Understanding practice production and why it really matters

I recently started working on a new book about increasing practice production in dental practices. The project began when I attended a business course that focused on how every industry has one metric that is more important than all others.

After years of studying how to increase practice production and the meaning of production relative to dental practices, I concluded that production is the single most important metric for dentists to understand. This is not to say it is the only metric, but it is the metric that tells us more about a dental practice than any other single factor. 

Why production? 

First, let’s understand that every industry has a single most important metric or measurement. For example, for Walgreens, it is sales per customer, not sales per store, sales per item, or sales per day. For Walmart, it is cost, which allows them to know when they can continue to offer large discounts on products. For brand companies, such as designer goods, knowing their profit allows them to charge exorbitantly high prices that do not relate to anything relative to the actual value of the products. 

Again, for dentistry it is production, but it’s not as simple as one number. Knowing that the production of a practice is $700,000, $1.2 million, or $1.8 million gives us a context to understand the level that the practice is at, but you must be sure to always divide production by the number of dentists in the practice and account for full time versus part time. 

Once you know the total production, you already have valuable practice insights. Consider this: Has production grown or declined in the last three years? 

Individuals who perform practice valuations figured out years ago that the answers to the three-year question have an impact on the valuation of a practice before it is sold. Production alone is important to understand, but part of the equation is looking at production as a ratio of other numbers, including the following: 

• Production per day
• Production per hour
• Production per provider
• Production per hygienist (if the practice has hygiene)
• Production as a ratio to overhead
• Production per patient
• Production per new patient 

If any practice analyzed these metrics or statistics alone, it would have great insight into performance. For example, we often see practices where one doctor is a mega performer relative to the other doctors. Or we see practices where one doctor has very low production compared to the other doctors. 

Neither of these scenarios is good or bad, but they do require understanding. Consider the following examples: 

• Production as a ratio of overhead: Starting in 2022, many dental practices saw their total production decline, and in some cases by as much as 10%. The changing economy was a factor in this. For the first time in dental history, we also saw overhead rise at the same time. Based on a national survey, Levin Group identified that the average practice overhead had increased by 8.2% from a combination of staffing costs and other inflation. The question became how do you compensate for the higher overhead? While you can lower overhead by a small amount by becoming more efficient, eliminating waste and unnecessary tasks, and hypertraining the team, the real answer to the overhead question is to increase production. If overhead can only be lowered by a small amount, production can be increased by a large amount without any real limitations. If production rises faster than overhead, then profit will still increase.
  
  
• Production per new patient: Having been tracking this for many years, we have data showing that the average new patient has a 200% to 300% higher financial value to a dental practice in the first 12 months compared to a normal active patient. This indicates that new patients, which typically make up approximately 40% of doctor production in general practices, have a strong impact on practice performance. Not only is it good to have the right number of new patients, but from a scheduling system standpoint, the sooner they are seen, the faster excess production is acquired.
  
  
• Hygiene production: We found that many hygienists can increase their production by 20% or more without working any faster or longer. By looking at the production-per-hygienist ratio, a practice might identify that every morning it should review all hygiene patients and determine which patients are currently overdue for x-rays or fluoride, have incomplete treatment, etc. They should then use the hygiene visit to offer all of these services to the patient, which would increase production within the same time frame. We find many practices do not realize that they are behind on x-rays and fluoride. 

These are a few of the many examples as to why production is the single most important metric in the dental practice. Although it is good to review other statistics, the truth is that data can be overwhelming, and most practices do not focus on more than a few key statistics at a time. 

However, generating a short list of production statistics that can be reviewed daily, weekly, monthly, and annually will help a practice to develop much better insights into its performance and allow it to identify opportunities to further increase production, which typically further increases practice profitability. 

Summary 

It may seem strange that one metric is more important in a dental practice than all others. One might think simply having enough new patients or holding overhead in the right range is all it takes to be successful, and in the past, that was true. 

Even now, some practices can simply ignore all key performance indicators and do fine simply due to circumstances that are in their favor. But to maximize the opportunities associated with having a dental practice, production and production-related ratios are a key place to begin understanding where new opportunities lie. Take time to perform a simple review of production and production ratios using the examples in this article, and I am confident you will find opportunities in your practice as well.

Dr. Roger P. Levin is CEO of Levin Group, a leading practice management and marketing consulting firm. To contact him or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit LevinGroup.com or email [email protected].

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.