Dental practices may be worth less in the future. Why? Demographics.
The number of charts in your practice is a very important measurement of how busy you will be. However, charts do not dictate the value of your goodwill. Why is this so?
Practice Philosophies
What’s your clinical philosophy – conservative or progressive? The philosophy by which you choose to practice will determine the revenue generated in your practice. I’ve seen practices with the same number of charts with gross billings that are very different (Chart #1).
Practitioner “A” graduated 30 years ago and follows a very conservative philosophy. He charges $65 for a 30-minute recall and believes that one visit per year is adequate. He performs all recalls himself (no hygienist) and refers out most complicated procedures. This practice would be classified as one with great potential.
Practitioner “B” is very progressive and she utilizes the services of a full-time hygienist and a preventative dental assistant who subscribe to a modern soft-tissue management program. Each patient returns at least twice per year and a 45-minute recall costs $125 on average.
Chart #1: Number of Patients
| Practice A: Conservative Philosophy |
Practice B: Progressive Philosophy |
| 1,500 patients Average recall fee of $65 Recalls are 9 months Gross is $250,000 Net is $125,000 Older equipment Appraised: $145,000 |
1,500 patients Average recall fee of $125 Recalls are 3 – 6 months Gross is $450,000 Net is $210,000 Modern equipment Appraised: $245,000 |
Remember, both doctors have the same number of patients. Is their goodwill worth the same? Absolutely not! As Chart #1 indicates, the resulting billings and net earnings are dramatically different. No one can dictate the clinical philosophy you wish to follow. It’s a professional choice that you alone must make, but understand that the economic results of your choice will impact the value of your practice.
What is an Active Patient?
Another common misconception about patients is the definition of an active chart. How often must a patient return to be considered active? Every 12, 18 or 24 months? I suggest that before you can arrive at total active patients, you may wish to determine the total number of regular recall patients first (Chart #2).
By determining the total annual number of recalls performed by all producers and by calculating your average recall fee, you can easily calculate the following:
1. Number of patients on regular recall.
2. Annual hygiene production.
3. Number of actual recall examinations performed daily, weekly and monthly.
Most practices still attempt to follow the traditional recall cycle of once every six months. Insurance coverage, patient education, and your personal philosophy will all affect the frequency.
Chart #2: How Many on Recall?
A) 225 days worked X 8 patients/day (average) = 1,800 recalls performed per year
B) If the average frequency is twice per year than there are 900 patients on a regular recall program.
Once you know how many regular recall patients you have, you can determine the total number of active patients. Every practice has patients that return once every one or two years for treatment, yet they cannot be convinced to return for regular recalls. These are definitely active patients and they sometimes require extensive emergency, surgical or restorative work.
My conclusion, after reviewing over 500 appraisals, is that the following is typical:
| Number of Recalls Performed (Annually) | Number of Patients on Regular Recall (6-month average) | Total Active Patients in the Practice |
| 1,000 1,250 1,500 1,750 2,000 2,500 |
500 625 750 875 1,000 1,250 |
750 – 850 875 – 1,000 1,000 – 1,200 1,250 – 1,450 1,500 – 1,700 1,750 – 2,000 |
These are approximate figures only
How to Verify these Figures
1. Calculate total hygiene revenues per year: (total # of recalls x average recall fee). (If you track hygiene separately, this is a good cross-check.)
Note: Children and seniors are usually a lower fee.
2. Multiply total hygiene revenues by 3. (Most practitioners will generate twice as much revenue per patient as a hygienist.) This result should roughly be your total annual gross billings (+/- 10 per cent) – another cross-check.
3. Divide dentist revenue (total annual gross – hygiene revenue) by the total number of active patients (not recall patients). The result is your average annual dentist fees per patient. (Again, a good cross-check here is that the result should be twice the average recall fee.)
Conclusions
There are as many opinions about patient count and active patients as there are consultants in this industry. I would recommend that you do not follow any one formula, including mine, as they do not take into account your unique clinical philosophy.