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Hi all,
I was hoping you would be interested in reading my latest article, which addresses how to determine if the cost of a marketing program per new patient acquisition outweighs the net collection from each individual patient. Although this article specifically tackles evaluating a marketing program, it's central idea can be applied to fixed asset acquisition and even acquisitions. I sincerely hope you enjoy.
Preview: "...What would make this assessment a more accurate assessment of return, however, would be to make these numbers would be to consider net collection and operating margins as opposed to just gross production. You would have to import data of new patients by insurance carrier, and subtract write-offs for each plan. Ideally, as Howard Farran has emphasized, you want to find the COGS. To put that in more simple terms, you want to figure out how much on average your labor, materials, supplies, and other variables cost. This variable cost does not change dependent on how many new patients you get. Subtract the variable cost and insurance write-offs from production. This gives you the “operating margin,” or net collection, which is how much money is left to pay your fixed costs (your salary, lease or mortgage, investment in fixed assets, etc.). This number is far more important to increase than your gross collection. It is the logical explanation why a practice that produces 1 million yet expenses are $900,000, on paper, is potentially less valuable than a practice producing $700,000 yet netting $400,000.
Tangents of practice valuation aside, what is of ultimate importance is being able to compare the cost of new patient acquisition to the margin per new patient. ALERT! If you zoned out during of all those very boring accounting explanations, this is where you should pay attention. The primary financial goal of any practice is to maximize the margin per patient while minimizing acquisition cost per new patient. We can take a ratio of margin to acquisition cost, which should be 1 or above. I’m not sure if this is an standard metric when considering financial health of a practice, but finding your operating margin and cost of acquiring new patients (regardless of what time of marketing you’re doing) would certainly allow us to find a pulse..."
http://www.dentalaptitude.com/dentists/roi/
I was hoping you would be interested in reading my latest article, which addresses how to determine if the cost of a marketing program per new patient acquisition outweighs the net collection from each individual patient. Although this article specifically tackles evaluating a marketing program, it's central idea can be applied to fixed asset acquisition and even acquisitions. I sincerely hope you enjoy.
Preview: "...What would make this assessment a more accurate assessment of return, however, would be to make these numbers would be to consider net collection and operating margins as opposed to just gross production. You would have to import data of new patients by insurance carrier, and subtract write-offs for each plan. Ideally, as Howard Farran has emphasized, you want to find the COGS. To put that in more simple terms, you want to figure out how much on average your labor, materials, supplies, and other variables cost. This variable cost does not change dependent on how many new patients you get. Subtract the variable cost and insurance write-offs from production. This gives you the “operating margin,” or net collection, which is how much money is left to pay your fixed costs (your salary, lease or mortgage, investment in fixed assets, etc.). This number is far more important to increase than your gross collection. It is the logical explanation why a practice that produces 1 million yet expenses are $900,000, on paper, is potentially less valuable than a practice producing $700,000 yet netting $400,000.
Tangents of practice valuation aside, what is of ultimate importance is being able to compare the cost of new patient acquisition to the margin per new patient. ALERT! If you zoned out during of all those very boring accounting explanations, this is where you should pay attention. The primary financial goal of any practice is to maximize the margin per patient while minimizing acquisition cost per new patient. We can take a ratio of margin to acquisition cost, which should be 1 or above. I’m not sure if this is an standard metric when considering financial health of a practice, but finding your operating margin and cost of acquiring new patients (regardless of what time of marketing you’re doing) would certainly allow us to find a pulse..."
http://www.dentalaptitude.com/dentists/roi/
