3 reasons your dental practice is drowning in overhead

October 5, 2014

No matter how hard you work, you just don’t feel like you’re making any progress. Overhead costs keep rising and profits are sinking fast. You’re overworked, overwhelmed and have no idea how you’re going to afford all the necessary practice upgrades you’ve been eyeing, let alone put money away for your retirement.

You’re barely staying afloat, and if you don’t make some changes soon, you just might go under. 

Does this scenario sound familiar? If you’re going to run a successful, profitable dental practice, you can’t let practice costs dictate your every move, but all too often that’s the case. Inconsistent production, low collections and high expenses add up, sending your overhead skyrocketing above 55 percent of production-the benchmark for practice success and profitability.

While there are many factors that play into rising overhead costs, there are typically three main culprits - staff, salaries and hygiene. Here’s a look at exactly how these areas can send overhead costs soaring, and what you can do to keep them grounded.

You have too many employees.

There’s no guarantee that hiring more team members will make your practice more efficient and increase your production. It will, however, raise your overhead costs.

Don’t let the obvious signs be your only guide to staffing decisions. Just because you see dirty instruments stacking up and you know for a fact collections calls aren’t being made, that doesn’t mean hiring a new team member is the best fix - even if that’s what your team is telling you.

Before you hire someone new, look at how much time patients spend at the front desk. Check in and check out takes about 10 minutes per patient. There are 480 minutes in an eight hour work day. If your practice sees 15 to 22 patients a day, the front desk is spending 150-220 minutes seeing patients - something one front desk person can easily handle.

If the practice is working a normal or common 8 hour day and one front office person is spending more than 240 minutes with patients, then it’s time to hire a new team member.

Clear job descriptions are also vital to making sure you get the most out of your current team members. Make sure every team member knows exactly what’s expected and what systems they’re responsible for.

Additional reading:The 10 worst ways dentists try to save money

You give raises just because.

You know your team members work hard, and you want to keep them happy. Unfortunately, if production is down and overhead is up, you can’t increase payroll, which should account for about 20 percent of your overhead costs.

Instead of giving out raises just because your hygienist has been with you for years, or because you’re afraid your team won’t like you if you don’t, establish a compensation policy. Take the emotion out of it, and don’t give an under-performing team member a raise just because he or she asked for one.

The next time you hire a new employee, set guidelines for raises and make sure the rest of the team is aware of these guidelines. Let them know when raises can be discussed and under what circumstances they’ll be given.

If you don’t already do them, now might be a good time to implement performance reviews. Your team may be resistant at first, but team members rated against objective measures will place more trust and confidence in the process. And if their performance goals complement practice objectives, they’ll also see the relationship between their performance and the practice’s success - as well as their potential for advancement and raises.

Additional reading:The 10 myths of dental practice success

Your recall system is nonexistent.

All too often, the recall system is set aside and forgotten. No one wants to deal with it, so instead of booking treatment, your patient coordinator spends time trying to fill holes from no-shows and cancellations - likely from hygiene patients scheduled six months ago.

It might be time to stop relying on six-month scheduling and to start focusing on recall. This outdated system isn’t doing your practice any good. It gives the illusion your hygiene department is booked out for months, and prevents patients who want treatment from actually seeing the doctor.

Practices that rely solely on six-month scheduling only achieve about 76 percent patient retention, and lose nearly 50 percent more patients than similar-sized practices that do not pre-appoint. This means you’re losing patients and revenue sources as your overhead costs continue to climb.

To turn this around, empower your patient coordinator to activate the recall system. Give your patient coordinator specific recall-related goals, such as making a certain number of patient calls per day, scheduling a specific number of appointments, ensuring a specific number of patients complete treatment, and scheduling to ensure hygienists produce 3 times their daily wages. You’ll start scheduling more treatment, patient retention will improve and overhead costs will fall.  

Controlling overhead costs isn’t easy, but it’s vital. Follow these tips and high overhead costs will no longer keep your practice from realizing true success and profitability.

If you’d like more advice on how to reduce overhead and increase revenues at your practice, please contact me at sallymck@mckenziemgmt.com to take my free overhead assessment and to receive my free overhead report. You can also download the assessment at http://www.mckenziemgmt.com/comp-overhead.php.