Mark Doherty DMD MPH

Financial Management II

Disclaimer

Evidence Based Decisions

Meaningful Use

Dental Team

Chair Side Technique and Customer Service

Disease Management

Marketing

School Based

Cariology and the effects of dental disease

New Sherriff in Town

QI in the Era of Accountability

Clinical Quality

• Some M and P!

• What the critical financial data and reports

are and when you should get them

• How to use that data to make informed

decisions

• Some tools and strategies to incorporate

your financial goals into your practice

• What do we seek to accomplish in our

dental program?

• What are our goals?

• What are the outcomes that we seek ?

Creation of high-quality, affordable, oral health programs that document the improvement of the oral health status of the patients we treat while being financially responsible.

• Affordable

• Quality Managed

• Documented Outcomes

• Financially Responsible

Actual

Desired (Finances)

What Finances Are

Financial

Goals

The Gap

Data

• Zero Variance?

• Sustainability?

• Viability?

• Profit?

• Clarity around the Vision

Zero Variance

• Create a Plan to achieve that “success”

• Establish Clarity around Goals, Roles and

Timelines

• Our Goals are_________

• My role is_________

• Your role is __________

• We need to get this done by_________

“Community health dental programs provide high-

quality clinical care to our nation’s most vulnerable

residents. However, without a balance between

mission focused-care and robust business

practices, community health dental programs may

jeopardize their own sustainability”

• You need good data to evaluate and measure dental’s performance

• Use this data to create a business plan for the dental department

• This business plan is a road map that shows the department how to achieve and maintain financial sustainability, maximize patient access and achieve meaningful and measurable quality outcomes

• Dental program performance evaluation should be part of a formal continuous quality improvement focus

• Dental program performance should also be regularly shared with staff to create a culture of accountability

What the dental practice needs to accomplish to be financially sustainable, maximize patient access and provide meaningful quality outcomes

• Numbers and types of patients to be seen

• Numbers, types and lengths of appointments

• Scope of service for the practice

• Staffing model

• Service delivery model

• Hours of operation

• Financial, productivity and quality goals to be met

• Optimal payer mix

• Evaluation plan

• Number of visits

• Gross charges

• Total expenses (direct and indirect)

• Net revenue (including all sources of revenue)

• Expense/visit

• Revenue/visit

• Transactions (procedures by ADA code)

• Transactions /visit

• Aging report

• Payer and patient mix • No-show rate

• Emergency rate

• Number of unduplicated patients

• Number of new patients

• Percentage of completed treatments

• Percentage of children needing sealants who received sealants

• Number of FTE providers (dentists and hygienists)

•Meaningful Data •Budget •Profit and Loss Statement •Variance Report •Reforecast

• How many of us have a budget?

• How many of us help create our budget ?

• How many of us use the budget?

• Estimate the number of visits based on capacity

• Define the payer mix

• Estimate the net revenue per payer type

• Determine the staffing pattern

• Estimate salary and fringe costs

• Estimate all direct expenses

• Identify all indirect expenses (administrative and/or agency allocations)

• Be as accurate and realistic as possible

• Plan for worst-case scenarios

• Goal is NO surprises down the road!!!

• Federally qualified community health center looking to add a new four-chair

dental program

• Clinic operates 230 days/year

• Hours of operation in Year 1 = M-F, 8-5; Year 2 = M-F 8-5, plus Sat. 9-3 and

one evening 5-8

• Year 1 Staffing: 1 FTE dentist/clinical director, 0.2 FTE staff dentists, 2 FTE

dental assistant, 1 FTE hygienist, 2 FTE reception/registration clerks

• Year 2 Staffing: 1 FTE dentist/clinical director, 0.4 FTE staff dentist, 2.5 FTE

