What are your KPI’s? Guidelines for a thriving dental practice

It stands to reason that a dental practice with strong production and healthy clinical culture most likely has a strong bottom line. Yet, those three indicators may not always paint a clear picture of practice performance. How then do dentists better diagnose the health of their practice?

Key performance indicators (KPI) are measurable values used by business managers and owners to assess the growth and profitability of their organization year over year. For dental leaders, the first step to establishing meaningful KPI is to conduct an objective evaluation of how the business is performing.

As the industry’s first Dental Leadership Organization, Lightwave is committed to offering dentists pathways for personal and professional growth. Helping doctors grow their practice is a core focus and measuring KPI can make a big impact.

To get started, it is important to understand that there is no one right way to track KPI, nor does it require a business background. The first step to meaningful results requires establishing the most appropriate performance metrics specific to the dental practice.

This may feel like a challenging, time-consuming process. Yet, by establishing basic guidelines from the outset, dentists can systematically work through the process. Begin by tracking a manageable number of factors, and then expand accordingly.

This article summarizes 10 KPI for dental leaders to consider. Think of the KPI that represent the most important factors in dental practice success. Then summarize each statistic in a monthly report, every month.

Also remember that many KPI are not necessarily tracked on profit and loss (P&L) statements, the results of which can distract dental leaders into thinking their practice is performing fine.

At Lightwave, we rely on three broad categories of KPI that include:

1.)          Net Promoter Score to track employee satisfaction;

2.)          Retention, including both customer and staff retention; and,

3.)          EBITDA, also known as Earnings Before Interest, Taxes, Depreciation, and Amortization.

These three universal KPI can be distilled into the following 10 key metrics every practice should consider tracking.

1. Practice production. The most important KPI is practice production. Rising production is a positive sign. Declining production is a reason for concern. Measure production performance on a daily, weekly, monthly, quarterly, and annual basis. This information provides a big picture of how the practice is doing compared to its goals and enables doctors to quickly determine whether any reduction in overall practice performance has taken place.
2. Collections. Collections ultimately make or break income and cashflow. What percentage of fees charged are actually paid? The industry standard is to collect at minimum 98% of billable production, after insurance adjustments.
3. Practice profit. What is the total revenue after subtracting operating expenses? This is important, because it combines production, overhead, and collections. Every practice or location should have a specific KPI for profitability. The calculation is simple: collections minus overhead.
4. Percentage of overhead. High overhead requires examining expenses to determine what can be reduced. According to the ADA, the industry average for dental practice overhead is around 62%. “Healthy” overhead should be at 59% for general practices, 49% for orthodontics, 49% for pediatric dentistry, 50% for oral and maxillofacial surgery, 51% for periodontics, 64% for prosthodontics, and 42% for endodontics, according to the Levin Group.
5. Number of new patients. Calculating the number of new patients on a monthly, quarterly, and yearly basis is vital for any practice. For some dental specialties, most patients are new. Therefore, every practice needs to establish its own model to track success. A general rule of thumb for general dentistry businesses will see 10-15% of new patient growth year over year.
6. Clinical culture. On its surface, this may appear to be hard to track. One of the biggest challenges dental leaders face relates to workforce. Finding qualified hygienists and office staff — and then keeping them. Employee satisfaction is a key gauge of clinical culture. Lightwave uses the Net Promoter Score (NPS) system to highlight employee engagement and job satisfaction for every single member of an organization. Tracking this allows organizations to adjust their operations based on results. Lightwave has 97% doctor retention, believing that happy teams cherish their patient relationships and are empowered to deliver outstanding service. It is important to remember that staff retention will always be an indicator of clinical culture.=
7. Doctor production vs. hygiene production. A healthy breakdown of activity means dentists generate at least 75% of production, with the hygiene team generating 25%, on average.
8. Percentage of patients scheduled. This is an increasingly important indicator of practice health. Most industry experts recommend that at least 90% of active patients should be scheduled for their next appointment on an ongoing basis. Patient retention is obviously an important metric for success, and any active patient who is not currently scheduled is a potential lost patient. A healthy practice should strive for >95% of active patients scheduled.
9. Cancellation and no-show rates. Reducing unproductive gaps in the practice schedule is an important metric. Tracking the rate of cancellations as well as no-shows will help identify early warnings that impact revenue generation.
10. Case acceptance: How do patients respond to treatment recommendations? Are at least 75-80% of case presentations accepted? Case acceptance rate is a highly variable KPI in dental practices. Understand that the larger the case, the lower the level of case acceptance. Many have a relatively low average production per patient, so the level of case acceptance is high because case acceptance on smaller cases is usually higher.

In summary, it is important to remember that KPI are based on unique data not often found on basic P&L and can provide a clearer picture of practice performance. The above KPI can be indicators of continuous growth when measured year over year. This is a critical gauge for practices that are doing well versus those that are struggling. Practices showing low to flat growth may be teetering on the brink of going backwards. By tracking metrics year over year, they can anticipate changes on the horizon and shift to avoid difficult periods.

There are many other KPI to consider, including average production per patient as well as per new patient. Other measurables include patient attrition, staff labor percentage, fee for service versus insurance production, and so forth. Selecting the most appropriate will depend on practice size and the scope of desired results.

Remember, a dentistry that fails to track and measure its performance is operating blindly and may miss early warning signs that the practice is in decline. The greatest opportunity for success comes back to overall health. Using these 10 KPI as a monthly guide can help reveal the true health of a practice.

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Every challenge represents an opportunity to grow. This is why Lightwave was established as a Dental Leadership Organization – to be a powerful resource for continuous improvement around the biggest issues dentists face.

Are you a dentist looking to grow? Reach out to learn how Lightwave Dental is obsessed with treating doctors as the #1 priority.