In Dental Billing

How do you know if you are running a successful dental practice? 

Happy patients and happy employees are a key factor, but are you actually making money? Many dentists struggle with the financial side of running a dental practice. It’s not that it’s just difficult to keep up with, it’s that most dentists don’t want to or know how to. Most dentists like to fix teeth, plain and simple.

With only 2% of dentists actually having a business degree, it’s no surprise that handling the financials of the dental office might not be their desire or forte. If you are reading this and it’s hitting home, don’t sweat it.

The purpose of this article is to educate you on the most important reports to run in your dental office. These reports are clear indicators on how your dental office is performing financially. By understanding and running these reports consistently, you’ll be able to notice financial trends in your dental practice, good or bad.

At Dental ClaimSupport we like to think of these reports as the pillars of your revenue cycle. We have educated hundreds of dental offices on the importance of these reports. Dental offices that have implemented a system for tracking these reports have seen drastic and immediate positive impacts to their bottom line. The reports that make up the revenue cycle are:

  1. Production report
  2. Write-offs report
  3. Collections report
  4. A/R report (insurance and patient)
  5. Daily Deposit report

What is a dental office revenue cycle chart?

As you can see in the flow chart, your revenue cycle begins with your production, and ends with what has not been collected, your Accounts receivable. We will break down each report, what it means and what you need to be looking for. By the end of this article, you should be able to run your own reports and see where you may be inefficient or hopefully, where you are killing it! 

A couple of important items to understand:

  • Production – Write-offs = Net Production
    • Net production is what you are TRULY owed.
  • Collections / Net Production = Collection Percentage
    • Collection percentage means what percentage of what you are truly owed have you collected. 
    • The national average is 91%. 

Where does your office fall?

The 5 Reports Necessary to Running Successful Dental Practice

  1. Dental Production Report

It all begins with production. You have to produce in order to collect. A production report can be run in any practice management software to analyze production by day, month, or year. Production refers to any procedures that have been performed on a patient and carry a dollar value. 

An easy example would be a crown performed for $1,000. For every crown performed, you produce $1,000. If all procedures performed in a month added up to $100,000, then your production for the month is $100,000.

Knowing your production month to month is important. If you consistently are producing $100,000 on average per month, then suddenly start producing only $70,000, you need to figure out why. 

  • Are patients dropping off your schedule? 
  • Has your production from major services such as crowns, implants, or bridges died down? 

If you aren’t running this report, you may not notice the downward trend. If you don’t notice the downward trend, you won’t even realize that your production has fallen $30k per month or $360k per year. That would be detrimental to your dental practice.

  1. Write-off Report and Net Production

Your write-off report is important as it indicates how much money is actually subtracted from your total production, so to speak. Write-off reports can be run in any software management system by day, month, or year. A “write-off” is essentially any amount credited to the patient for any number of reasons. Two common examples of write-offs include insurance write-offs and professional courtesies.

Insurance write-offs 

Many dentists participate with insurance companies. When you participate with an insurance company, you agree to accept that insurance company’s fee schedule. This means you can only charge a patient covered by that insurance a specific negotiated fee associated with each procedure. 

For example, let’s say you have a Metlife patient coming in for a cleaning, and you participate with Metlife. Your standard fee you would charge a cash patient or a patient with an out-of-network insurance is $100. However, you are in-network with Metlife, and their negotiated fee for a cleaning is $70. In this instance you can only charge that patient $70 and $30 would have to be written off (write-off)

$100 – $70 = $30 write-off

Therefore, $100 – $30 write-off = $70

In this case your true net production is $70, not $100.

Professional Courtesies 

These write-offs consist of anything you agree not to charge a patient for any particular reason. Maybe the patient had a bad experience. Maybe the patient is a family member or friend. Maybe the patient is a veteran and you give discounts to veterans. Regardless, whatever courtesy or discount you give will “take away” from your production.

An example would be charging a cash patient $100 for a cleaning, but giving a 10% discount because they are a veteran:

$100 x 10% discount = $10 discount/write-off

Therefore, $100 – $10 write-off = $90

In this case your true net production is $90 not $100

So in both these examples, it’s important to know what your true net production really is. Take the two examples from above and add them together. Do you have your number?

The thing is we have heard many doctors, even with those two example procedures, say that their production is $200. This is incorrect. The true (net) production is actually $160 not $200 because of the $30 and $10 write-offs. 

$200 – $40 (write-offs) = $160 net production

Sorry, more math… Since you have $40 in write-offs in this example, that means your write-offs total 20% of your full production.