dental assistants, 1.2 FTE hygienist, 2 FTE reception/registration clerks, 0.5

FTE Practice Manager

• Number of visits in Year 1 = 5,520; number of visits in Year 2 = 6,624

REVENUE Year 1 5520 visits Year 2 6624 visits

Self-Pay (20%) $66,240 $60/visit $ 79,500 $60/visit

Medicaid (65%) $538,200 $150/visit $ 645,900 $150/visit

Commercial Insurance (5%) $27,600 $100/visit $ 33,100 $100/visit

Other contracts (5%) $27,600 $100/visit $ 33,100 $100/visit

Free care patients (5%) $0 $0 $ - $0

$659,640 $ 791,600

Grant Revenue

Federal Expansion $250,000 $ -

Foundations $600,000 $ -

330 Allocation $0 $ 80,000

Total Revenue $1,509,640 $ 871,600

year 1 year 2

Build-Out

Construction $400,000 $ -

Clinical Equipment $363,006 $ -

Office equipment/supplies $41,700 $ -

Total build-out expenses $804,706

Direct Expenses

Personnel Related

Salaries $345,280 $ 448,240

Fringe Benefits (25%) $86,320 $ 112,060

Malpractice Insurance $0 $ -

Subtotal Personnel Costs $431,600 $ 560,300

.

Support costs year 1 year 2

Dental Supplies $55,200 $10/visit $ 66,240 $10/visit

Dental Lab Services $22,500

150 patients @

$150/patie

nt $ 26,250

175 patients

@

$150/pa

tient

Equipment Repair/Maintenance $9,500 $ 10,000

Housekeeping $7,500 $ 8,000

Conference/Travel $2,000 $ 3,000

Office Supplies $3,000 $ 4,000

Books & Subscriptions $1,000 $ 1,000

Fees & Dues $3,500 $ 4,000

Recruitment Expenses $3,000 $ 4,000

Computer--licenses fees, maintenance

agreements $12,000 $ 15,000

Insurance $10,000 $ 10,000

Printing $2,000 $ 3,000

Postage $2,000 $ 3,000

Total Support Costs $133,200 $ 157,490

Building-Related Costs Year 1 Year 2

Maintenance $6,000 $6,500

Rent/Mortgage $30,000 $30,000

Utilities $12,000 $15,000

Telephone/Internet $6,000 $6,500

Total Building Costs $54,000 $58,000

Total Direct Expenses $618,800 $775,790

Indirect Expenses

Total Support & Admin Allocation (12% of direct

expenses) $74,256 $93,095

Build-Out expenses $804,706 $ -

TOTAL EXPENSES $1,497,762 $868,885

TOTAL REVENUE $1,509,640 $871,600

Excess revenue over expenses $11,878 $2,715

Cost per visit $271 $131

Revenue per visit $273 $132

• Payer mix

• Revenue per visit

• Expenses in line with projected revenue (biggest cost is personnel—be

strategic!)

• Strategic planning should be a continuous quality improvement activity

within the dental program; environmental factors (internal and external)

impacting the dental program can and do change, and the business and

strategic plans have to change, as well

• Any business plan for sustainability needs to have a quality management

mechanism built in (can’t sacrifice mission for business—there has to be a

balance)

• Any strategic plan should include quality indicators (how will the dental

program measure quality?)

REVENUE: Jan-12 Feb-12 Mar-12

GROSS CHARGES 451,392 404,048 626,948

INSURANCE ADJUSTMENTS (170,175) (152,326) (236,359)

GRANT REVENUE 22,917 22,917 22,916

CAPITATION PAYMENTS 5,366 5,186 5,224

INTEREST/OTHER INCOME - - -

TOTAL REVENUE 309,500 279,825 418,729

EXPENSES:

SALARIES & BENEFITS 235,182 221,523 247,372

COMMISSIONS - - -

RENT, BUILDING EXPENSE, OFFICE EQUIPMENT13,542 13,542 13,542

PRINTING & ADVERTISING 250 250 250

POSTAGE & SUPPLIES 35,808 35,808 35,808

TELEPHONE 1,715 1,708 1,708

OPERATIONAL EXPENSE 1,542 1,542 1,542

PROFESSIONAL SERVICES & CONSULTING18,417 18,417 18,417

INITIATIVES - - -

COMPANY INSURANCE - - 2,900

TRAVEL 67 67 67

MISCELLANEOUS 993 993 3,193

DEPRECIATION 32,223 32,223 32,223

Total Expenses 339,738 326,071 357,021

NET INCOME (30,238) (46,247) 61,708

BUDGET

Jan-12 Feb-12 Mar-12

REVENUE: ACTUAL ACTUAL ACTUAL

GROSS CHARGES 496,121 455,188 481,936

INSURANCE ADJUSTMENTS (159,450) (191,456) (173,739)

