Turning On the Dental Overhead Light by Dr. Claudia T. Le

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Turning On the Dental Overhead Light 

Learn how to reduce overhead waste and increase efficiency in all areas of your practice


by Dr. Claudia T. Le


Dentists love to talk about production numbers—and why not? It’s an easy number to know and compare. The bigger, the better, right? When I began writing this article in September 2021, one of the trending message board threads on Dentaltown was “How Would You Increase Office Production by $1,000 a Day?” While office production is indeed a key performance indicator and most of the contributions on the thread were great, some of the suggestions could actually decrease overall net income if one is not careful.

Coming to terms with production and overhead

Production is the total amount of money charged for dental services for a particular period, such as monthly or yearly. Adjusted production refers to that same amount, but after the fees have been adjusted to reflect insurance participation, discounts or refunds. Of the adjusted production, collection is the actual amount of money received. Finally, net income is the amount of money remaining after revenue is collected and expenses are paid. It’s also known as profit. This article will focus on some key expenses that I, an average practicing dentist, implemented to bring overhead costs down—or, in essence, how to increase office net income by $1,000 a day.

Owning vs. renting: The overhead differentiator

When someone says their overhead percentage is less than 50%, it’s likely they own the real estate of their practice. Not only can they control their own rent, but they are also building equity into a nest egg for retirement, either as a landlord or through the real estate sale. These practice owners also have more autonomy and control over their business. If you haven’t recently explored refinance options on your office property, it might be a suitable time to do so.

However, for the rest of us, if a great practice becomes available and there is no real estate option, we can try to save on overhead elsewhere. Some benefits can include free introductory rent, tenant improvement allowances, or increased signage or visibility. In Southern California, there can be multiple dental offices in the same shopping plaza, so I negotiated a lease exclusivity clause. Recently, I renewed my lease and leveraged the pandemic to receive some concessions. My landlord started referring patients to my practice as well, so these are intangible benefits. I just wanted to mention this when comparing overhead with dental colleagues because the difference can be major, especially in more expensive areas of the country.

Accounts receivable: The not-so-obvious overhead

Improving collections will quickly lower your overhead. Put a recurring reminder in your calendar to run the aging report at the end of every month. Print out the list and highlight account balances over 60 days and hand it to your front desk.

The easiest ones are balances owed by insurance: Simply have the front office resubmit the claim, because it is likely “lost.” For balances owed by patients, if a billing statement has already been sent, have the front office send a text reminder instead. (My front desk likes to jokingly threaten repossession of the teeth!) Run the report every month so your front office knows that this work is important. Also, if you have not done so, switching to electronic claims and direct deposit payments will accelerate insurance collections to as fast as one week.

Labor: The highest overhead

Many practices have staffing inefficiencies. If your office is undergoing staffing changes, use it as an opportunity to reevaluate the positions. First, know your practice and understand your business model: high-end FFS, community clinic, lean and mean, or prophy palace, to name a few examples. If you do not know who you are, it will be hard to identify the staffing inefficiency.

For offices with a separate insurance coordinator or sterilization tech, is it better to pay eight hours/day for this, or could it be outsourced to an outside company? For offices that employ hygienists, would assisted hygiene improve the patient experience and eliminate wait times for appointments? How about if the doctor combined prophylaxis with operative, fixed or removable deliveries or postoperative visits? Most patients would appreciate saving an extra trip to the dentist’s office. (Obviously, this applies to routine prophylaxis. Anything else should be rescheduled as gross debridement or scaling and root planing.)

This list is not exhaustive. There are many ways to run your office creatively; don’t get stuck thinking about traditional models only. After I reopened my practice after the pandemic lockdown, my hygienist resigned and because of staffing shortages, pay rates for hygienists went up by 20%–30%. I evaluated some of my choices: a new hygienist, a new assistant or a new associate doctor.

For me, a new hygienist at the new market rate is highly inefficient (see Scenarios below). On the other hand, a new assistant would be a fraction of the cost of a hygienist and will enable the practice to see more patients in less time without compromising quality.

Lastly, because hygiene salary is approaching dentist per-diem salary in some states, an associate doctor would be an economical choice because they can perform additional dental procedures that a hygienist cannot. It became clear to me that my practice could not go back to the traditional model with a hygienist. In fact, I found that by reconfiguring my staff, I was able to afford pay raises, boost employee retention and improve patient experience. Now, is that counterintuitive or what?

Turning On the Dental Overhead Light


Supplies: The insipid tedious overhead

Supplies are mundane. Nobody wants to deal with them, and supply companies know this. They will suggest a subscription plan or creep up contracted rates when you’re not paying attention. Dentists also talk a good game about negotiating good prices or joining groups for discounts, but have you ever actually looked at your supply closet, operatory shelves and cabinet drawers?

Marie Kondo, a tidying expert, helped business clients declutter and save cash on her Netflix series, and Breakaway dental seminars are telling us the same thing with their office designs. However, this is something you can easily do yourself over a weekend with some items from The Container Store. Start by taking out all your supplies and labeling your shelves before organizing everything. If you find expired local anesthetics, you can forget about group discounts, because you just lost $30! Reevaluate each product you use and why. For example, in my practice, I don’t need 10 different shades of composites; with Tokuyama Omnichroma, I can simplify my composite inventory. Another example: I don’t automatically use Articaine on every block; I try lidocaine first and chase with Articaine only if needed.

Next, you must count everything. This is an inventory list. It does not matter how you choose to implement this concept, but you cannot order supplies before you know what you have (and thus do not have). This counting can later be delegated to a staff member to complete right before you order supplies. So instead of having a list of what is empty or needs to be ordered, we want a list of how many we have.

When ordering supplies, be familiar with what you paid last time—this is where the supply companies will try to get you with price creep. Take advantage of sales and bulk-buy items with long shelf lives, especially if you have extra storage space like an unutilized or unplumbed operatory.

Lastly, when supplies do arrive, staff must initial the packing list against the items delivered and store them where they belong, rotating the stock. Organization saves you time and money, and you will never lose track of expired products again.

Turning On the Dental Overhead Light


Now your work is cut out for you

Being a good dentist and successful practice owner requires discipline. Just like when first learning to use the mouth mirror, it will one day click and get significantly easier if you are consistent and conscientious. By committing to reduce overhead waste and inefficiency, you can pass on these cost savings to your loyal patients and staff and start to enjoy some financial freedom. Remember to keep your head up, be smart and work hard. You’ve got this!

Author Bio
Claudia_Le Dr. Claudia T. Le, a native Californian, has been serving the San Diego community since 2015. Le has worked every position in the dental office and holds a master’s degree from Brandeis University, a postbaccalaureate from Harvard University and a dental doctorate degree from Tufts University. Before becoming a dentist, she traveled globally, helping clients as a business software consultant for IBM. Her family dental practice was featured in an Office Visit in the December 2019 issue of Dentaltown.

 

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