Overhead

[RDentist]

Hi, I am new to these forums and have a question about overhead.

Let's say there is a practice in MA. The total staff number is mid 30's. 2 managers, 9 doctors (some full so part), and the rest are front desk, billers etc. It is a Medacaid practice and grosses between 2.5 and 3 million dollars annually. The question is, what should/what can the overhead percentage be for this practice?

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[Daurang]

If it's a community health center, overhead is 100% or more. Lots of staffs sitting around doing nothing. Lots of no-show but walk-in not allowed and not wanted cause it's not their business and it's not their problem. Typical government job and typical government workers.

If it's private, I'm hoping 85%.
21 staffs * $40k salary/benefit/healthcare= $850k.
9 dentists * $140k salary/benefit= $1.25M.
$2.1M/$3M=70% personel overhead.
Add rent $15k monthly, lab, heat, a/c, electric, triplenet, etc and you may go into the negative.
Remember 1/3 or more of your medicaid patient will likely be noshow.

 

[DrJeff]

Hi, I am new to these forums and have a question about overhead.

Let's say there is a practice in MA. The total staff number is mid 30's. 2 managers, 9 doctors (some full so part), and the rest are front desk, billers etc. It is a Medacaid practice and grosses between 2.5 and 3 million dollars annually. The question is, what should/what can the overhead percentage be for this practice?

IMHO, given the numbers of total staff and the annual gross, reguardless of the full time/part time status of some of the docs and the medicaid practice status, that's seems like LOTS of staff for that level of production to be truly running an efficient office.

My guess is that if you had a practice consultant come in and look at how things are running, they'd suggest that you either cut back on your staff (while maintaining the same level of production) or work to add atleast another million (if not more) to the gross production to get things running more efficiently for a staff of that size.

If it's a full medicaid clinic and/or Federally Qualified Health Center, then my hunch is all the ridiculous rules and regulations that organizations of that type are required to follow is both a massive drain on the overhead and a hinderence to the efficiency, at which point then any logical person has to ask the question "is this really the best way to spend the federal/state dollars that provide the revenue for the office in a way that allows the most amount of care to be delivered from the limited pool of funding money that is available?"

 

[RDentist]

What would be stopping this practice from having overhead be 60% like in other practices. It is a private practice that accepts Medacaid; not a government facility. I have been doing some research and have been reading or seeing some doctors with private practices having overhead of 70% down to sometimes 50%. Right now, it is 92% so obviously it has a big problem with overhead, but I was curious as to what would stop this practice from cutting overhead to 60% range like in other practices?

 

[DrJeff]

What would be stopping this practice from having overhead be 60% like in other practices. It is a private practice that accepts Medacaid; not a government facility. I have been doing some research and have been reading or seeing some doctors with private practices having overhead of 70% down to sometimes 50%. Right now, it is 92% so obviously it has a big problem with overhead, but I was curious as to what would stop this practice from cutting overhead to 60% range like in other practices?

Plain and simple, staff.

My practice currently grosses just under 2 million a year, also a mix of medicaid and private insurance/paying practice (about a 20% medicaid, 80% private ratio), and we do that with a staff of "only" 2 full time dentists , 3 full time and 2 part time hygienists, 3 assistants, 2 front desk staff and an office manager(12 people total). Our overhead has varied in the 10 years that I've been in my practice between 52 and 62% - usually ending up in the 52-55% range. We have plenty of modern technology in the office, so it's not like we don't spend any money on upgrades as a way to keep our overhead artificially low.

It's just really about taking an honest look at how efficiently the office is running, and then when an area(s) is identified that we and my business partner feel could run more efficiently, taking steps to make it happen. My hunch is that the practice that you mention could generate those same production numbers with "only" a staff of 20. My other hunch is that the practice you mention has a few of the "senior docs" who are mainly retired but still show up and work a day or 2 a week and also keep their long time assistant employed to work just with them. That very often is the case, and as harsh as it sounds, they become a major overhead drain on the practice, and likely will be until they finally decide to fully retire

 

[RDentist]

Alright, so it is possible to get overhead there. The reason I ask this is because this practice is my father's and, well, as you can see from the numbers, he can produce well, but he is just not good at managing money and overhead. I am considering stepping in for a year to help fix this place up. He is starting another practice and says that in a couple of years it will have similar numbers, and I tell him that if that is the case, he could be making close to 2 million dollars of net by then. I don't know too much about dentistry, but I certainly know a thing or two about business. I will have to take a look at his staff, and certainly get rid of any of these senior docs that you talked about. Aside from staff, the rent is only about 5k a month and supplies and lab are pretty low too. Would there be any other big drains on overhead aside from staff? If not, then I just want to say thank you for the information, it helps in planning for lower overhead.

 

[DrJeff]

Alright, so it is possible to get overhead there. The reason I ask this is because this practice is my father's and, well, as you can see from the numbers, he can produce well, but he is just not good at managing money and overhead. I am considering stepping in for a year to help fix this place up. He is starting another practice and says that in a couple of years it will have similar numbers, and I tell him that if that is the case, he could be making close to 2 million dollars of net by then. I don't know too much about dentistry, but I certainly know a thing or two about business. I will have to take a look at his staff, and certainly get rid of any of these senior docs that you talked about. Aside from staff, the rent is only about 5k a month and supplies and lab are pretty low too. Would there be any other big drains on overhead aside from staff? If not, then I just want to say thank you for the information, it helps in planning for lower overhead.

Year in and year out, unless one is doing either a major office rennovation and/or upgrading a large amount of equipment, the biggest portion of one's overhead is going to be staff.

Also, instead of opening a second practice, my hunch is if that practice could run much more efficiently, that a much higher net could be realized out of that one office than if a second office was opened(and probably run with the same style as the 1st office). Kind of a 1/2 the total work for twice the pay type scenario

Best idea might be to get a dental/medical specific accountant in to look at the books and then also give a comparison about where your Dad's practice falls with respect to overhead and staff salaries in particular to the other practices that that accountant handles. I know that the accountant that handles my practices gives us such a report every year, so my business partner and I can see how our overhead compares to the other 100 or so offices that our accountant handles, and that gives us some good perspective as to how were operating

 

[RDentist]

Well, he has an accountant that basically scolds him every year on bad management of resources. So all the information is there, but my Dad fails to really see it because he simply isn't good with money. He has been doing this for 6 years with overhead in the 90's and has never really felt need for a change So, thanks again for your help, it's given me good points to think about for the near future.

 

[Daurang]

Plain and simple, staff.

It's just really about taking an honest look at how efficiently the office is running, and then when an area(s) is identified that we and my business partner feel could run more efficiently, taking steps to make it happen. My hunch is that the practice that you mention could generate those same production numbers with "only" a staff of 20. My other hunch is that the practice you mention has a few of the "senior docs" who are mainly retired but still show up and work a day or 2 a week and also keep their long time assistant employed to work just with them. That very often is the case, and as harsh as it sounds, they become a major overhead drain on the practice, and likely will be until they finally decide to fully retire

Honestly. OP need to lay off everyone, sell the building or sell the practice, and start over. Why deal with 30 employees and all the headaches only to net $250K a year? OP can start over with a one man practice and easily net that much with 30% overhead.

 

[RDentist]

Thats a pretty radical option though, is it not? I was thinking of laying off a good chunk of the staff since half of them are probably a waste of space anyway, but to completely do a wipe on the practice just sounds like too much of a risk. We could keep 2.5 to 3 mil gross and get overhead down to around 60% if we cut back on staff, and change some pay around.