GRANT REVENUE 22,917 22,917 22,916

CAPITATION PAYMENTS 4,330 4,524 4,783

INTEREST/OTHER REVENUE - - -

TOTAL REVENUE 363,918 291,173 335,896

EXPENSES:

SALARIES & BENEFITS 254,205 249,129 256,607

COMMISSIONS - - -

RENT, BUILDING EXPENSE, OFFICE EQUIPMENT13,593 14,025 15,989

PRINTING & ADVERTISING - 1,548 -

POSTAGE & SUPPLIES 43,958 26,000 27,871

TELEPHONE 1,111 533 29

OPERATIONAL EXPENSE (389) (150) 3,184

PROFESSIONAL SERVICES & CONSULTING17,566 23,301 16,203

INITIATIVES - - -

COMPANY INSURANCE 397 508 -

TRAVEL 10 - 131

MISCELLANEOUS 919 4,098 -

DEPRECIATION 30,507 32,890 30,722

Total Expenses 361,875 351,882 350,736

NET INCOME 2,043 (60,709) (14,840)

ACTUAL P&L STATEMENT

JUNE

Actual Budget Variance Actual Budget Variance

Revenues:

Gross Charges 410,093 487,190 (77,097) 2,767,732 2,965,725 (197,993)

Insurance adjustments (145,552) (183,671) 38,119 (1,001,406) (1,118,078) 116,672

Grant Revenue 22,917 22,917 - 137,500 137,500 -

Capitation payments 4,446 5,198 (752) 27,113 32,034 (4,921)

Interest/Other Income - - - -

Total Revenues 291,904 331,634 (39,730) - 1,930,939 2,017,181 (86,242)

Expenses:

SALARIES & BENEFITS 232,954 238,549 5,595 1,464,196 1,413,315 (50,881)

COMMISSIONS - - - - - -

RENT, BUILDING EXPENSE, OFFICE EQUIPMENT 15,636 13,542 (2,094) 88,037 81,250 (6,787)

PRINTING & ADVERTISING - 250 250 1,548 1,500 (48)

POSTAGE & SUPPLIES 14,378 35,808 21,431 191,953 214,850 22,897

TELEPHONE 2,574 1,708 (865) 6,620 10,257 3,637

OPERATIONAL EXPENSE 2,855 1,542 (1,313) 19,907 9,250 (10,657)

PROFESSIONAL SERVICES & CONSULTING 17,224 18,417 1,193 114,384 110,500 (3,884)

INITIATIVES - - - - - -

COMPANY INSURANCE - 2,900 2,900 7,776 5,800 (1,976)

TRAVEL - 67 67 262 400 138

MISCELLANEOUS 2,721 3,193 471 10,561 10,357 (205)

DEPRECIATION 30,722 32,223 1,500 186,287 193,336 7,049

Total Expenses 319,064 348,198 29,134 2,091,533 2,050,815 (40,718)

Change in Net Assets (27,160) (16,563) (10,597) (160,594) (33,634) (126,960)

Month - To - Date Year - To - Date

JUNE

VARIANCE REPORT

• Potential capacity is based on number of FTE providers,

hours of operation, chairs and standard productivity

benchmarks

• Benchmarks are different for dentists vs. hygienists

• Potential visit capacity is impacted by factors affecting

provider productivity

• Remember, What happens in the visit determines your

quality and your quantity. Mission and Margin

• No-shows and last-minute cancellations

• Scheduling issues [types of patients]

• Insufficient support staff (dental assistants)

• Lack of goals and accountability

• Individual provider issues (unmotivated, inexperienced,

health problems, life issues, etc.)

