12 Critical KPIs for DSOs

September 19, 2022

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For DSOs with clear business targets and performance objectives, Key Performance Indicators (KPIs) are a vital performance measure that enable you to monitor your progression.Although you may have a sound growth strategy and execution plan, if you're not monitoring the results, you can quickly veer off course.Using the right KPIs that measure your most critical value drivers allows you to see where improvement is required and affords you the time to correct your course of action to meet your targets.Let's look at the 12 KPIs DSOs should use to monitor crucial areas such as production, patient activity, service levels, and costs and profits.

Evaluating Your Practice's Performance

The dental industry is quickly becoming increasingly more competitive. Prospering amid the competition and safeguarding your long-term viability requires you to outperform your competition in all areas, including providing top-notch dental care and excellent customer service, otherwise, you risk losing the very patients you worked so hard to gain.Although high patient volume may give the impression your practice is doing well, the truth lies in the details.KPIs ensure objectivity, providing a measurable value showing how effectively your practice achieves its key business objectives. Measuring KPIs allows you to see where you've improved and have seen growth while offering valuable insights into the specific areas that need attention.Here are twelve KPIs DSOs need to know — and utilize — to identify performance gaps and improve their processes for better results.

12 KPIs You Need to Know

Total Practice Production

We've listed it first for a reason. For obvious reasons, Total Practice Production is considered the most important KPI for dental practices. Production growth is directly co-related to long-term business performance. As your fixed costs such as rent and insurance remain, well, fixed, and do not change, the more you increase your production, the higher your rate of return.But you know the saying you can't improve what you don't measure. Therefore, tracking your production daily, weekly, monthly, quarterly, and, of course, annually is critical for DSOs, providing you the benchmarks you need to set and evaluate your production and collections KPI targets and determine your overall practice performance.An increase in production is a good sign that things are being done right, while a reduction in production rates or failure to meet targets may flag an underlying issue that needs to be addressed.

Total Collections

Although production rate is a vital indicator of your practice's overall performance, your ultimate goal is profits. Sadly, unless you manage to collect, production negatively impacts your profits, creating overhead by costing you in employee time, supplies, and missed opportunity — you can't make back the time lost on caring for patients whose bill remains due.Your total percentage of collections can make or break your profits, reducing your income and impeding your cash flow. If you compare your Total Practice Production to your Total Collections and find you're experiencing a large gap, then it's time to identify the underlying problem.Are you participating in an insurance plan with a high rate of write-offs? It may be time to reconsider your participation in those plans. Or, perhaps your team is under or newly staffed and is failing to verify dental insurance as it should be, or you have a backlog in accounts receivable that needs to be addressed.Either way, you want to keep your eye on- and maximize- your collections, getting as close to your net production rates as possible. But to give you something to gauge against, on average, we believe a good collections percentage should be between 91% to 98%.

Profit

Although providing top patient care is of the utmost importance to all dental practitioners, to remain viable, a practice must remain profitable. Therefore, every DSO and single office practitioner should have a KPI targeting practice profitability. The math is simple, just take your total collections minus your total overhead. The balance is your profits, which may be directed toward growth plans, improving your practice efficiencies with technology, or increasing employee or personal income.Regardless of how profits are spent, tracking how much you profit is important as it is also a good gauge of your performance in its three inputs — production, collections, and overhead. If you're unhappy with your results, take a look at those three key factors for opportunities for improvement.Before running ahead on plans to increase production, improve your collection rates, and reduce your overhead. First, we suggest you take a moment to ensure you understand exactly how each area impacts profits and determine what your likelihood of success is vs. the resources and time required. This will help you evaluate your risk and ensure you're focused on the initiatives that are most likely to have the fastest and biggest impact on your profits.For example, gaining new clients can be a costly, requiring expensive marketing and having no guarantee of success. Comparatively, if you manage to save on dental supplies, every dollar you save goes directly to your bottom line. When it comes to increasing profits, we've estimated that saving one dollar is equivalent to generating $2.94 in revenue. And unlike the new patients that may or may not make their way into your door, the control is in your hands, to buy, and save, when you're ready.

