4a. Key Performance Indicators (KPIs) | American Dental Association

Measuring Success

Guidelines for Practice Success | Managing Finances | Measuring Success

Key performance indicators (KPIs) are measureable values used by business owners to assess the business’ growth, profitability and other factors. The first step to establishing meaningful and achievable KPIs is to conduct an objective and comprehensive evaluation of the business. While this exercise can be an intimidating process, it may seem especially challenging for dentists, since few have had extensive business school training. Some dentists work their way through the process solo; others opt to engage a practice management consultant to guide them through the process.

While it’s possible to have a long list of KPIs, it may be best to start by tracking a limited number of factors and to reassess them at least quarterly.

Possible KPIs to track can include your accounts receivable; the number of new patients; insurance claim aging; production per provider; patient demographics; and the number of patients by referral source.

At the start, a good rule of thumb is to pull the last three months of data on the KPIs you choose. Many state-of-the-art practice management software systems include KPI tracking as a feature, so it’s possible that this can be a relatively easy undertaking. KPIs that relate to clinical production, appointments and overhead should be tracked more frequently than others, since they’re the core of the practice.

Ten of the most commonly tracked KPIs include:

  1. Production: What are the daily, weekly, monthly, and annual production figures? This information provides the big picture of how the practice is doing.
  2. Collections: What percentage of fees charged are actually paid? If a practice isn’t collecting 98% of billable/adjusted production, your policies and scripts may need to be adjusted.
  3. Profit: What is the practice’s total revenue after operating expenses are subtracted?
  4. Overhead: Is overhead 63% or less of total income? If not, examine expenses to see what can be reduced.
  5. New patients: How many new patients are coming in each month and each year? This number should increase 10% to 15% annually. 
  6. Fee-for-service vs. insurance production: What is the ratio? Can it be adjusted one way or another to the practice’s benefit?
  7. Case acceptance: How do patients respond to treatment recommendations? Are at least 75-80% of case presentations accepted? 
  8. Doctor production vs. hygiene production: Does the dentist generate at least 75% of production, with the hygiene department generating the remaining 25%? This breakdown represents healthy levels of activity in the hygiene department, treatment acceptance, recare system, pre-booking hygiene appointments, etc. Hygiene departments that generate less than 25% of adjusted, or billable, production usually lack a structured, systematic approach to recare, which makes it challenging to achieve at least 85% of patients being active in the recare system. Gross production includes all dentistry produced, regardless of the ability to collect fees. Some examples would be contracted plans that will not pay for certain procedures or that reimburse at fees that are lower than your usual, customary and reasonable fees. Other examples include "re-do's", charitable dentistry, dentistry on staff, etc. Adjusted, or billable production, is the amount that is considered collectable after any adjustments have been taken. 
  9. Percentage of hygiene patients scheduled: Are 90% of the practice’s recare patients scheduled for their next appointment at all times?
  10. Cancellation and no-show rates: Is the rate 5% or less? If not, the practice likely has unproductive gaps in the schedule.

It’s a good idea to conduct a fee analysis at least annually so you can make sure your fees are both current and appropriate for your expenses. That review should go beyond your own fees and include the costs charged by your lab as well as the costs of your equipment, dental supplies, plus employee benefits. You should use a variety of sources and products that are available to help you track the numbers in each category; many of them can be found in your practice management software. The results of this analysis may indicate that you need to raise your fees. It’s a good idea to also review which codes are used most frequently in your practice so you have an idea which services your patients need most often and to identify possible opportunities for expanding services. It may also indicate that you should consider renegotiating contracts with some of your vendors and suppliers.

Be sure daily production goals are at levels that will allow you to meet your long term financial goals.

Evaluate every decision in terms of how it contributes to your growth plan. For instance, if you’re thinking about bringing in an associate, make sure you know what the break-even production point is and what you need to collect from that person’s production. Decisions like this should be based on the needs of the practice and its patients, not on general, optional lifestyle choices such as wanting more free time. Having that extra free time will cost you in terms of scheduling, having another provider, instruments, and staff. The practice also has to have an adequate patient base and sufficient influx of new patients; not having all of this in place could actually end up costing you more than you think.

Again, the above, detailed information could be beneficial when you’re in the market to sell your practice.