• Insufficient instruments, supplies

• Equipment issues (chairs,outdated, missing, broken)

• Lack of EDR/PMS (or not being used maximally)

• Standardization leads to predictability

# of FTE

Providers

X 1.7

Visits/FTE/Clinical

Hour

X # of

Clinical

Hours

Potential Visit

Capacity

Mon. 3 5 8 40

Tues. 4 6.8 8 54

Wed. 3 5 8 40

Thurs. 3 5 8 40

Fri. 3 5 4 20

# of FTE

Providers

X 2

Visits/FTE/Clinical

Hour

X # of

Clinical

Hours

Potential Visit

Capacity

Mon. 3 6 8 48

Tues. 4 8 8 64

Wed. 3 6 8 48

Thurs. 3 6 8 48

Fri. 3 6 4 24

• Goals

• Roles

• Timelines

• Responsibilities

• Production can be measured by gross charges,

revenue and number of visits

• If measured by gross charges you must know

what your collection rate is

• Each provider in the dental department should

have individual production goals that tie in with

the dental departments overall goals

• Each member of the staff should know what it

cost to see a patient. [visits/expenses]

• Use benchmarks (1.7 visits/hour for dentists, 1.25

visits/hour for hygienists, 1 visit/hour for externs and new

residents)

• Benchmark x number of daily clinical time = total number

of visits/day/provider (eg, 1.7 x 8 hours = 14 visits)

• Goal for procedures per visit: 2-5 (for basic dental

program serving mix adults and children)

• Revenue goals need to be based on overall costs of

running program

Productivity Benchmarks

• 1.7 encounters/FTE dentist/hour

• 13.6 encounters/8-hour day/FTE dentist

• 2,500-3,200 encounters/year/FTE dentist

• 1,300-1,600 encounters/year/FTE hygienist

• 8-10 encounters/8-hour day/FTE hygienist

• 3-9 procedures per visit (depending on age of patient)

• Transactions are procedures with ADA codes attached to

them

• Transaction reports reveal the scope of service for the

practice, as well as what is happening at the visit level

• Look at number and types of procedures that are non-

Medicaid covered

• Total number of procedures ÷ total number of visits =

procedures/visit (important measure of productivity and ability

to complete treatment plans in a timely manner)

• Break out procedures by type (diagnostic, preventive,

restorative, specialty, prosthodontics, oral surgery and

emergency)

• Calculate percentage of each type to reveal scope of service

Standard of Care

• Diagnostic 30%

• Preventive 30%

• Restorative 25%

• Endodontics

• Periodontics 2%

• Prosthetics 3%

• Oral Surgery 5%

• Emergency 5%

Poor Quality

• Diagnostic 50%

• Preventive 15%

• Restorative 11%

• Endodontics

• Periodontics 1%

• Prosthetics 1%

• Oral Surgery 8%

• Emergency 13%

• In order to develop goals and meet the budget you must

know what it costs the dental program to operate

• If direct and Indirect expenses =$950,000 and the dental

program is open 230 clinical days, 8 clinical hours per

day we can determine what we need to generate in

revenue

• Per Year: $950,000

• Per Month: $950,000 ÷ 12 months = $79,167

• Per Day: $950,000 ÷ 230 days= $4,130

• Per Hour: $950,000 ÷ 1,840 = $516

• Per Minute: $950,000 ÷ 110,400 =$8.61

• Determine the cost per visit (total expenses ÷ visits)

• Determine the revenue per visit (total net revenue ÷ visits)

• If revenue/visit is higher than cost/visit, pat yourself on the back and keep up the good work

• If you’re like the majority of community health dental programs, cost/visit is higher than revenue/visit

• The difference is what the dental practice needs to make up in each visit to reach sustainability

• If the goal is to generate $1,000,000 in revenue to

break even

• And If our collection rate historically has been

60% then $1,666,666 in gross charges would

need to be produced

• Dental Department Goals

– $1,666,666 in gross charges

– $1,000,000 in net revenue

– 60% collection rate

Based on 60% Collection Rate Net revenue would be $1,000,000

2 FTE providers (both general dentists); each FTE dentist needs to generate $325,000/year in net revenue ($541,667 per FTE in gross charges)

