down, his production per hour was steady and his recall and appointment systems were sound. His number of hours worked was reduced because he was taking extra time off due to a lack of patients. His team did an excellent job of bringing delayed treatment cases into the office, although the amount of dentistry in the charts had been declining during the past two years.

The next three trend indicators pertain to collections:

* The collection percentage -- collections divided by total office production;

* Accounts receivable ratio -- all monies owed to the practice divided by the month’s total office production; and

* Accounts receivable percentage over 90 days -- monies owed over 90 days divided by total accounts receivable.

A healthy practice should maintain a collection percentage of 98 percent or higher. In a growing practice that is extending financial arrangements, a healthy accounts receivable ratio can range from 1.5 to 3 times the monthly production, provided the collection percentage is high. This means that if the growing practice is producing $50,000 a month, it can be OK to have accounts receivable up to $150,000, provided systems are in place to collect 98 percent. In a mature practice that wants to limit growth, we recommend that the accounts receivable ratio be less than 1.5 times monthly production. For practices extending financial arrangements for four months or fewer, the accounts receivable over 90 days should be no more than 18 percent to 20 percent of total accounts receivable. This figure will be higher for growing practices with more extended payment terms. Dr. C had a mature practice with good collections and tight payment terms. These trend indicators were not causing the problem.

The last three of the 10 basic trend indicators measure new patient counts and the success of the practice in gaining case acceptance. They are:

* Number of new patients;

* Case acceptance rate for new patients; and

* Case acceptance rate for patients of record who are having significant dentistry.

For a general adult practice, the number of new patients should normally be 15 to 25 per month. Dentists who see 60 patients a month will not have time to build strong patient relationships that lead to acceptance of quality, comprehensive care. Practices seeing too few new patients need to review their internal referral and external marketing efforts. We have found the case acceptance rate for new patients should be at least 85 percent of treatment presented, and for patients of record, 90 percent or higher. If these indicators fall short, the dentist and staff need to look for solutions again.

Dr. C’s case acceptance rate for new patients and patients of record was high. However, the amount of treatment presented to his patients of record was steadily declining. Dr. C was depleting the dentistry in his patient-of-record base. And Dr. C was only averaging eight new patients per month. Although this figure was acceptable in previous years when he had more dentistry to perform on patients of record, Dr. C now needed to increase the number of new patients to boost his production because the amount of dentistry in the charts was declining. Dr. C and his staff stepped up their external and internal marketing efforts and established more flexible financial arrangements. In time, these efforts doubled the new patient count and gained high case acceptance. Dr. C and his team reversed the downward production trend, and they are now in a growth phase.

And so it goes every month. The trend indicators are the diagnostics you need to pinpoint the problem. They are the dentition exams, perio probes, and radiographs of the business side of dentistry. Once you begin using them, like so many of dentists, you will be unable to live without them. Your staff, too, will gain a deeper understanding of their work and a sense of accomplishment from hitting or exceeding monthly goals. To all of you who have a vision of excellence that you want to achieve for your practices and dividends you want to enjoy from the investment you’ve made in your careers, get to know the numbers that make all the difference.

Author

James R. Pride, DDS, is founder and president of Pride Institute, a practice management consulting group. He has also served as assistant dean and assistant clinical professor at the University of the Pacific School of Dentistry and as a consultant to the ADA and the California Dental Association.

To request a printed copy of this article, please contact James R. Pride, DDS, Pride Institute, 3 Hamilton Landing, Suite 240, Novato, CA 94949 or at (800) 925-2600.