$40 / $200 = 20% in write-offs

Track this number! If you typically have an average write-off percentage of 20%, and it starts to rise to 30% or 40%, you need to figure out why. Make sure your dental team isn’t writing off what you are truly owed. Then make sure your team is collecting on insurance claims and patient balances and not just writing off what they haven’t fought to get paid. 

  1. Collections Report and Collection Percentage

You need to know the revenue coming into your practice. Collections in a dental practice come from two entities: the insurance companies and your patients. Coordinating insurance and patients payments combined can be a very tough task. 

The collections report can be run by day, month, year, or any length of time you choose. You should be running your collection report daily for reconciliation purposes, and we’ll talk about that in the final section below. 

Now that you understand your net production and what you are truly owed, you can figure out if your team is collecting payments sufficiently. The best way to know if your team is hitting target numbers is to understand your collection percentage. 

Collections Percentage

We stated earlier that the national collection percentage for dental offices is around 91%. Think about that for a second. Does that number sound good to you? Here’s a clear cut example for you to mull over.

We know that your collection percentage is a simple equation:

Collections / Net Production = Collection Percentage

To achieve the average collection rate in the U.S. think of your office as producing $1 million in services. To hit the average your office numbers would be:

$910,000 (collections) / $1,000,000 (net production) = 91% (collection percentage)

This means that the average million dollar dental practice nationally, loses out on collecting $90,000/year or $7,500/month. This should not be the case, but it is. I’m sure you could think of plenty of ways you could use an extra $90,000 per year.

This occurs because there isn’t a clearly defined dental billing process in place, to follow and execute. Think about if this practice only collected $800,000 a year… That would be a collection percentage of 80%. Can you imagine not collecting on $200,000 owed to you that should be in your pocket?

Let’s get back to the 91% national average. Where is the other 9%? That should be the question you ask yourself after you find out your own collection percentage. Where is the other uncollected percentage, and how do I get that money in my pocket?

The other “9%” is wrapped up in your A/R reports. Let’s take a look.

4. Accounts Receivable Reports: Patient A/R and Insurance A/R

All insurance and patient amounts owed to you in your practice can be found on the accounts receivable reports. 

Most dental softwares have the ability to run this report as a whole, meaning all money owed to the dental practice by patients AND insurance companies. Or you can run the accounts receivable reports separately. You can run the patient A/R report or the insurance aging report.

Both reports are equally important. 

Let’s say you are owed the $90,000 from the above example. Where is this money? If you run your patient A/R report and are only owed $10,000 from patients, then naturally you are owed the other $80,000 from insurance companies.

What should this tell you?

It should tell you you need to work your insurance aging report. Working the insurance aging report, simply means researching all outstanding claims that have not paid or processed. 

If the numbers were flip-flopped, meaning patients owed your dental office $80,000 and outstanding insurance was only $10,000, then that means your dental team needs to work on getting patients to pay their balances.

5. Daily Deposit Report (Reconciliation)

Earlier in the article we said we would get back to this report. 

It’s in the name of this report how often it should be run, daily! Your daily deposit report consists of all different forms of payment made to your office on that work day. Although there are only 2 entities that pay your office, patients and insurance companies, payments can still come in many forms.

Patient payments can come via credits cards, patient checks, and cash. And insurance payments can come via virtual credit cards, insurance checks, and direct deposits (or electronic funds transfers, EFTs).

However you receive your funds, what ends up in your bank account needs to match your deposit report in your dental software, to the penny. That is the definition of reconciliation.

Not running this report or reconciling your payments daily is a recipe for errors. 

For example, if insurance checks are being deposited into your bank account yet no one is posting these payments in your dental software, your dental software will show you are still owed money when in actuality, you’ve already been paid. We see this all the time in offices that are struggling with their own dental billing processes. 

Running your deposit report can also help pinpoint fraud or detect possible improprieties. No doctors ever want to think they have a dishonest employee, but it happens. This report can catch things like $100 cash payment being applied to a patient, yet that $100 not showing up in your bank account. That is just one of many examples that can occur. Protect yourself.

A defined dental billing process leads to favorable reports

With hope, this article shed light on these important reports, and you begin utilizing them in your office moving forward. 

You now know the importance of data such as your collections percentage and total accounts receivable, but is there an immediate measure you can take that will impact these reports in a positive way?

The beauty is, there is! Having a streamlined dental billing process is one of the best ways to make sure you are collecting what you produce. High production, high collections, low A/R, and favorable collection percentages have a better chance of success when processes are followed.

Check out the ultimate guide to the dental billing process and see just what a streamlined process can do for your dental team and bottom line. Don’t miss out on a surefire way to help your practice.

Download your Ultimate Guide to the Dental Process HERE!

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