Posted 06-11-15

One Number Says It All!
by Jason Siruchek

We recently had a meeting with a potential coaching client. He is a typical type A, super busy and impatient business owner/dentist. He's way too busy doing dental procedures to have the time set aside to pay attention to the business of dentistry. He focuses all of his attention on clinical procedures and technical issues, but wants his business to be more profitable. One of the questions that he asked us during our time was: "I don't have the time or the attention to focus on all of the numbers and reports that I've been told to track. I need one simple number to keep an eye on in order to let me know that my business is on track. Can you give me a benchmark number that solves my issue?" Our answer was yes, absolutely!

When we work one-on-one with our clients, some of our conversations revolve around expenses and overhead, P&L's and A/R, and what "numbers" they should be watching.

No matter which numbers we discuss, all of the numbers are important. Keeping an eye on any of the metrics of your business can only help, and almost every number that you look at has at least some value in helping grow or maintain your practice. Regardless of the different statistic or metric, the reason for tracking numbers is always the same. We measure statistics in order to control expenses, reduce costs, increase revenue or decrease waste all for one common goal; increasing profit.

However, there is one number, that above all others has the power to set an office free, and help it achieve the highest levels of success. This number can stimulate growth. This number should be used as a benchmark, and this number can absolve you of your dependence on fees for controlling profitability.

The one number that is most predictive of success or failure, of efficiency or waste is the Hourly Collection Rate (HCR). In order to calculate this number, follow the equations below:

Total Annual Collections/(Dr. Hours per Week ) X (Weeks Worked per Year)

For Example: An office that collects $750,000 annually with a doctor that works 30 hours per week, 50 weeks per year has a HCR of $500.

$750,000 / (30 x 50) = $500

This calculation does not require the differentiation between individual productivity, hygiene revenue, or even product sales. The total cumulative collections of the practice should be used in the calculation. If there is more than one doctor on staff, the combined hours worked should be used for the calculation.

This number has efficiency at its core. Efficiency can be defined in business as maximal profit at minimal cost, time and effort. HCR tracks this phenomenon. As you increase your offices ability to generate more revenue in the same amount of time through improved business strategies, increase speed, improved technology and reduced waste, your HCR will rise. When you factor fixed vs. variable expenses, and you assume minimal increase in fixed costs with increase hourly collections, relative overhead percentages drop. As you begin to provide more treatment with less "energy," your overhead decreases!

Moving faster is not necessarily the solution. The average practice in the US has an HCR of $450. The same practice has on average 4 operatories. Instead of the doctor moving faster and doing more treatment in one of the treatment room, we focus on clinical and business strategies that allow for the other rooms to increase their relative production to drive the HCR up. Empty rooms create Zero Dollar Hours (ZDH). We have discovered that ZDH have more of an impact on HCR than increasing or decreasing fees: Empty chairs drive the HCR down. Increased sales through the efficient capturing of opportunity allow for a reduction in ZDH. Even a small increase from zero can have a massive impact on HCR. Simply put, it's easier to grow your business by substituting open chair time with small inexpensive procedures than it is by selling complex, high fee treatment.

Finally, the HCR addresses a common issue in human behavior. As people, we are overwhelmed easily. Large numbers can be confusing, and create not only a distortion of purpose, but also a disconnection from the immediate task at hand. We often asked attendees at our seminars to describe, in detail the number and types of procedures that they would have to add to increase their practices by $175,000. Try to do it. Imagine that you had to create a excel spreadsheet with each individual procedure, the code and its cost. It would be extremely difficult, and before you had completed the task, you may have given up. Now do the same exercise for $100. Not too difficult. You can probably think of 20 ways to generate $100 in additional dentistry for your practice, and you can definitely be specific. Now imagine that you did this every hour over all of the hours that you worked in one year. The average office has 1,500 doctor hours. An increase of $100 for every one of these hours would result in a growth of $150,000 over 12 months; same growth, different perspective.

If you want to know how well your practice is relative to others calculate your HCR. If you want to set a benchmark from which to grow and set your goals, calculate your HCR. If you want to determine if you are efficient calculate your HCR. If you need help changing the way you run your business in order to improve your HCR, visit our website at www.milliondollarppo.com and request us to contact you.

Jason Siruchek is the co-founder and C.O.O. of Million Dollar PPO. He entered the world of dentistry in 1990 with a specific focus on practice management and technology on which he has lectured extensively. As a natural evolution in his personal and professional growth, Jason began the current phase of his career in practice management consulting in 2000. Over the course of his dental career, Jason has been instrumental in the success of hundreds of practices and lives. Jason has completed the Landmark Education Curriculum for Living, an extensive personal and professional development program and he is a graduate of The Consulting U, a Masters Training Program for dental management consultants. He is a certified consultant with Bent Ericksen Human Resource Compliance Division, as well as their scientifically proven Integrated Performance Management hiring and team building division. Jason is a member in good standing of the prestigious American Academy of Dental Management Consultants.