$325,000 ÷ 230 clinical days = $1,413 in net revenue per dentist per day to break even ($541,667 ÷ 230 days=$2,355 per FTE per day in gross charges)

2 FTE hygienists; each FTE hygienist needs to generate $175,000 ÷ 230 days= $761 in net revenue per day ($291,667 per FTE in gross)= $1,268 per FTE hygienist in gross charges)

Provider FTE Gross

Charges

Net

Revenue

(60%)

Annual

Days

Worked

Charges/Day Revenue/Day

Dr. D 1.0 $541,667 $325,000 230 $2,355 $1,413

Dr. G 1.0 $541,667 $325,000 230 $2,355 $1,413

Total

Dentist

2.0 $1,083,333 $650,000 460 $4,710 $2,826

RDH 1.O $291,667 $175,000 230 $1,268 $761

RDH 1.0 $291,667 $175,000 230 $1,268 $761

Total

RDH

2.0 $583,333 $350,000 460 $2,536 $1,522

TOTAL $1,666,666 $1,000,000

Example:

Total operating costs (Breakeven costs to cover from patient care )=

$1,000,000

Total expected visits for the year =7,820

Cost per visit = $1,000,000 ÷ 7,820 visits = $128 [this is also the

revenue per visit goal to break even]

• Per Month: $1,000,000 ÷ 12 months = $83,333

• Per Day: $1,000,000 ÷ 230 days= $4,348

• Per Hour: $1,000,000 ÷ 1,840 hours = $543

• Per Minute: $1,000,000 ÷ 110,400 minutes=$9

• Per Visit: $128

• Huge impact on financial sustainability

• Big challenge to manage

• Determine the average revenue per visit per

payer type

• Use that information to create a payer mix that

ensures financial sustainability while preserving

access for all patients

• Designate priority populations and work to get them in the practice

• Women and children first!

• Pregnant women and children are more likely to have Medicaid coverage

• More Medicaid means less uninsured, yes, but “no margin, no mission”

• Goal to preserve as much access for uninsured patients as possible while maintaining financial sustainability

• Being financially sustainable lays the groundwork for

expansion, which increases access for all payer types

Now (7,500 visits)

35% Medicaid (avg. revenue/visit =

$100)

55% Self-Pay/SFS (avg. revenue/visit

= $30)

10% Commercial (avg. revenue/visit =

$125)

2,625 visits x $100 = $262,500

4,125 visits x $30 = $123,750

750 visits x $120 = $90,000

Total revenue = $476,250

Total expenses = $500,000

Operating loss = ($23,750)

Better (7,500 visits)

50% Medicaid (avg. revenue/visit =

$100)

40% Self-Pay/SFS (avg. revenue/visit

= $30)

10% Commercial (avg. revenue/visit =

$125)

3,750 visits x 100 = $375,000

3,000 visits x $30 = $90,000

750 visits x $120 = $90,000

Total revenue = $555,000

Total expenses = $500,000

Operating surplus = $55,000

• Scheduling is an art

• Done properly, it supports maximum access, quality outcomes and financial sustainability

• Done improperly, all of these areas suffer

• First step: create a formal policy

• Second step: create a scheduling template with goals and designated access for priority populations

• Third step: make sure staff who schedule know how it needs to be done

• Final step: monitor how well things are working and provide regular feedback to schedulers

Designated Access

Accountability

• Trust

• Goals-Roles-Timelines

• Clarity

• Provide regular feedback to staff

• Listen and engage

• Reward success, coach setbacks

• Lead by example

• Have Fun

Partnering to Strengthen and Preserve

the Oral Health Safety Net

2400 Computer Drive, Westborough, MA 01581 Tel: 508-329-2280 Fax: 508-329-2285 www.dentaquestinstitute.org

A PROGRAM OF THE

Thanks for sharing your time , Mark