The Economics of Dental Hygienists

Analyzing Your Hygiene Profit Potential
Editorial by Jim Du Molin

Last week I started talking about dentists and dental hygienists, and how you, the dentist, need to think like a capitalist. The first step in this capitalistic venture is preparing the operatory space for the hygienist – as I mentioned last week, it’s both an investment and a risk, and it’s one you need to consider fully.

Next you need to actually hire a hygienist. Let us assume that the dentist is working four days per week and that 25% of his or her time is spent performing treatments that a hygienist could perform. This means that there is at least one day of potential hygiene production per week.

Let us further assume that based on the dentist’s fee schedule, a hygienist would average $700 per day in production. Collections at 96% would reduce this to $672, from which we have to deduct variable costs (disposable supplies and materials used in treatment), salary, and employer taxes. Our estimated profit before indirect overhead costs is $292 per day.

Daily Gross Profit on Hygiene Production

Production $700
Collections (96%) $672
Minus variable costs (9%) – $63
Minus salary – $288
Minus employer taxes – $29
Profit before indirect costs $292

This is the first level of profit to be realized from hiring the hygienist – direct profit on the hygienist’s production. Adding just one day of hygiene per week provides $1,168 of passive income per month and $14,000 per year.

More importantly, the dentist is now free to use his or her time more productively. Previously, 25% of the dentist’s time (two hours per day) was used to perform hygiene treatments. Let’s say that he or she could bill $88 an hour for those treatments. Now, the dentist can use these two hours to perform more complex and more costly treatments – at, say, $313 per hour. That’s an increase of $225 per hour, or $450 per day.

Assuming that collections are 96%, and variable costs including lab and supplies are 24%, the marginal net profit on the additional production is 72%. Therefore, if daily production increases by $450, the extra net profit will be $324. Remember, that’s $324 everyday. In an average 16-day month, that comes to an additional $5,184 in profit per month.

Adding the dentist’s additional production to the hygienist’s production, the total additional profit is $6,352 ($1,168 + $5,184) per month.
However, there’s more to the story: capitalists have to take risks, and smart capitalists can make lots of money… but I’ll get to that next week!

Dental Management & Marketing: Fun – or No?

Dental management & marketing - responsibilities and enjoymentDentists are split over dental marketing and management — almost half hate those responsibilities, but just as many say they sometimes enjoy them.

“I hate the management, but like the marketing,” said one dentist.

In this survey, 43% said they sometimes enjoy dental management and dental practice marketing, 16% say it’s not the best and not the worst, and 41% absolutely hate it.

  • “I like patient education and motivation.” (Endodontist)
  • “I like the dental surveys and hearing what other dentists are thinking.” (New York dentist)
  • “I enjoy bringing out the best in the team and coming up with a marketing plan that works!” (California dental professional)
  • “I love the marketing; it is fun and profitable. Dental websites are essential, and I have many.” (Illinois sleep apnea & TMJ dentist)
  • Internal dental marketing, where my patients tell their friends about the appointment they had at our office, is what I prefer most.” (Wisconsin dentist)
  • “I don’t like that we have to advertise, but the general public has been so brainwashed to accept marketing that we are almost forced to do some form of marketing in order to stay competitive.” (Florida dentist)
  • “I wish I could have someone buy my practice and do the management! I have been told often that I am an excellent manager, but it is not my favorite part of practice ownership. I never seem to get a total break.” (Alabama dentist)

Read more: Enjoying Dental Marketing & Management Dentist Responsibilities

Dentists’ Greatest Fear – Raising Fees (video)

Dental feesMost dentists have been avoiding fee increases, this survey found, even though regular fee increases are a basic principle of effective dental management.

But in a recession, dentists fear they’ll alienate patients if they raise dental fees.

“Same fees, more dental marketing…” said one orthodontist.

Read more: Dentists and Dental Practices May Have To Raise Fees

Dental Associates vs. Hygienists: Who’s More Profitable?

