Entry #19
Your Dental Practice’s Production Is (Probably) Worthless
“Never Take Your Eyes of the Cash Flow, Because It’s the Life Blood of Business ” – Sir Richard Branson
Production is a meaningless number when it comes to most dental practices. As Matthew McConaughey’s notorious movie character says from The Wolf of Wall Street, “It’s a wazi, it’s a woozi. It’s…fairy dust. It doesn’t exist, it’s never landed, it is no matter, it’s not on the elemental chart. It’s not f****** real.” Production is a number that dentists love to talk about, but straight office production is not a number that is grounded in reality which holds any weight. It’s a made up number dentists throw out to other dentists to make it sound to their other dentist buddies like they make more money than they really do. Especially in a practice that takes insurances. Even if you are a cash only FFS, never-speak-a-word-to-insurance-company dentist, production and production goals are still a myth.
Let’s look at an example of a hypothetical dentist, Dr. Mulah. Dr. Mulah has a $100,000 production month.
-The doctor’s practice management software – Dentrix, Eaglesoft, Open Dental, etc – says that production by Mulah for the month was a solid $100k. Awesome!
-However, Dr. Mulah works with PPO insurances. What’s the big deal?
-Well, Dr. Mulah is going to have some major ‘write-offs’ or discounted prices via contract agreement which are extended to his patients. Say Dr. Mulah charges $1,400 for a crown. Well, Mulah has a lot of patients who have Cigna Dental insurance, and Cigna only permits a crown cost in this scenario of $700. Half the price. Which means that Mulah has an adjustment or write-off of $700. He gets paid $700, but the other $700 disappears into fairyland.
-Okay, so that means that even though Mulah’s production on that crown was $1,400 – he is going to get to have that $700 in his bank account from Cigna, right? Wrong. Because in our example, Cigna covers 50% of the crown, with a 50% patient portion. However, Dr. Mulah has a great office payment policy and his patients pay their $350 (half of $700, NOT half of $1,400) up front to Mulah. So, at the time of service, Mulah will have the $350 from the patient in his bank account. The other $350 we are waiting for the insurance to pay, which can take weeks to arrive in your bank account. For Dr. Mulah, Cigna took 35 days to pay the claim. Not too bad, lots of insurance take 30 to 60 days to pay. Some like Delta pay faster.
The example given above offers us a great chance to look at some key vocabulary:
Production, Adjusted Production, and Collections.
In our above example lets take a closer look at that crown’s contributions to the month’s finances:
Production (How much the dentist charged)= $1,400
Adjusted Production (How much the dentist can actually get paid)= $700
Collections (How much the dentist actually got paid): $350
Your production does not matter. Collections matters. In our example, Dr. Mulah produced $100,000 for the month, but how much did he collect?
Kaizen,
–DeAngelo S. Webster, DDS
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