Improve Dental Revenues using Key Performance Indicators

What gets measured gets attention.

Most business leaders use Key Performance Indicators (KPIs) to track their business’s performance. It is almost universal because what gets measured gets attention, not only from leaders but also everyone else in the organisation. Communicating KPIs to your staff lets them know what is important to the success of your practice and tells then where they should focus. By tracking relevant KPIs you can grow revenue and profit.

KPIs fall into to two categories: Leading Indicators that provide an insight into the future and Lagging Indicators that identify opportunities for improvement. Which KPIs should you use to track and manage a dental practice?

Let’s start with Leading Indicators. There are four I would recommend.

Number of patients.  You should track the number of new patients added minus the number of existing patients lost. Clearly you want this number to be positive. Identifying new patients is simple, each patient who seeks treatment is a new patient. Lost patients are more difficult, patients will often not tell you that they are changing to a different practice. They could move and find a more convenient practice to their new location, or they may move overseas. This is quite common for practices with a higher percentage of expats among their clients. You need to decide the criteria for a lost patient that is appropriate for your practice but, as a start, I would recommend if a patient has not returned within 12 months, you can consider them lost.

Customer Return Rate: What percentage of first time patients return for a second time? This is a excellent indicator of your first time patients experience at your practice. Some experts suggest you should target at least an 75% return rate. What is important is to track this over time, is the return rate increasing? Or decreasing? If it is decreasing consider contacting patients to ask why they did not come back.  This can provide valuable feedback. Was it cost? Long wait times? Unfriendly staff? But keep in mind that patients may not provide the real reason they did not come back, so some self reflection is important. If your return rate is falling then ask honest questions of yourself of what has changed and how to fix the problem. On the positive side if the return rate is increasing think about what changes you have made that could be leading to this improvement and do more of it.

Customer Retention Rate: This is similar to Customer Return Rate but measures how many patients remain with the practice for an extended period. Typically this would be the percentage of patients who have been with the practice for more than one year. This is not as a responsive indicator as Customer Return Rate so improvement or deterioration will be slower to show up but it is an important measure of the longer term viability of your practice.

Referral Rate: What percentage of new customers come from referrals? Another great measure of your patients view of your practice. Keep in mind that people are more likely to share bad experiences with friends/colleagues than good experiences. A growing referral rate shows you are doing things right. As with the customer retention KPI continually review what you can do to improve your patients experience.

By tracking these four leading KPIs you can identify whether your practice is likely to grow or decline in the future. Early detection of negative trends allows you to take action before there is any significant impact on revenue.

Dental Practice

Now let’s look at Lagging Indicators. These tell you what has happened in the past but as with leading indicators they provide insights on how you can improve. In my experience two KPIs are essential for any dental practice.

Revenue per hour: Time is a commodity that once used cannot be replenished. The objective of any dental practice should be to increase the revenue dollars produced per hour of operation. In practices with multiple dentists this KPI will also identify top performers and opportunities for improvement.

Measuring a dentist’s performance can be controversial but dollars per hour is an objective measure that, if handled with tact, should not create tension.

Understand how your leading dentists achieve their high revenues per hour, do not just ask then what they do, watch what they do. How does their work differ from others? Use this knowledge to help dentist who are generating lower revenues improve. You may find that you need to train some dentists in higher value procedures. This would be an investment both in your practice and your dentists.

Dentist Utilization Rate: How many hours a day is a dentist engaged in revenue generating activities? How many hours are spent idle?

Scheduling is key to improving both these KPIs. Some thoughts from the world of industry are worth considering.

Optimize your key assets: In industrial production there is often a rate limiting step – sometimes referred to as a bottle neck. In a dental practice the dental surgeon is your rate limiting step. The surgeon only has so much time in a day to perform dentistry. Where possible delegate non key procedures such as cleaning to others. Hiring a dental hygienist may seem like an additional cost but if the hygienist frees up the dental surgeons time to perform higher revenue generating procedures it will be money well spent.

Change over time: Industrial production managers work to minimize the number of product changes per shift. Each change over results in idle time and preparation costs. This is no different in dentistry. Each change in patient results in lost time in preparing the surgery and cost in replacing supplies. Try to minimize patient changes by scheduling treatment in as few sessions as are possible – consistent with a good patient experience. Quadrant dentistry provides benefits for both the patient and the dentist and should be part of your scheduling philosophy.

Time allocation: Accurate estimation of the time required for each patient is critical. Not all dentists work at the same speed so time allocation needs to adjusted for each dentist. If the time allocated is too long there will be excess idle time, if it is too short this will result in back ups and extended wait times for patients.

Flexibility: Patients will cancel appointments at the last minute, others will call asking for urgent treatment. A willingness to adjust schedules on the fly, to see opportunities for additional treatments is key to optimizing earnings.

Amortization of overheads:  Any dental practice will have significant fixed costs, rent, depreciation of equipment, IT costs etc. Like an aircraft that is only making money while it is in the air, your practice is only making money while patients are in the chair. Evening hours and weekend working will spread your fixed cost over more hours. These additional hours are often appreciated by patient as it can mean less time off work.

Scheduling is a skill that is critical to your practice’s profitability – a good scheduler is an invaluable asset who should be supported by the team.

In conclusion KPIs enable you to track and improve metrics that will deliver increased revenue. It does not matter where you are today; only that you ensure the KPIs show continual improvement. If you can do that the viability of your practice will improve. In addition to the immediate benefits, being able to demonstrate a excellent set of KPIs will greatly enhance the valuation of your practice if, and when, you decide to sell.

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