Showing posts with label Dental collections. Show all posts
Showing posts with label Dental collections. Show all posts

Wednesday, March 22, 2017

Making the Most Out Of Financial Planning

Did you resolve to make better financial decisions for your dental practice this year?
Financial improvements are the third most popular resolution people make on January 1. It’s not too late to make progress for 2017. Use this guide as a starting point to set up your office for success.
Tips for Financial Success from the ADA
According to the American Dental Association (ADA), smart financial planning for dentists begins with a profitable practice. A profitable practice begins with raising fees. A good rule of thumb is to implement a small increase every ten months; that way, you’re netting one extra increase over a five-year period.

Next, on the ADA’s list of recommendations is collecting 100 percent net. Make sure you see all the gains from your work. Setting your expectations lower can impact your profitability and your staff’s collection procedures. So if your monthly gross is $50,000 and after insurance adjustments and other write-offs, the net is $45,000, make $45,000 your collection goal. Don’t settle for less.


The third tip for financial success is having a plan for consistent growth. Involve your staff in this discussion, and benchmark at least the following figures:
  • Gross Production
  • Net Production
  • Collections
  • Net Collections
  • New Patients
In 2015, the median gross billing for dentist owners in private practice, including specialists, was $640,000. The top source of gross billings in 2015 was private insurance, followed by direct patient payments, managed care, and government programs.
Other Recommendations
Other recommendations include viewing overhead expenses in terms of revenue, doing everything possible to ensure quality patient care, and properly managing debt.
Don’t be so quick to cut expenses if doing so would negatively impact practice growth. For example, investing in a new patient billing system requires up-front expenses, staff training, and perhaps ongoing maintenance expenses. If the new billing system allows you to serve patients better and more efficiently, it’s a win in the long run.
When it comes to debt, debt that will increase your practice’s profitability and efficiency is good. Think mortgage, software, and better equipment. But any debt you struggle to pay off is problematic.
Practice growth planning is time-consuming and sometimes difficult. But it’s time well spent. Don’t put off your financial planning goals. Put a plan in place now and see the benefits throughout 2017 and beyond.
Contact us today to make the most of the financial planning at your dental practice.

Monday, November 14, 2016

Get Your Education On!

Get Your Education On!

Have you ever wondered what you need to know about the financial operations of your practice? Have you ever wondered what you should be looking at and monitoring when it comes to your practice numbers?  Well, you can stop wondering! Next month, our very own Lance Jacob will be teaching dentists on Dentaltown about these very issues, and you can learn as well.

Lance prepared a video course for Dentaltown that qualifies for CE, and the topic is “Improving Patient Care by Improving Practice Performance”. Let me tell you a little about it and some of the things you’ll learn.

Viewers of the course will gain some insight on what they need to be looking at when it comes to the operational performance of their practice and how their practice financials can aid in that insight. You’ll learn some of the key performance indicators you should be calculating and how to interpret the results. You’ll learn about what our latest performance statistics showed so you can compare your practice with those results.

Lance will discuss production, production adjustments, collections, production by provider, etc. This will include various revenue ratios you should be looking at and what the typical GP practice looks like as it relates to these ratios.

Lance will also talk about practice overhead for a GP practice and things you need to know about overhead specifics and what our survey results showed about the average overhead statistics for a GP practice.

If you’d like to get your education on, schedule an hour to view the course then login to Dentaltown today and begin learning. Lance's CE course will be available the first week of December. 

If you’re not a member of Dentaltown you should be, their motto is “You’ll never have to practice alone again!” Sign up and become a member so you can view this course and many other courses...it’s a one-stop shop for much of your CE needs. The forums board is incredible with forums on just about every practice topic you can think of so you can get feedback from dentists just like you as well as other dental related consultants and experts.
For more information on accessing this CE course or to set up an appointment for a consultation on improving your practice's performance, please give us a call at 844-DENT-CPA, or visit www.dentalcpas.com 



About Lance Jacob
Lance Jacob is a Principal with Naden/Lean, LLC. He provides accounting, tax, and consulting services for individuals and businesses which include dentists, other healthcare providers, retail, and equine. With his equine clients, Lance works to ensure they are in compliance with the federal, state, and local taxing authorities with respect to employment, business tax and reporting issues.


Wednesday, September 7, 2016

2015 PRACTICE FINANCIAL STATS COMMENTARY – WHAT’S CHANGED FROM FIVE YEARS AGO?

We’ve completed the process of compiling our dental practice financial statistics based upon 2014 & 2015 data and the results show very little change compared to five years ago.

Remember, the US economy went through a downturn beginning in late 2008 which lasted probably through the majority of 2012. Therefore, the 2010 results included some of those down years and compared to 2005 we saw some interesting changes, likely due to that downturn. However, many practices began to rebound sometime in 2012, and we saw significant upticks in some practices in 2013, 2014, & 2015. We were curious to see how this would impact the financial statistics for dental practices.

