Dental Economics and the Academy of Dental CPAs are pleased to present the results of their 2005 survey for General dentists. We had about 1,250 useable responses to work with. Interestingly, about 1/3 used the internet to reply to the survey questions, but the remainder preferred the hand written questionnaire.

 

We manually reviewed the data, tossing out extreme outliers and typos we could not interpret. Needless to say, you have to be careful when looking at “averages”. (As one famous economist noted, “It does not mean that you can wade across a river just because the “average” depth is four feet!”) We continue to prefer the “percentile” approach because that minimizes the effect of unusually high figures. While a practice producing $5M per year would definitely pull up the “average” production for the respondents, that would not affect the 90th percentile point. So, the 50th percentile is the “median” and not the “average” (or “mean”). 50% of the responses are below the 50th percentile and 50% are above–regardless of how low the lowest figure is or how high the highest figure is.

 

Here are some observations about specific aspects of the survey results:

 

Staff Wages:

 

  • There are a limited number of responses in some specific categories, so you need to interpret these figures with caution.

 

  • As expected, certified chairside assistants are paid about 15% more than non-certified assistants.

 

  • Although it is a gross oversimplification, the typical owner-dentist seems to make about twice as much as the typical associate.

 

Fees Charged:

 

  • Note that production figures are show PER producer so you can compare yourself with group practices.

 

  • At all levels, hygiene production ranges from 21-24% of total production. From my own experience, older practices tend toward 30% hygiene as the dentist often slows down. (This is known as becoming a “prophy palace”, where hygiene is not necessarily high. Instead, restorative and operative begins to decline.) On a positive note, hygiene production also approaches or exceeds 30% in practices that are doing a lot of perio procedures. You need to determine which case applies to you.

 

  • 78% of respondents reported that their production increased since last year. The range of increases is shown under Pct. Production Increase. Similar figures are shown for those with a decrease.

 

Collections & Broken Appointments:

 

  • Surprisingly, town size does not seem to affect collection statistics and accounts receivable as much as I would have thought. For instance, the median collection percentage is 98% for all four geographic categories. Likewise the median practice has about one month’s production in accounts receivable, regardless of town size.

 

  • It is interesting to note that the aging of accounts receivable is slightly more favorable in small towns with 66% of receivables classified as Current.

 

  • About 75% of practices regularly use third party financing, regardless of town size. (Based on the positive results of using third party financing, as noted in the ADCPA study discussed in the November issue, this should not be surprising.) About the same percentage offer courtesy discounts if patients pay up front.

 

  • Talking with consultants and my own clients, I do not see a high percentage of practices actually charging for broken appointments. However, more than one half of the respondents report that they do charge, with the rate being slightly lower in smaller towns.

 

  • Broken appointments for dentists and hygienists both decline as the town size gets smaller. The reported median numbers of less than 8 per month is not consistent with anecdotal evidence, where I see 6-8 BAs per week!

 

Procedure Mix:

 

  • The low number of crown and bridge units done per month, along with the related percentage of total production, seem surprisingly low. However, they do not seem entirely inconsistent with conversations I have with the average bread and butter dentist, where 20 crowns per month is still a big number.

 

  • Even more surprising is the low number of veneers and inlays/onlays reported by the median practice, especially in this age of “cosmetic dentistry”. The “extreme makeovers” have apparently not made it to the typical practice, so you do not need to feel that you are out of the mainstream

 

  • The number of planning/scaling procedures for the median practice seems quite low too, given today’s emphasis on “soft tissue management” by many consultants and speakers.

 

Patients:

 

  • The number of active patients may seem lower than you expected, but I have always told dentists that 1,500-1,800 quality active patients per dentist is plenty for most fee for service practices. (Truth be known, many comprehensive practices do very well with fewer than 1,000 patients.) Remember, we are defining an active patient as someone, other than an outright emergency, who has been in for treatment in the last 18 months or so.

 

  • However, I am surprised to see the median number of new patients at about one half of what I would prefer to see in a fee for service practice. This figure would be fine for a truly comprehensive practice that likes to spend an hour and a half for each new patient evaluation.

 

  • The number of patient visits per day seems consistent with typical practices and does not vary much with town size.

 

Staffing:

 

  • Notice that the typical staff complement is 1.5 hygienists, 2 chairside assistants and 1-2 business staff. The vast majority of practices are still solo operations, and this does not vary much by location size

 

  • Only about 1/3 of the large city/town practices have associates, but that percentage increases as the town size decreases. Even so, the typical practice only has one associate, if they have one at all.

