The Practice Support Team tracks trends in data collected from practices throughout the year.

In 2021, we learned that average office fees continue to be low, in the 59th percentile for their respective zip code, and that only 19% of the practices we analyzed this year have healthy fee ranges.

Inflation, as measured by the CPI (Consumer Price Index), increased by 5.4% for the 12 months ending June 30, 2021 — its biggest increase in 13 years. Economists estimate that prices will likely rise 4-5% for 2022 due to higher overhead costs. In light of this, McGill Advisory has recommended an annual fee increase of 5% for 2022. (If your fees have not been balanced, you’ll need to do this first.)

 

Why 5%?

In addition to increased costs for supplies, lab fees, and infection controls to ensure staff and patient safety, the dental sector continues to face a tight labor market with rising staff compensation packages, some 5-15% higher to attract new hires and retain existing staff. Practice owners will also need to continue to implement new technologies for a digital workflow to stay competitive and meet patient expectations. These higher costs necessitate an increase in fees.

 

Realize an Immediate and Substantial Impact

Let’s run through the math to fully understand the impact of moving your fees to a healthy percentile. Keep in mind, if you are not currently in the 80th percentile, your overhead will appear higher than the accepted healthy range. The higher your fees, the lower your percentage of overhead will be relative to your total collections. A change from the 60th to the 80th percentile may mean only a small difference to the patient. However, when you multiply the frequency of each code used in your practice, you’ll quickly see the potential impact even a small increase can have.

For example:

Code

Current Fee
(60th percentile)

80th Percentile Fee

Frequency

Difference

D0120

$56

 $63

1251

$8,757

D2392

 $265 $286 185

$3,885

D1110

$103

 $113 1030

$10,300

TOTAL

$22,942

What would happen if ALL your fees were optimized AND increased each year?
Now, take a look at the long-term impact of this small change*:

Year

Collections

1% Collections Increase

3% Collections Increase

5% Collections Increase

1

$500,000

 $505,000 $515,000 $525,000

5

$500,000

 $525,505 $579,637 $638,140

10

$500,000

$552,311

 $671,958

$814,447

15

$500,000

 $580,484 $778,984 $1,039,464

20

 $500,000 $610,095 $903,056 $1,326,649
25 $500,000

$641,216

 $1,046,889

$1,693,177
30

$500,000

$673,924

 $1,213,631

$2,160,971
Total $15,000,000 $17,566,370 $24,501,339

$34,880,395
Difference over practice lifetime (30 years)

$2,556,370

 $9,501,339

$19,880,395
*McGill Advisory, Nov. 2017

These incremental increases, along with the power of compounding, have a tremendous impact on your practice profitability – $9 million over 30 years, if you commit to an annual 3% increase.

Bust the Myth

You may think you can’t realize these profits due to your participation with managed care plans. Banish those thoughts with this positive perspective:

  • You have private pay patients in your practice (conservatively 20%).
  • You have out-of-network patients.
  • 64% of the population consists of dual-income families, leading to more dual-coverage opportunities (bls.gov).
  • Well-positioned fees fuel your negotiating power with managed care companies.
  • Annual increases will raise the fee profile of your area, increasing the chances of higher reimbursements in the future.
  • Healthy fees make your practice more attractive during transitions.

Plan to adjust your fees now. Burkhart’s Practice Support Team welcomes the opportunity to support your healthy business in 2022 and beyond. We are committed to your practice’s business success.

Your success is our success. Please reach out to us anytime.
Learn more, visit the Practice Support Team page, email us at PracticeSupportTeam@BurkhartDental.com, or call 1.800.665.5323.

Burkhart Dental Supply – Practice Support Team

Category: Practice Consulting

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