To keep on track for practice success, Levin Group has always encouraged dental practices to establish a key set of measurements or key performance indicators (KPIs) to help monitor their performance. However, understanding and applying these KPIs will be different than in the pre-COVID-19 era. Almost every practice, like most businesses, will be facing a recovery or business turnaround.
The Recovery Timeline
Levin Group has developed the 24-month COVID-19 Recovery Timeline, which includes the following three phases:
Phase One: Months 1 – 5: Pent-up demand
Phase Two: Months 6 – 12: Production decline
Phase Three: Months 13 – 24: Recovery
Most dental practices experienced a high level of pent-up demand leading to extreme busyness in Phase One. As Phase One begins to decline, Phase Two will be characterized by many practices noting a decline in production. At around month 12 into the recovery we will enter Phase Three which is the actual recovery. This will be characterized by a gradual rebuilding of practice production. After 24 months many practices will be functioning at 80% (or more) of 2019’s monthly production average. Keep in mind that any or all of these projections may need to be recast depending on external factors such as a vaccine timing or definitive treatment for the virus. Data from ADA’s Health Policy Institute also show that patient volume was at 81% of pre-COVID-19 levels as of Sept. 21.
Measure Your Way to Success
All business and management experts would advise any company to have a clear set of metrics that are measured consistently to understand the past, current, and projected future performance of the company. In fact, the concept of using key performance indicators (KPIs) is over 100 years old. Unfortunately, dental practices have not always utilized KPIs despite having easy access to them through software generated reports. And some of the practices that do use KPIs only measure a few of them such as production and collections or, even worse, they measure them but do not understand or act on them.
During the COVID-19 crisis it’s more critical than ever to have a set of KPIs that are consistently measured and understood. However, in a recovery you’ll measure fewer things than you would under normal circumstances. Practices must be highly focused on the most critical KPIs, measuring them as frequently as possible so that modifications can be made when necessary.
The Seven Most Important KPIs
The KPIs that practices must put the most focus on include:
Production is the single most important factor in the recovery. This is based on a simple formula that production creates revenue, revenue creates cash, and cash creates income. If a practice has the right level of production it will not only survive COVID-19 but will move back into a strong and successful position. To maximize production in the face of a lower patient volume, new management methods must be put in place.
For example, production can be increased by scheduling the largest cases as soon as possible and extending patient appointments to complete as much dentistry as possible. Another method that practices may want to consider is expanding or shifting hours to create a higher level of convenience for patients.
Practices should establish a general production goal and measure performance each day against that goal. If production is steady or increasing, then the practice is in a positive position for recovery. If it is declining, then new approaches need to be established.
Although production is the single most important factor in practice recovery, production alone is not sufficient. Practices should target collecting 98% of all money that is owed to the practice. Many practices collect far less than 98%, and we’re expecting that collections will become increasingly difficult if economic financial challenges expand. Like in retail businesses, practices need a very streamlined and efficient collection system, and the goal should be to collect payments due at the time of the service. However, dental practices differ from retail in that insurance reimbursements, and payments from patient financing and payment plans can take time to recoup. This means that practices need a well-scripted approach to collecting at the time of service, and a plan to track payments daily and collect on overdue payments. Practices that allow accounts receivable to expand and increase will have a slower practice recovery.
Expenses, or what most practices refer to as overhead, are another critical factor in the recovery. It might make sense to believe that reducing all possible expenses to a minimal level is in the best interest of the practice, but this is not necessarily the case. Although expenses should be carefully monitored and streamlined, practices will need to invest in opportunities that can contribute to a strong recovery. For example, if a practice decides to decrease its number of dental assistants, it may find it also ends up decreasing the capability for creating production by more than the compensation of the dental assistant. Most dental assistants have the capability of allowing for a minimum production increase of 3 to 5 times their salary, so a decision of this nature must be carefully tied to production.
Another lens to view overhead through is the national statistics for general practices and each specialty. For example, if based on national averages, a practice should be at 60% but is running at 70% or 50%, the practice should analyze the reasons for this higher or lower level of overhead and its impact on recovery.
It’s also important to review expense reports in detail. Regardless of the overhead percentage there are areas of the practice that may be higher or lower in performance. For example, if supply costs are 3% higher than recommended overhead targets, the practice can then make decisions about how to reduce those costs going forward. Keep in mind that every 1% that overhead is reduced is $1,000 of profit for every $100,000 of production.
Ultimately, profit is the measurement of how well the practice is recovering. As stated earlier, production is the most critical KPI because the right level of production with a reasonably controlled overhead will lead to the right level of profit. Pretend for a minute that the dental practice has stockholders. The stockholders would measure the level of recovery based on the level of profit. If profit is increasing then the practice is recovering and moving in the right direction. If profit is flat or decreasing, the practice is moving in the wrong direction.
5. Number of active patients
The number of active patients should now be defined as the number of patients who have appointments. Pre-COVID-19, active patients were defined as patients who had been seen in the practice within the last 18 months. This measurement is no longer valid or beneficial as there will be patients leaving the practice today, a month from now, or 18 months from now that don’t alert the practice to their decision. Almost every dental practice will have patients that don’t come back out of fear for COVID-19 or financial concern. In recovery it’s important to look at real-time metrics. By measuring the number of active patients based on how many patients are currently scheduled, practices will get a much more realistic view of their patient base. They should then spend time every day contacting patients without appointments, using effective scripting to encourage them to schedule. If the practice has a strong patient base and sees a decline in average production per patient during the COVID-19 recovery, it will still most likely recover well.
6. Number of overdue patients
The number of overdue patients is the inverse of the number of scheduled patients but is an equally critical number. On one hand, a high number of overdue patients represents significant potential for the practice if most of these patients get scheduled. On the other hand, every overdue patient represents lost production and a potential lost patient. Practices must do everything possible to reach out to overdue patients, ease their safety and financial concerns, and create confidence for them to make and keep appointments.
7. Hygiene production
Dental hygiene is often an under-performing area in the practice. Hygienists must always be focused on excellent care, comprehensive diagnosis, providing routine services such as radiographs and fluoride, and offering the opportunity for elective services. When they do, it creates a very positive result for the practice without increasing the time allotted for the hygiene appointment. Start with a baseline of understanding the current average production per hygienist per patient and per day. Then track progress as the recommendations above are implemented. There should be a steady increase in overall hygiene production until it reaches a new stable baseline and a higher level of practice production.
These seven KPIs are critical measurements. For example, a practice that is increasing in production and collection while stable or decreasing in overhead is most likely moving in the right direction. Conversely, a practice increasing in overdue patients will gradually decline in production and collection, and potentially increase in overhead. The key is to monitor these measurements daily, weekly, and monthly so that important improvements can be made.
About the author
Roger P. Levin, D.D.S. is the CEO and Founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on dental practice management and marketing, he has written 67 books and over 4,000 articles and regularly presents seminars in the U.S. and around the world. To contact Dr. Levin or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit www.levingroup.com or email firstname.lastname@example.org.