Dental CPAs: Production by Procedure Report in Practice Acquisition.

Here is a guest blog post from Dr. Richard Wyne, DDS

The production by procedure report is a very simple report to review when doing your due diligence on a potential buying opportunity that offers a wealth of information. A quick scan allows you to gauge the size of the practice, search for fraud/malpractice and shows you how the previous dentist practiced. All of this information can tell you if this is the right practice for you, or if you should keep looking.

The first and most obvious is the fee schedule. From this report, you can either directly see the fee schedule or do some quick division to find out what the doctor is charging. If the doctor is charging appropriately for the area? You can contact the company Renaissance for a quick area fee assessment to see if the previous dentist’s fees are high, low, or just right. (They are never just right).

Super high fees will be tough to justify to patients as the new doctor. A longer transition may be needed.

Average fees require little to no change initially, but some minor tweaks can bring in more money.

Unusually, low fees can be good and bad. Good in that if you raise them the office will make more money. It is bad in that the previous doctor has most likely been attracting patients looking for the lowest fees. Any noticeable change will send some of these patients running. So the patient count is actually lower than it appears because you will be losing some.

On to codes.

Perio vs prophies. Are they doing 4910, and 4341/4342? A lot of old docs do not at all. Some don’t even own a perio probe. That means you are going to have a lot of patients with undiagnosed perio. It is a train wreck to convince them. So expect a lot of work maybe a few years to build up trust but an increase in profits. On the other hand, if they are doing more patients with quad scaling than prophies they are probably over diagnosing. To keep income up you would have to continue doing that (committing fraud/malpractice).

Prophies+perio vs x-rays. A lot of old docs have weird x-ray policies. Some never take FMX/PAN's, some take 2 BW's instead of 4, and some take them every 6 months some every 3 years. Some take PA's at every visit on every patient.

So do the math. They did 1000 prophies and took 250 sets of BW's. That means they are doing BW's approximately every 2 years. If you up it to once a year you'll double the income coming in from BW's. If they are doing 1000 prophies and 1000 BW’s that means every 6 months which is overkill for most patients. Your best case scenario is an office that takes x-rays less frequently than you are comfortable with. The office would make more money on day 1 after you took over. Worst case scenario is an office that takes x-rays more often than you are comfortable with. The office would lose money as soon as you took over.
If they only do 2 BW’s at a time which some older docs do, you could increase profits a little by doing 4 which is generally the standard of care.

Are they taking 1000 Pa's and doing 1000 prophies. That means they are taking a PA per patient so probably fraud there. Some insurance companies are going to begin requiring scripts for every PA. You can assume 100% of patients don’t need an individual PA taken on them and taking way too many single PA's is a way some offices try to increase profits. It’s also sometimes done instead of an FMX to increase billing. If you see unusual amounts of PA’s per cleaning apt ask why.

How often are FMX/PAn's are done? Insurance covers every 3-5 years so 1000 prophies and 166-100 would be right on that line. Fewer means they are taking less, more means they are taking more. What frequency are you comfortable with? Also more FMX/PANo’s than normal can come from other sources. Lots of new patients will mean more than typical amount of PAN/FMX so compare to NP count given by office and to code 0150. A new Pan machine will also greatly elevate the amount of Pan’s being taken. That number will die down with time but could give the practice a massive bump that you may not get to cash in on as it dies down.

Example: the previous dentist takes no FMX/PAN’s, buy’s a PANO one year before practice goes on the market. Every patient is due. Pan to prophy ratio can be massive 50% or more. Remember it will not stay massive it will die down once everyone has had their pan so be careful.

Comp exam count will give you NP count if they doing it right. So when the doc lies to you and says they get 30 NP's (they always overestimate) a month but do 30, 0150's a year you know they are way off.

Limited exam 00140 some docs charge some don't. See how many they are charging and make sure it is in line with your personal practice management philosophy or account for the difference in income. 09110 palliative exam same thing see if they are using this code.

Fl varnish. Are they doing it to adults? Look for the 1206, 1208, 1205. Various other assortments of codes are used for this. Sometimes it’s processed as an application of desensitization medication. Compare to the amount of kids in the practice. Do you want to do it on adults? Income could go up or down based on the answers and what the existing office does.

Pedo prophies 1120. How many did they do in a year and divide by 2. That's how many kids are in the practice roughly. Some doctors just don’t see kids. If you see very few pedo prophies either the doctor doesn’t see kids or there just aren’t any kids in that demographic. If they don’t see kids and you do, expect a small boost. If you hate kids and the office does more 1120’s than 1110’s. You are in trouble.

1351-1352 check sealants per prophy. If they are doing a bazillion then they are an office that seals every groove on every patient adult or child. Are you ok with that? Is that how you practice? If they never do any there's a chance to increase profits there.

Fixed
Crowns/exam Insurance companies say around 20% is average.
So for every 100 exams that's 20 crowns. Personally I do a lot less, more like 10% but if the office you are looking at is rocking 50% - they are crowning everything. If you are more conservative you could see a massive decrease in collections. If the office is far lower, doing just a couple %, they may be doing a ton of massive fillings. Check the big filling/core/big amalgam codes.

Look for inlays/onlays. Do they do them? Do you want to do them?

Are they doing amalgams or composites? Check that one out too. If they do nothing but amalgam that's what patients will expect you to do. You can change just expect some resistance and plan on still doing some amalgams.

Are the composites direct or indirect? Different codes that pop up for indirect composite inlays/onlays.

Specialty Procedures.
Look for endo/ortho/oral surgery/dentures/implants. Do they do them? Does it make up a large part of the practice?
If only oral surgery code he uses is 7140 then they are only doing the easy ones. It also gives you an idea of the patient base. If they are doing a butt load of dentures, you better like dentures because that's who's in your office. If the doctor does procedures you do not do, you will make less money. If there are procedures the doctor does not do, and you are proficient at them, you will make more money.

You can also get a total patient recall count from (prophies+perio maintenance per year)/2. That gives you a real ballpark of whether there is a good recall system in place or if the office is more of an emergency clinic. If the total patient count given to you by owner/broker, is similar to (prophies+perio maintenance per year)/2, then this is a hygiene driven practice with good systems for retaining patients. If the numbers very widely, then there are a lot of emergency patients, who don’t come in for regular care. Neither is bad it just helps to know what you are getting into. Also, it’s nice to separate out the count. Dr. says 1000 active patients in practice. Last year they did 500 prophies.

That means 250 recall patients and 750 patients who come in when something’s wrong. You can re-verify that data by comparing it to the 0140/9110 codes. It won’t be perfect because some patients only come in once a year for cleanings or every 8 months, but it gives you an idea.

Finally, look for fake codes. Non-ada codes they use to track things or upcharge. Figure out what they are and why they are used. How much money comes out of these codes?

Thanks for reading.

Written by Dr. R. Wyne, DDS