How to Value Production

How do you analyze production when buying a dental practice? It’s an important question, since YOU, the dentist, will be the main driver of production once you own that practice. You don’t want to get this one wrong.

When reviewing office production, look into three categories: ratio of collections to production, hygiene production, and procedure production.

1. Ratio of Production to Collections

This one is all about the office’s efficiency. In other words, how much of the work you do are you actually being paid for?

The benchmark for a healthy, effective office is around 95%. Meaning, the office should collect about 95% of what they produce. 

Any number lower than that needs an understandable explanation. Is it an issue with their insurance fees? Is the office staff poorly trained at collecting? Does the doctor just not care that much?

This may also be helpful if you’re concerned about staff costs. 

If you don’t remember, we talked about paying employees what they’re worth. If you have a well-paid office manager who is responsible for collecting payments and the ratio is sub-par, it’s fair to conclude that this employee is likely not worth the expense. 

2. Hygiene Production

The success of your practice is largely dependent on and predicted by the strength of your hygiene department. Why? Hygiene is the lifeblood of your office because they keep those patients coming through your doors.

Now what is a strong hygiene department? I strongly recommend looking for practices where hygiene is 25% (or higher) of production. Anything between 20-25% is considered “fair”. Anything less than 20% is a red flag.

Your patients establish an emotional attachment with your hygienists, whether your patients know it or not. How many times have you heard, “I hate getting my teeth cleaned but not if Jane is my hygienist”? 

Your hygienist will be the team member that makes them feel most remembered, leading to more recall appointments. A strong hygiene department means a loyal patient base, especially as a new owner.

Hygiene is also where much of your sales will take place. A struggling hygiene department means that the well may be starting to dry up in terms of available treatment. A strong hygiene department means plenty of available treatment for you to treat (and bill).

3. Production by Procedure

If you are looking at an office that either has low hygiene numbers or doesn’t supply you with a “production by provider” report, but you do have a “production by ADA procedure code” report, refer to this article to really assess how strong (or weak) the hygiene department is.

Finally, take a look at the top 10 procedures performed in the practice. Not procedure by category, like periodontics, restorative, etc. but actual, individual ADA procedure codes. 

Here at DBA, we do lump certain codes together, like composite restorations and scaling and root planing procedures, but we love to show our clients the ten highest producing procedures.

This breakdown, though seemingly simple, speaks a lot to your future in the practice and how well it aligns with your skillset. 

Are you a very bread and butter dentist? Well, if you see D6010 on that top 10 list, you’ll either need to find a way to keep that in house by taking some continuing education courses, find a different specialty you like to do to replace it, or walk away. 

If the practice you’re looking at doesn’t perfectly align with your current skill set, though, that may not be a problem. In fact, it may be a huge opportunity.

Maybe you’re a doctor that either currently does (or plans to do) sedation and implant placement. Finding a bread and butter practice that’s mostly hygiene, exams, fillings and crowns can open up a world of possibilities for you! 

Having the ability to add procedures are simple ways you can know that you can grow this practice instead of relying on cutting supply costs or having to fire an employee.

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