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Howard Speaks: Data Processing by Dr. Howard Farran

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Categories: Practice Management, HR and Accounting;
Howard Speaks: Data Processing

In dentistry, it’s essential to know your numbers

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine

“In God we trust; all others must bring data.”
— W. Edwards Deming

W. Edwards Deming was one of the smartest scientists of the 20th century. After the United States dropped two nuclear bombs on Japan in 1945, we sent Deming to help that country’s industry leaders rebuild their postwar economy. He’s often credited as one of the inspirations for the decade of recovery that followed; by 1960, Japan was well on its way to becoming the second-largest economy in the world, based on the principles Deming taught.

Whereas most Americans usually say, “I’ve got a gut feeling about this,” Deming said guts are just filled with fecal matter, and decisions should be data-driven. Most business leaders agree: If you go to a Dairy Queen, at the end of the day, every manager knows that food costs will eat up 31% of daily revenue, the crew labor was 14%, marketing was 5%, etc., and they can figure out the daily bottom line. Most dentists wouldn’t be able to do that under threat of bodily harm.

When I go to most dental offices, I tell the owner: “I just had a cleaning, an exam and bitewings. Your hygienist, who has worked here for decades, does this eight times a day. Did you just make $12.18 after taxes, or did you lose five bucks?” The owner doesn’t have a clue, and then will say, “Well, do you think I should get another hygienist?”

Calculate your costs and earnings

It would take me a day to sit down and put all this information in Excel spreadsheets to figure out exactly how many full-time hygienists that dentist would have to employ before he goes bankrupt, because he’s never made a dollar off a cleaning. The expensive root canals, crowns, implants and ortho cases are subsidizing all those cleanings, fillings, exams and X-rays that are being done at a loss.

Sometimes I’ll just ask dentists how much they charge for an MOD composite filling on #3 and they’ll say $250, even though they don’t actually get $250 from anyone because they’re signed up with a dozen different PPOs. It’s worse when they think they’re only signed up with three companies but aren’t aware whether the PPO contract says the company can sell its distribution list to other providers, so they’re doing one filling for 12 different prices. They don’t know what the breakeven point is to have that operatory open for an hour.

What’s worth your dollars?

The same dentists who have strong opinions about their favorite sports team getting rid of that wide receiver in favor of someone who doesn’t have butter all over his hands don’t measure the statistics for their most important employees. In most small businesses, the sales force is made up of the only people who might make as much as the owner—they’re in suits, taking calls and selling. But in dentistry, callers usually get greeted by, “Thank you for calling our practice. Can you please hold?”

Do you know many people were put on hold in your practice yesterday? How many calls got returned? Do you know how many people you have to call before you can convert one call into a filled chair? Is it worth it to spend $1,400 on a TMJ continuing education course if only 1% of your revenue comes from TMJ cases?

In today’s environment, you’ve got to get focused and sophisticated about tracking your numbers and their growth potential. Your competition is sometimes as close as across the street!
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Dentaltown founder Dr. Howard Farran has done more than 1,600 podcasts with dentistry’s most interesting people. To listen to the latest ones, or browse by topic, click here.

 

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