Keeping data on key performance indicators (KPIs) and financial figures is key to the viability and success of a dental practice, according to leaders in the dental industry. That's because data alone are not beneficial unless the information is related to something else in the practice.
"Without data, you are working blind," said Dr. Roger P. Levin, founder and CEO of the Levin Group dental practice management consultancy. "We encourage dentists to pay a lot more attention" to data.
Data are "the measurement of practice performance, which is really important," he added.
Know what data can tell you
Practice management software may include a dashboard that can provide tons of data about a dental practice. However, many dental practices may not maximize the use of all the data a dashboard can offer, Levin noted.
Dr. Roger P. Levin.To get a sense of how well your practice is doing, it's crucial to look at the data and numbers, which can tell you whether you are increasing, flattening, or decreasing in growth.
"The data will tell you what you should be working on," Levin said. "The numbers will tell you where you're strong, where you're weak, and where you need to implement new systems."
Even dental practices that feel very busy may not be seeing as many patients now as they were before the COVID-19 pandemic. According to Levin, production is down about 17.5% on average.
"You may feel busy and be misled into thinking everything is fine," he said. "Numbers are the barometer of how the business is doing."
In terms of making year-to-year comparisons in growth and revenue, dentistry is excluding 2020 across the board as a comparison year because it was highly atypical for many sectors, including dentistry, Levin said.
Don't forget the financials
Dentists need a two-pronged approach to data that tracks typical KPIs as well as key financial metrics, according to Dan Croft, head of the Healthcare Practice Solutions Group at TD Bank.
"They work hand in hand, and when you are talking about practice success, it's important to track and measure both of those for optimal success in your practice," Croft said.
Dan Croft.In terms of traditional KPIs, Croft advised that dentists have short- and long-term production goals, revenue collection goals, profitability goals, and overhead targets. It's also important to track cash reserves and active patients, which Croft defined as patients who have visited the practice in the past 18 months. In addition, look at the production of the individual members of the team, including production per dentist per day and production per hygienist per day.
As for financial and operational metrics, Croft said to look at financial statements to track and measure gross margins, net income, and EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. Croft put forth tracking these metrics annually, quarterly, and even monthly to get a picture of the best practices to effectively manage a dental practice.
"This will allow for some powerful analysis techniques, including comparing a profit and loss statement from different periods and to benchmark your performance against industry averages," he said. "That is how we determine the strengths and weaknesses of the business based on ADA and historical practice data."
However, Croft cautioned that there are nuances to the numbers, as dental practices need to consider additional factors such as their practice model. As an example, practices will have different considerations if they have a fee-for-service, preferred provider organization (PPO), or Medicaid focus. The same applies to different specialties.
"If you are a general dentist versus an orthodontist versus an endodontist versus a pediatric dentist, the staff salaries, clinical supplies, and overhead benchmarks vary," Croft said.
What's one advantage of looking at the data? Making positive changes can help drive up dental practice appraisal values, he added.
"The more profitable your business is, the higher the revenues your business brings in, which are key factors in driving dental practice appraisal values," Croft said. "Therefore, tracking KPIs and financial data drive the ultimate sales price when you sell your business."
Don't let the numbers lie to you
Integrity is a core value of dental practices, and data collection and reporting are instrumental to exemplifying integrity in a dental practice, said Dr. Marc Cooper, president of MBC Consultants.
Dr. Marc Cooper."For many dental practices, integrity is their North Star," Cooper said. "Numbers don't lie, and if we did not do it, we did not keep our word. Data is a way to measure the integrity of the dental practice."
Still, data can be misleading, and the information needs to be considered in context, according to Cooper. Some data can be open to interpretation, which is where accountability comes into play.
"It is easier to manage through accountability because people have a higher investment in their performance and success when they are accountable," he said.
Both actionability and the practice culture will affect data collection, reporting, and analysis. A dental practice may consider using a third party to collect and analyze data so that an independent view of the practice can be obtained, Cooper said.
"It is always good to refer to a third party to get an objective report about what the numbers mean and how the numbers can be made better," he said. "The numbers can indicate where your practice is, where it could be, and what is holding back the practice. It is diagnostics."
