Key Takeaways
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Misaligned fee structures erode dental practice profitability as overhead and team compensation rise. Annual fee reviews aligned with insurance participation and cost controls protect margins and long-term net income.
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Discounted new-patient promotions and weak collection protocols strain cash flow and revenue cycle management. Clear financial policies, patient financing and timely insurance follow-up strengthen collections and retention.
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Low case acceptance rates limit production and growth. Monitoring treatment plan presentation targeting 60% acceptance and 80% monthly production improves capacity planning and financial performance.
Dentistry is an art, a craft — a profession that allows the gifted to gain referrals and grow. But it’s also a business. Managing margins to optimize profits is an equally critical craft, particularly in this rising-cost environment.
Below are four crucial mistakes that we see over and again from even the most highly skilled dental professionals that negatively impact the bottom line. We also share our strategies to help you prevent them. The end in mind is to work smart: grow your practice and your profits to benefit as many patients as possible long into the future.
1. Misaligned Fee Structures
It’s inevitable: costs to run a dental practice typically rise each year in almost all overhead expense categories, including team compensation. It’s also certain that increases in overhead will negatively impact your available net income if you don’t make proportionate increases to your fees. If fees are not adequately increased, you will either have to work more hours or earn less profit — neither of which is sustainable over the long term.
Prevent This: Increase your fees annually to align with and offset your rising overhead and keep profits steady — even when participating with insurance companies. Some considerations:
- Ensure your entire team understands and agrees with the reasons behind the fee increases (including how they are calculated). This will help provide clear communication to patients.
- If you’ve delayed raising fees for many years, don’t “catch up” all in one year. Increasing fees every six-months, for example will help bring your fees in alignment faster. However, patients will experience fee increases during each of their two hygiene visits in that year. It is recommended to increase hygiene related fees annually.
- Although fee increases may not immediately improve reimbursements from insurance companies, it is possible, over the long term, that they may change their contracted rates.
- If you find the spread is too great between your fee for services and insurance reimbursements, you may need to discontinue participation.
2. Discounting Fees
Offering very low initial new-patient prophylaxis (prophy) and exam fees is a typical strategy for capturing new patients and increasing the opportunity for more case presentations and acceptances. But this strategy can backfire. Very often, patients who shop for the lowest price don’t typically accept next-step treatments beyond the new-patient promotion. Consider this: the 2024 Henry Schein One Industry Report revealed that only 57% of patients are retained over an 18-month period.
Prevent This: Consider the value of the health care you provide and remain committed to the fees you charge. Discounting fees can be perceived as diminishing the medical services you deliver.
- While offering initial discounts for new patients can sometimes lead to improved retention, make that decision on a case-by-case basis. If there is additional work needed past the initial exam, perhaps offering third party interest-free patient financing with monthly payments can help with acceptances.
3. Poor Collection Protocols
Cash is vital to the success of any business including dental practices. Collecting outstanding balances from patients or insurance companies is critical. Too often, invoice collection procedures are lax. For example, sending monthly statements incurs both time and expenses, with older invoices being more challenging to collect.
Prevent This: Have your team focus on more current receivables that are more efficient to collect:
- Request payment when services are provided.
- Offer patient financing options through third parties.
- Inform insurance patients of their financial responsibility in advance of their appointment.
- Promptly follow up with insurance companies for payment.
- Use a collection agency for older, outstanding invoices to reduce administrative burden on your staff
4. Leaving Dentistry in the Charts (Low Acceptance or Delivery Rates)
Diagnosing treatment of an oral healthcare issue provides no benefit to the patient (or your practice) unless the proposed treatment is planned, accepted and delivered. If 50% of a dentist’s production is the result of accepted treatment, a good benchmark is to have case acceptance rates of over 60% of the treatment plans you present (not including fillings or low-value treatments). Not meeting this measure could be a symptom of other characteristics in your practice that need to be addressed.
Prevent This: Typically, your current month’s accepted treatment plans become next month’s production. To optimize patient acceptances, keep your schedule at capacity.
- If your practice is already at capacity, it may be time to hire an associate, increase fees or drop participation with some insurance companies.
We Can Help
Our PKF O’Connor Davies Dental Practice Accounting and Consulting Team is available to assist with tax, practice management and transition services to improve your dental business. From helping you establish an optimal fee structure or making decisions on insurance-company participation, to tracking treatment plans and acceptance rates — we can help.
Contact Us
If you have any questions, please contact your PKF O’Connor Davies client service team or:
David J. Goodman, CPA
Partner
Dental Practice Leader
dgoodman@pkfod.com | 201.712.9800