Overhead

Often referred to as the silent killer, high overhead can easily go unnoticed and quickly erode your profits. As the dental industry grows more competitive, and supply prices continue to escalate, controlling your overhead has become more critical than ever before.Waste comes in many forms, including inefficiencies, overspending, and lack of expense control. These areas offer great opportunities for competitive advantage but, when ignored, can do great harm. Establishing an overhead target allows you to monitor your performance in these critical areas that can otherwise silently kill your business.According to a study done by Dental Buyer Advocates, between 2010- 2020, depending on the size of the dental practice, the nationwide median overhead for practices ran between 63.4% and 64%.Although this is a good benchmark for your overall overhead costs and is an important KPI, it's difficult to decrease fixed overhead such as rent or payroll. By having a separate KPI for dental supplies, you can keep an eye on the costs you can (and should) control.Although ideally, a dental practice should spend 4% to 6% of its overhead on supplies, according to an Aldrich report, in reality, the average single dental practice spends 7.2% of collections on supplies, showing there's plenty of room to reduce costs and improve your profits.Luckily, from streamlining processes to managing inventory and buying more effectively, there are things you can do to cut unnecessary spending and make your dental office more cost-efficient.

Total Patients vs. Active Patients

Active Patients is a commonly used KPI, but it can be unintentionally misleading. Whether a patient is active or inactive, you should be actively working on (see what we did there?) getting them back into your office for a recall.Although you'll naturally lose some patients if they've moved out of town or due to extenuating circumstances such as job changes, patients often don't come back for hygiene appointments simply because your front office isn't following up or being persistent enough.Active patients also represent an opportunity for growth in the form of referrals. In a healthy practice, it is estimated that 70%–80% of new patient referrals come from existing active patients.By comparing your total patient count to your active patient count, you can see how many appointments and chances for referrals you're missing out on and identify issues. For instance, if you've noticed a large spike in new patients yet no increase in hygiene appointments, this should flag you have a problem somewhere in your process.Similarly, if your active patient count has steadily increased but your total patients remain stagnant then it may be time to review and improve upon your referral program.

Active Patients Currently Scheduled

Data from the Levin Group Data Center shows that although the percentage of active patients currently scheduled should be 98%, most practices are falling short, coming in under 85%.Many dentists and DSOs continue to be focused on attracting new patients while turning a blind eye to the number of patients leaving to find another dentist. In today's environment, any patient without a scheduled appointment should be considered a potentially lost patient that needs to be recovered.A healthy practice with growth potential should be able to show an increasingly active patient base. Rather than focusing on new patients for revenue growth, practice owners and DSOs should focus on delivering the best care experience they can provide, offering patients more choices and increasing the value derived from each patient.

Average Production Per Patient

You should see your average production per patient increasing annually. This important KPI shows a patient's financial worth to your practice. If it's not increasing, it's likely heading into a decline, providing you with an advanced warning to implement strategies such as introducing a new service or increasing whitening cases to improve performance.Due to the lack of care a patient has experienced that caused them to find a new dentist, new patients are often diagnosed with larger cases. Hence, with a separate KPI, average production per new patient helps to monitor performance in this area more accurately, allowing you to optimize its full potential.Although many practices see an increase in the production rates with new patients, it's still often not what it could be. The average production per new patient should be approximately two to three times higher than that of a standard patient. A new dentist will also see things with a fresh perspective and may be able to suggest treatments for the first time.

New Patients

There is no standard target for new patients. The number should be aggressive yet attainable. Dentists and DSOs need a thorough understanding of their production goals, historical performance, and capacity for growth and take these into account to calculate a new patient growth target.Due to the nature of their services, in some specialties, such as oral, endodontics, and orthodontics, most patients are new. In these cases, the target will likely be higher than 90% of all revenue.In general practice, a practice's production is produced by the dentist and the hygiene department and consists of hygiene patients, emergencies, and new patients. Each should be given its own KPI taking into account the overall annual production goal.

