The Profitable Employee Dentist

Dr Phillip Palmer, August 2010 

What makes the difference between having a dentist (ED) employed to work in your practice who is just occupying space, and one who is genuinely contributing to the practice profitability?

An employee dentist that is hired in a practice under the right conditions, with the right setup will almost always be profitable.

The level of profitability of an employee dentist (ED) can vary-from only just profitable, to extremely profitable.

We are involved with a number of practices working in all areas of Australia, with profitability (what’s left for the owner after paying the ED their commission) levels of employee dentists up to 30% of their production. And this can be on gross production levels of over $7-800,000!

So for a profit of well over $250,000 a year (per ED), it can become a very worthwhile exercise.

How do they do it? To look at this properly we need to examine the increased revenue and cost of having an ED in a practice separately.

Revenue: Given the right conditions (see these later) you can expect a good ED to produce up to and over $3,300 per day. Working full time at 200 days/year, they would produce $660,000. At 225 days (45 weeks, 5 days per week), it would be nearly $750,000.
Costs: Assuming there is already a chair and room fitted out (if not account for chair lease payments of approximately $15,000 pa) the extra costs involved include:

• Another DA (say $50,000 pa total). 
• Lab fees (say 10% of production= $66,000).
• Supplies (6%=$40,000).
• The ED wages (@ 40% after lab fees= $237,600).
• A few miscellaneous extras such as more phone costs, printing, etc (...say $20,000).
• Total costs would be around $413,600

So incoming (conservatively), we have $660,000
Outgoing we have $413,600.
The total profit for the practice would be $246,400.

Most practices don’t need to hire another front office person for an ED alone, but even if it was essential, there is more than enough profit to absorb the costs incurred.

With all that said, some practices cannot seem to make money having an ED working in their practice. What are they doing wrong and what does this level of profitability depend on?

1. Abundance: the practice has to have enough patients to keep the ED busy, without the Principal Dentist (PD) workload suffering.
2. Clinical ability: the ED has to have the clinical skills to do reasonable amounts of indirect dentistry (inlays, onlays, crowns, veneers, implants, etc).
3. Communication skills: the ED has to have the communication skills to get patients to accept more comprehensive dentistry (generally more indirect work)
4. Compatibility: you need to be able to work side by side with the dentist in the medium term. This will depend on: a) Recruiting the right person and knowing what to look for. b) Setting the ED up to have ground rules as to what is expected of him. Loose arrangements where everyone does what they feel like doing, rarely work out happily for anybody in the long run. c) Ongoing monitoring.
5. Fees: the example given earlier depends on the practice having average fees. The lower the fees are in a practice the harder an ED will need to work in order to attain the same level of profitability.
6. Systems: the practice needs to work like a well-oiled machine. Job descriptions need to be in place, regular training of auxiliary staff has to happen and everyone needs to be communicating well to each other and to the patients. The more the practice has this in place, the more the ED will be well supported by patients with regular recall visits, an appointment book without gaps and low staff turnover (among other things).
7. YOU: the only real issue is... do you have the leadership, management and entrepreneurship skills? They usually don’t teach these types of skills in the undergraduate course of dentistry. But just as we don’t have the skills to do dentistry until we learn them, the same situation exists with respect to leadership, management, and entrepreneurship.

It may well be worth your while to spend the time to learn them as aside from professional gain they will add enormously to your effectiveness with your family, your general staff and your community. From a financial standpoint, they can also be an extremely rewarding set of skills to learn.

If someone says you can’t make profit from an ED, then they just haven’t done the figures or analysed it properly.