 

  • The vast majority of associates are treated as employees vs. independent contractors. It is a shame that so many practices - and their CPAs - have rolled over in the face of the IRS and taken the easy way out. There are many advantages to the host and to the associate if the associate can be an independent contractor. Talk with a dental CPA who is familiar with the exceptions and possible safe-harbor provisions in this area.

 

  • It is interesting to note that a majority of respondents appear not to pay their associates based on a commission. Smaller towns appear to pay based on commission than the larger towns. Personally I prefer to see associates incentivized with a commission-based compensation system, which is essentially how the owner is rewarded - and paid.

 

  • Of those who do pay a commission, the vast majority base it on collections instead of production. Most hosts feel that, “if they haven’t collected it, they aren’t going to pay it”. However, if collections are indeed 98%, then there does not seem to be much risk if they would pay the associates based on production. In fact, it may simplify your life – and be fairer to the associate – if you pay them on production. For one thing, the associate has very little control over the collection efforts at your front desk. Also, I have seen a number of cases where the associate gets shortchanged due to miscodings of collections at the front desk.

 

  • The fringe benefits paid for an associate vary widely, but at least ¾ of the offices pay for health insurance, once you get out of the Major City.

 

  • Over 80% of offices pay the hygienist a fixed daily or hourly rate. Fortunately an increasing number include some form of bonus in the compensation equation. I strongly suggest such a bonus component to keep them incentivized, just like associates. After all, they are both producers.

 

  • In the larger towns, fewer than 25% of the offices use hygiene assistants, but that jumps to over 40% in the small towns. Presumably that may be driven by the acute shortage of hygienists in small towns.

 

Overhead:

 

  • Overhead percentages for the major variable expenses appear consistent regardless of town size. Notice that median lab fees may be lower than some figures you have seen. But these figures appear consistent with the number of crown and bridge units being done by the typical practice.

 

  • The median practice is still able to charge for a crown 5-6 times the lab fee that they pay for that crown. Many “cosmetic” practices are facing a profit squeeze because they are paying $250+ for a unit, yet they are charging the patient less than $1,000. So their multiple is four times or less.

 

 

Fringe Benefits:

 

  • While it is exciting to see a high utilization of 401k plans, it is possibly distressing to see such a high use of SIMPLE or SEP plans. Such plans are inexpensive initially, but the SIMPLE plan limits how much you can contribute each year. While fine for a new practice, the lower limits are not sufficient to fund your retirement in the long run. While the SEP plan does allow you to put in about $40,000, that kind of plan often has very

 

high staff costs. You should consult with a retirement plan advisor to be sure you have the best plan for your practice. You should ask if a “cross tested” type of plan may be suitable for you.

 

  • The debate continues about the efficacy of staff bonus plans. I think that bonus plans that are designed strictly to effect a change in behavior are probably doomed – and are the kind of plans that have generated the most complaints about being ineffective. On the other hand, a bonus that is thought of as a “thank you” or as a way to share the practice’s success, is worthwhile to me. I can’t tell which motive is behind the respondents’ bonus plans, but I am pleased to see more than 2/3 of the offices have a plan.

 

  • I am pleased to see the most plans are based on either production, collections or both. While a plan based on net profit is conceptually sound, there is often too much room for manipulation or misunderstandings, so they are not as simple to implement fairly.

 

  • As expected, a very large percentage of offices pay for the health insurance for full-time employees. There is no easy solution to the rising cost of insurance, and respondents are paying $250-$300 per month for each covered employee.

 

  • The percentage of respondents paying for insurance for dependents is much lower, of course, but that figure does rise as the town gets smaller.

 

  • Vacation policy seems about the same regardless of town size, and three weeks is the most that the majority of practices offer.

 

  • I am encouraged that a majority of offices use the “well pay” approach to sick days. That means that an employee will be paid for, say, 5 extra days at the end of the year if they are not out sick. If they are out sick, then those days are deducted from the well pay days. So they are taking money out of their own pocket. On the other hand, it is well worth it for you to guarantee them extra pay if they are not out sick. It would cost you a lot more than that to replace them with temps. If you offer a certain number of sick days off with pay instead, then you are encouraging them to take time off rather than “waste” their sick days.

 

  • Comparing the Selected Fees for this year with those same procedures for 2004 shows an average increase of 5.8%. Again, this should be kept in perspective because we are not assured that the same offices responded this year. So we are not truly comparing apples to apples. Still, such an increase seems consistent with my own observations.

 

Thank you for your participation! We will strive to increase the number of respondents each year in order to make this the most reliable survey in the dental industry!