We also know that over the past five years there’s been even more technology that practices are buying and using whether it’s their dental equipment, office equipment, computers, software, and even outside service providers (to handle calls, etc.). While we were a little surprised to see that overall, the changes were minor, we’ve summarized our findings below and provide commentary as to why we think some changes occurred.

     1.     Revenue:

The mix of dentistry to hygiene production has increased slightly in favor of the doctor, with a ratio of 3.1:1 as opposed to 3:1 five years ago. We expected the ratio to be even higher with practices adding implants, invisalign, other ortho, sleep dentistry, etc., however, we didn’t see a big increase.

The surprising statistic is the adjustments or write-offs. Five years ago the “average” practice was writing off 19% of their gross production, and it’s decreased to 14.4%. With all the talk about everyone joining PPOs, especially with the downturn years, we expected that to increase. That said, we’ve also seen an increase in the number of practices that have been maturing and attempting to reduce their PPO participation. Many practices have implemented in-house membership plans to battle the PPO participation urge. In-house membership plans will show a write-off percentage in the 10% neighborhood. It’s also possible and likely that more practices are opting to report their GROSS production based on their PPO reimbursements instead of the UCRs…that’s unfortunate.

We also see a positive increase in the ratio of hygiene production to hygiene wages of 3:1, up from 2.7:1 back in 2010. This increase is likely to the impact on hygiene wages that were forced down in many parts of the country due to the economy and practices doing a better job of making sure their hygiene departments are operating as efficiently and productively as possible.

      2.     Labor:

There wasn’t much of a change overall. If anything, we saw the lower end of the total labor cost range dip down to 25% and as high as 29% In some cases.  The average is still around 27%, and that includes wages, payroll taxes, retirement plans and other benefits. Hygiene remains around 8-10%. However, assistants actually came down a little on the top end, from 9% to 8% while front desk wages bumped up on the lower from 5% to 6%.

     3.     Facility Expenses:

There was no change in the facility costs and rent expenses. They both remained similar to 2010, 6-7% overall facility costs and 5-6% for rent expense.


     4.     Lab and Dental Supply Expenses:

These categories are beginning to show the changes in technology and additional procedure offerings. Whether it’s the use of CADCAM equipment or adding implants to the procedure mix, we think we’re seeing the changes. Dental supplies were at 4-7% back in 2010, and we’re seeing them around 6-8%, again, the cost of implants, maybe some milling supplies and even some practices doing more endo. Lab was 5-8% back in 2010, and the top end has dropped down to 7%. Practices manufacturing their own crowns will see the drop in lab and practices doing larger cases without a milling machine could see their lab hit 10-12%.

     5.     Other Costs:

In total, other costs went from 8.8% in 2010 to around 10% in 2015, a slight increase of 1.2%. We see an uptick in advertising and marketing to 2% on average, up from around 1.5% and 1.5% for collection expenses, like carecredit and merchant services, up from around 1.2% back in 2010. We also see more use of outside service providers like call centers, providers offering in-house membership, patient reminder systems, website SEO services, etc. which is likely driving the increase in some of these other expenses.

In summary, total overhead went from 48.8% in 2010 to around 51% in 2015. Keep in mind, this is based on gross production, we also provide the stats based on net collections for those practices that record their production based on PPO fees, NOT their UCR fees.

So overall I’d say the changes from five years ago have been nominal, yet there are a few areas like revenue, production, and clinical costs that are showing signs of “changing with the times” and for the better no doubt.


Tim Lott, CPA, CVA has decades of experience working with dentists at all stages of their careers. He is a regular speaker at study clubs, societies, and dental schools. Tim is a frequent participant and a moderator on Dentaltown.com. You can reach Tim at tlott@dentalcpas.com or any of the other dental partners/principals at (800) 772-1065 or info@dentalcpas.com 

Friday, April 30, 2010

Extra Dental Collections - What Should the Dentist Do?

I have a question regarding my first year collections...

My background:

I opened my office in January

I am a PLLC

I have basically lived off of savings from previous years and have not paid myself very much this year

I was saving money to make sure I would have enough for this part of the year when my rent started (got first year free) and when my loan ended its interest free period.

I earned about 30 during the first part of the year as an associate

I have about 65k in my business account

My Questions:

So, with all the deductions that I will have with the purchases made for the business, should I pay all of that extra to myself as a salary? If so, is there a problem with paying it in a lump sum or should I break it up?


Dr. Dersley Replies:

If your LLC is a pass-through like mine, all the profits are automatically counted as personal income, so it won't matter if you write yourself the check or not. Whether the profits are sitting in your business account or your personal account, it doesn't matter.