Examine the Bottom Line When Considering a Hygienist and/or Associate
Editorial by Jim Du Molin

Have you ever wondered what your real profit is on your hygienists or dental associates? Have you ever wondered whether a hygienist can be more profitable to you than an associate? If you have an extra operatory available, would it be more profitable to hire a dental associate or another hygienist?

In last week’s column, I explained how you can earn a profit of $493 per day from a hygienist who produces $962. How much would an associate have to produce to yield the same profit? Here again, the Comparative Value Analysis is helpful.

Comparative Value of One Day’s Production

Provider: — Hygienists — Associate
Mary Tim Goal Equiv.
(Commission) (Salary) (Per op)
Production $700 $700 $962 $1,176
Collections (96%) 672 672 924 1,129
Less…variable costs (9%) – 63 – 63 – 87 – 106
…commission (41%) – 288 n/a – 482
…salary n/a – 288 – 313 n/a
…employer taxes (10%) – 29 – 29 – 31 – 48
Profit $292 $292 $493 $493

Let’s assume that you would pay the dental associate 41% of his or her production. (In reality, we normally recommend that the associate be paid a percentage of his collections. However, we will keep things simple here.)

Further assume that the associate would pay his or her own lab fees and assistant, and that you would not have to add any front desk staff to handle the associate’s patients and scheduling.

Your net profit rate on the associate would be as follows:

Net Profit Rate on Associate

Collections 96%
Less: variable costs – 9%
Less: commission – 41%
Less: payroll taxes – 10%
Profit 36%

The associate would have to produce $1,176 per operatory used to give you the same profit as a hygienist. If the dental associate used two operatories, he or she would have to produce $2,352 per day to be as profitable as hygiene would be in those same operatories.

In our experience, it is easier to bring hygiene production up to $960 per day than it is to find a dental associate capable of consistently producing $1,176 in each operatory, or $2,352 in two operatories. Also, the associate must have a sufficient flow of patients to make this production level possible.

When structuring both hygiene and associate compensation, we advise that you compare what the hygienist or associate is earning on the relationship, compared to what the senior dentist is earning. The relative compensation levels should reflect a fair distribution based on the parties’ investments of time, energy, and financial risk.

For help in increasing hygiene production, a key element to increasing doctor profitability, contact J.P. Consultants or Advance Hygiene Concepts.

Dental Management: The Value of Entrepreneurism

dental management entrepreneural opportunity Dentists are classic entrepreneurs — they seek to better themselves through education, and take economic risks (the cost of education, the cost of opening and managing a dental practice) in pursuit of a better life for themselves and their families.

According to American Enterprise Institute President Arthur Brooks, “Earned success gives people a sense of meaning about their lives.”

Moreover, by succeeding as entrepreneurs, Dentists keep alive the American Dream that others may likewise create a better life for themselves, if they too elect to take advantage of the opportunities that exist.

The recent marriage of Prince William to Catherine Middleton, child of two employees-turned-entrepreneurs, broke tradition in Great Britain and brought attention to the value of entrepreneurism.

“The Middletons symbolize the opportunity that exists in a free-market system for those who take advantage of it. It is worth noting that they founded (their business) during the Thatcher era, when the Conservative government focused on lifting barriers to entrepreneurs through lower taxation, less regulation , and privatization,” writes John Berlau, a director at the Competitive Enterprise Institute in Washington, D.C.

The idea of ordinary people building successful businesses — a concept often called the ‘American Dream’ — is now realized in certain British TV programs.

One study of thousands of British employees revealed that the workers’ perception of happiness actually rose as their demographic group’s average income increases relative to their own. It was the opportunity to advance that mattered.

When William and Kate said ‘I do,’ the royal family of Britain “officially wed the dreams and aspirations of millions of entrepreneurs in the UK, the U.S., and throughout the world” . . . and maybe some dentists too.

For more on this story see: The Entrepreneurs’ Princess

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