Patient Attrition

Remember, it costs more to acquire a new patient than it does to retain and upsell services to current ones. According to Cleardent, five times more.As dental practitioners continue to face significant challenges and an increasingly competitive landscape, it's easy to see why patient retention has become critical to a practice's success, much more so than acquiring new patients.Patient attrition (the number of patients you lose) should be calculated annually. Henry Schein reports that the average attrition rate in dentistry is 17 percent. This will help you gauge how you're doing. However, as they note, top-performing practices often have an attrition rate of just three percent.From marketing costs to the extra time you spend engaging and evaluating their cases, new patients can be expensive. Once you've established the patient relationship, remember to nurture it to make sure you retain them with careful treatment plan follow-ups, hygiene recalls, and all the niceties like holiday cards that remind them you're there.

Recall Appointments in Hygiene

Tracking new patients is a must. But you should also be interested in your hygiene recall appointments as it's a good indicator of overall practice growth.As their doctor, you want to make sure you're seeing your patients and that they're getting and staying healthy. Plus, as we've said, it's more cost-effective to keep existing patients than it is to gain new patients, so you want to ensure the bulk of your income is coming from your current patient base.Take a moment to review how many recall patients you see every week and if your hygiene department is growing in ratio to your new patients. For example, if you've had 1000 new patients and they had come in twice throughout the year for cleanings, that's 2000 more hygiene appointments you should have added. Did you? If not, it could mean you're losing patients.

Case Acceptance Rate

Your case acceptance rate is a clear indicator of how well you're performing examinations and communicating proposed treatments to patients, but it also shows you how much production you may be leaving on the table.But don't let the numbers fool you, there could be more opportunity for improvement in this area than what first appears.One of the most variable KPIs in the dental industry, Case Acceptance Rate, must be taken with a grain of salt. As it can be misleading, it's important to understand how it works.Generally speaking, the larger the case, the lower the level of case acceptance. Therefore, as most practices have a fairly low average production per patient, case acceptance is high.Due to how it's calculated, the acceptance rate KPI can offer a false sense of security. For example, If you've diagnosed a patient with needing four crowns and they accept only the one their insurance will cover, although you've missed out on three crowns, this would be counted as an accepted treatment.This skewed, incomplete view makes the acceptance rate look falsely high. Meanwhile, patients may not get the required treatments, and you may be losing out on production opportunities.

Cancellation Rate

Cancellations and no-shows should be rare in a doctor's schedule. However, if patients aren't making it to their treatments, it's time to look at why. It may be that your office failed to make financial arrangements prior to scheduling the appointment, and the patient had yet to truly be "sold" on the treatment and made the appointment with no little to no intention of following through.Monitoring this KPI will help you identify if you have a sales problem and need to review how you're communicating the importance of hygiene to your patients or if there is a quality problem and you need to improve on the level of service you're providing at each visit. Either way, if you're unhappy with your cancellation rate, it's a good time to audit and review your reminder and confirmation procedure to see if retraining or procedure improvements are necessary.When scheduling overdue inactive patients, keep in mind that their cancellation rate will be naturally higher, perhaps as high as 20- 25%.Keep in mind that if your hygiene department is growing and your daily production is good, a few missed appointments are nothing to stress over. But if you see a trend of increased cancellations, that should be something that triggers some action.

Staying On Top of Your Data: How Method Can Help

Leveraging procurement data analytics to monitor key performance indicators gives you the foundational measurements you need to ensure you are moving in the right direction, identifying areas for improvement, and creating a scaleable process and profitable practice.Contact us today for a personalized demo of our dental inventory management software, and take a look at the software you can leverage for a streamlined, strategic procurement process that saves you money.

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