August 29, 2024

Profit margin is a measure of how much money your practice makes after paying all necessary operating expenses, expressed as percentage: Profit margin = [(Revenue – Expenses) / Revenue] x 100.

You turn a profit only when your revenue exceeds your expenses, i.e., when you make more than you spend. For example, if you make $100 in revenue and use $60 to pay expenses, you are left with $40 in profit. To find your profit margin, you divide the $40 in profits by your total revenue of $100 to get 0.4 or 40%. While the profit margin of a typical dental practice should be at least 40% of revenue (with 60% devoted to paying expenses), there’s always room for improvement. In order to raise your profit margin, you may have to make adjustments in your practice to increase revenue, and if possible, decrease expenses.

For a dental practice, revenue is equal to collections. If you increase collections, you increase revenue. Expenses include variable expenses that can change monthly on an as-needed basis, such as supplies and lab fees, as well as fixed expenses that don’t change from month to month, including rent and salaries. Increasing revenue and decreasing expenses are perhaps more easily said than done, but below are some ideas to help move things along.

Raise your fees. Don’t sell yourself short. Times are changing and demographics alongside them. If you’ve been charging the same fees for a while, now is a good time to reevaluate and make sure your rates are in line with today’s standards and those of your geographic area.

Negotiate with insurers for better reimbursement rates. You can and absolutely should renegotiate PPO insurance fees. It’s not a quick and easy process, but setting aside the time to educate yourself on the process and then take the necessary action to negotiate with insurance providers can have huge payoffs. Alternatively, you can hire a company that specializes in dealing with PPOs.

Negotiate with suppliers and labs for better rates. If your practice has multiple locations, you may potentially be able to obtain better rates based on higher volume.

Increase patient volume and reduce patient attrition. Creating personal relationships with your patients, implementing self-scheduling processes via your website, increasing marketing efforts, and focusing on the patient experience are all ways to add new patients and retain existing ones. For more on this, please read “How to Increase Patient Volume.”

Increase hours of operation. Dental practices are generally open during regular business hours, making it more difficult for patients with day jobs to make or keep appointments. Try staying open for one or two hours in the evenings or for a few hours on Saturdays and Sundays.

Integrate AI virtual assistants to streamline administrative tasks. AI can handle appointment scheduling, patient communication and billing processes to reduce administrative burdens and enhance overall practice efficiency.

Outsource billing collection. Dental billing companies can increase profitability by speeding up the payment process, handling claims appeals and follow-up, and accurately posting insurance payments to patient accounts. Outsourcing also facilitates your increased focus on patient care.

Questions or comments? Please contact us at (646) 213-9044 or Admin@AndrieuxLaw.com.