Dr Michael Sernik, March 2003 - Lies, lies and statistics. It is possible to construct almost any argument based on statistics. The ABS conducted its 1st survey of the dental services industry and the figures showed General Dental Services as having an average operating profit margin of 25.2%. So if you are paying an Assistant Dentist anything more than 25.2% it might appear that you are losing money. Using the above logic, many Dentists have concluded it is not possible to employ Assistant Dentists profitably. Yet there are thousands of Assistants employed and it is difficult to believe they are all costing the principal money.
The numbers don’t lie, but which numbers do we look at?
The argument above stems from the following logic: ‘If my operating profit margin is 25% (expenses of 75%) then paying 35% of the gross is costing me 10%!!
But consider this. If you now hire an Assistant Dentist, and he/she earns an extra dollar, what additional expense did you incur to get that dollar? The point being: your basic costs are already accounted for by your own production. Once your fixed running costs have been covered, there is no logic in including those costs for the additional income provided by the Assistant.
So if you consider the fees collected from the Assistants Production and now subtract only the additional costs incurred for having an assistant, you would then have a fairer picture.
Ask yourself the following question: “If I didn’t have an assistant dentist would I still have this expense?” If the answer is yes, then don’t include that figure in their expenses.
If you only have 1 receptionist, would you fire her/him if the assistant dentist left? Chances are the answer is no. If that is the case, then there is no logic in including that cost when calculating the cost of having an assistant. The same logic could be applied to your facility rental costs. The same question should be asked. Without the assistant, would you move to smaller premises? However, if you are about to add purpose-built rooms specifically for assistants, then those additional costs should be included.
Example 1
Principal Figures (without assistant dentist)
| Gross |
Principal 400k gross | 100% |
| Supplies |
$32k | 8% |
| Lab |
$40k | 10% |
| Fixed Expenses |
$208k | 52% |
| Profit |
$120k | 30% |
Additional costs/yr related to having an assistant dentist (grossing say $200k)
| Assistant Gross | +$200k | 100% |
| Supplies 8% | -$16k | 8% |
| Lab off top 10% | -$20k | 10% |
| Fixed Exp (Extra Staff) | -$32k | 16% |
| Net Before Assistants Commission +$132k | +$312k | 66% |
Total Figures With Assistant Dentist:
(additional $200k gross by assistant dentist is included)
| Practice Gross | With assistant 600k gross | 100% |
| Supplies (with assistant) | $48k | 8% |
| Lab (with assistant) | $60k | 10% |
| Fixed Exp (With extra staff) | $240k | 40% |
| Profit (before paying assistant) | $252k | 42% |
If we pay 35% of $200k (gross) less 20k (lab)=$63k to Assistant.
You are left with 132k - 63k = 69k net profit from the assistant’s work.
In this example, if you paid $63k to the Assistant, the practice would net 252k - 63k = $189k
Your overhead % would be 600k -189k = 411k/600k = 68.5% i.e. it started as 70% without the assistant and became 68.5% with the assistant (It would have been dangerous to have it rise).
Example 2
In this example, everything is the same, except: -
(a) This Assistant has 2 staff ($32k each) specifically for him/her
(b) You created treatment rooms specifically for the Assistant with the latest computers and digital x-rays at an annual cost of $30k + $20k ($50k)
Principal Figures (without assistant dentist) Same as Example 1
| Gross |
Principal 400k gross | 100% |
| Supplies |
$32k | 8% |
| Lab |
$40k | 10% |
| Fixed Exp |
$208k | 52% |
| Profit |
$120k | 30% |
Additional costs/yr related to having Assistant Dentist
| Assistant Gross | +$200k | 100% |
| Supplies 8% | -$16k | 8% |
| Lab off top 10% | -$20k | 10% |
| Fixed Exp (2 Extra Staff) | -$64k | 32% |
| Annual cost to cover fit-out + Lease for assistant’s surgery |
-$30k | |
| Lease for assistants equipment | -$20k | |
| Net Before Assistants Commission | $50k |
Practice Figures With Assistant Dentist:
(additional $200k gross by assistant dentist is included)
| Practice Gross | With assistant 600k gross | 100% |
| Supplies (with assistant) | $48k | 8% |
| Lab (with assistant) | $60k | 10% |
| Fixed Exp (With extra staff) | $322k | 53.66% |
| Profit (before paying assistant) | $170k | 28.33% |
In example 2, if we pay 35% of $200k (gross) less 20k (lab) = $63k to Assistant.
You are left with 50k - 63k = -13k net loss from the assistant’s work!
In this example, if you paid $63k to the Assistant, the practice would net 140k - 63k = $77k. Since your net was $120K before you had an Assistant your total loss from the exercise is $120k less $77k a difference of $43,000!!
Your overhead % would be 600k-77k = 523k/600k = 87% i.e. it started as 70% without the assistant and became 87% with the assistant. The first 87 cents in every dollar collected goes to expenses. If anything goes wrong you would be in trouble.
The main message:
Paying assistant dentists a simple % of gross (such as the standard (35-45%) or a fixed fee is arbitrary and possibly very dangerous.
The Solution:
Each practice is unique. Know your numbers! Calculate: -
1. Their production,
2. Your additional expenses in having them there and
3. Your overhead %.
Creating scenarios based on your unique circumstances will protect the interests of both parties.
A Final Word.
If you have the sort of relationship where you don’t mind sharing all your figures with your assistant, then the safest solution is to agree to share the Assistants Net (after deducting the additional costs related to employing the Assistant.) The advantage to the assistant is that if they want a fancy toy like digital x-ray equipment, now they could get it because they would be contributing to the expense via this formula and you could offer them a higher percentage for higher production with the certainty that you are on firm ground.
[Published in Australasian Dental Practice, March/ April 2003]