What if you’re looking at a practice for sale, but you can’t see how much of the production comes from the doctor and how much comes from the hygiene? What if, for whatever reason, you can’t get detailed information about production before you have to make a decision on submitting an LOI?
Keep reading to see exactly how we at Dental Buyer Advocates estimate hygiene production without a detailed production report.
The rule of thumb in transitions is to have 25% of total production coming from the hygiene department in GP offices. 25%+ hygiene shows the practice has a consistent, loyal patient base and plenty of opportunities to find dental work for you to do.
If you think about it, after paying expenses, the income from a healthy hygiene department can often pay for the entire amount of the practice loan payment — a nice bonus!
When we provide our list of documents to request from sellers, we include a production by ADA procedure code (i.e. D0120, etc.) and production by provider (i.e. the owner, associate if applicable and hygiene).
More often than not, we are only given a Production by Procedure code report. So we can’t see who is doing the work. You’ll probably see the same thing when you shop for a practice. Below are the basic steps to consider when all you get is a Production by Procedure report:
- Get the Production by Procedure report.
- Use the General Guidelines below to mathematically count up hygiene production.
- Sit back and use some common sense, to see if the number looks right.
- Prophylaxis Treatment – All prophylaxis treatment, child and adult, and fluoride treatments are allocated as hygiene production.
- Periodontal Treatment – All scaling & root planing and periodontal maintenance procedures should be applied to hygiene as well.
- Sealants – About 85-90% of sealants should be applied to hygiene, as most practices have hygienists or assistants placing them.
- Bitewings (BWX) – Generally, we’d recommend 85-90% of bitewing production also be attributed to the hygienist(s). For example, if an office has $120,000 as bitewing (D0274) production, we’d attribute around $100,000-$110,000 to hygiene. That may be generous to the doctor but we’d rather be underestimating the hygiene department than overestimating, in order to avoid overpaying for a practice that is not as strong as anticipated.
- Panoramic X-rays – If the practice does a lot of implants, give less to the hygienist(s). If they have a generally low amount of full mouth series (FMX) being billed, then we advise allotting around 60% to hygiene, however, this depends on how many implants are being placed. Therefore, pano production is dependent on implant production and how the office performs and bills FMX. Do they do 4 BWX, 3 PAs and a Pano? Or do they do all 18 images?
- Individual Periapical (PA) Images – Generally, we’d recommend attributing a low amount to hygiene just because, as you know, doctors will take many PAs as part of crown placement and emergency procedures. This also depends on the same conditions regarding recall and new patient radiograph protocol as listed above. That being said, we recommend attributing around 30-40% to hygiene. Again, we’d rather be under than over. Additionally, because so much of BWX production is designated as hygiene production, we recommend that PA production be lower in the event that too much BWX production is attributed to hygiene.
- Retail Products – Some offices include retail products such as Sonicare or Oral B toothbrushes on production reports. Make sure to attach those to hygiene as well!
While 25% hygiene is a good rule of thumb, I consistently see practices where anywhere between 15-35% production is produced by someone other than the doctor. If you did the math and are getting numbers higher or lower than that range, double-check your assumptions.
Using the general guidelines above, when we get the actual Production by Provider report, we’re almost always within 5% of the actual production.
And now you know how to do it, too.
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Listen to this podcast to understand how to quantitatively analyze a practice for sale.