Tim Lott Responds:

It sounds like it's time to start paying yourself a salary. If there are any purchases you need to make for your practice, you could make them before the end of the year to minimize your tax liability.

Is your PLLC being taxed as a sole proprietorship or a corporation?

I'm guessing you'll have plenty of deductions with your start up that you won't need to take any more deductions. Have you done any tax planning for 2009? Will you wind up with taxable income or a loss from your practice? How will the $30k of other income impact your projection? To you have itemized deductions? If you wind up with a tax loss from the business due to the start-up deductions, what will happen do your 2009 itemized deductions? Does it make sense to carry some losses to earlier years? Carry them forward for potentially higher tax brackets? Do you have traditional IRA's to convert to ROTHs ?

You need to consider all of these questions and consider 2009, 2010, as well as previous years.

I agree with Dr. Dersley that it won't matter when you take the cash. If you need it, take it. (assuming you haven't elected to be taxed as an S-Corp!)

Coming back east anytime soon?


Thanks Tim. I have no plans to return anytime soon now that my bro has graduated and is living out here on the west coast as well. I'm sure we'll do something as a class for the 10 year, but that is still 5.5 years away...so we'll see.

I am a sole prop. I do have plenty of deductions, more than I can take advantage of. We did start some planning, but were going to wait until later to decide on some things so I thought I would get some ideas from here and thus this question. Most of those questions I don't know and I'll take to the CPA.

Can I take a loss to an earlier year if it wasn't income earned from this practice?


Generally you can carry back BUSINESS losses, but you can't carry back itemized deductions. So in years of a start-up where there may be a projected loss with the new equipment without it may be better to forgo those depreciating deductions so you can use your exemptions, itemized deductions, and maybe tax credits since you can't carry them over or back.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on Twitter, Facebook and Pinterest

Monday, December 14, 2009

Dental Production vs. Collection Problem

Can you tell me where I can find legal definitions of "production" and "collections" as they relate to dentistry?

 
I've just started working for a group practice. I have a contract (as an independent contractor) that states that I will be paid "30 percent of the production resulting from dental services provided by" me according to their standard fee schedule. I was happy with that until I discovered that they are trying to call their collections "production" and compensate me accordingly. (The word collections is not mentioned anywhere in my contract.)

 
Some of the things they are claiming according to this nomenclature are that when they run a promotion for a free exam (etc), since they are charging nothing, it doesn't count as "production" and I get paid nothing. If they discount a fee, it discounts what I get paid. They also said that if a patient defaults on their payment, that it retroactively counts against my "production" and is backed out of my pay. (Of course, since I'm not an owner, I have no say what promotions get run, or when.)

 
Naturally, I'm contesting all this, since it would basically give them carte blanche to not pay me for whatever they decide not to charge for. In school, production was always defined as "the procedures you perform" and collections as "what the patient/insurance actually pays." Is this incorrect? Can anyone help me find official definitions of these terms? I'm really hoping I don't have to involve an attorney.

 
Thanks!


First, different people use the term “production” very loosely. While one might expect it to mean the number based upon the practices fee schedule, many people simply use it to fit their needs. You’ve learned a very valuable lesson, which is (and this is for every associate and owner dentist):


Make sure you define these terms in your agreement. As an associate, if you get a contract that says you'll get 30% of production, insist that a definition be inserted that your dental attorney is comfortable with. The same goes for many other terms thrown around in agreements, compensation, professional expenses, full time and part time, just to name a few. Use examples if you must so it's very clear.


Check with the ADA as to their definitions. They put statistical information out there and they must have "standard" definitions for these terms.


Good luck. You’re right to contest this.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on Twitter, Facebook and Pinterest

Tuesday, September 29, 2009

Which Dental Associate Collections vs. Lab Fees Scenario is Best?

With all else being equal, what is the better deal for an associate?

A. 30% of collections, no lab fees
B. 33% of collections, 33% of lab fees

In other words, how much (in terms of a %) does no lab fees make a difference? I understand that alot depends on how much you send to the lab, but looking for a ballpark range.


You do need to assume what the typical lab cost is as a % of revenue. If it typically runs 5-8% in a GD practice lets assume 7% as a nice round #. Now we also know the typical GD practice generates 75% of its revenue from dentistry (not hygiene), so lets take a million dollar practice, where $750k is from dentistry. Lab expense would be $70k (7% of $1mill), so 70/750=9.33%.


Now, lets assume you make 30% of collections which are $100,000, you'd make $30,000.


33% of collections is $33,000, however, 33% of your lab (9,330 x 33%)= $3080 and 33,000-3080 = $29,920.


So 30% of collections is better.... in this case - assuming 9.33% lab expense.

How much lab related work will you be doing?

The less lab the more the 33% less 33% lab looks better.


BTW, some also do 100,000-9330=90670x33% = 29,921. Same result, different path, that's all.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on Twitter, Facebook and Pinterest