Throughout your life, there are many “important” numbers that you will experience. In dental school, it was the “clinical procedure unit count” you needed in order to graduate. As a practicing dentist, it is your “active patient count” or the size of your “active patient base.” This critical number is the foundation of your business success. After all, in dentistry it’s the patients who provide us with the standard of living we are accustomed to. The old adage “more is better” can make all the difference in our long-term financial success. Yet over 90% of dentists do not know with any accuracy the number of active patients in their practice!
Defining the Active Patient Count
So what exactly is “active patient count?” The active patient count is defined as the number of different individuals seen in the practice during a prior specified time period, typically the prior 18 months. Not everyone uses this period of time with calculations ranging from 12 months to 24 months. The variation is often due to reporting limitations in the dental software or definitions used (e.g., for how long is a patient a new patient?). We prefer the 18-month time period and that the count include “any patient seen” for any reason as being included in the active count. This information can be used to determine, among other things, hygiene staffing needs. If the practice is well managed, most of the individuals seen, including “emergencies,” will be converted to regular patients and enter the recall system, making them regular patients.
Role in a Practice Purchase
The primary reason to purchase an existing practice is to acquire the active patient base. It is the most important asset purchased. What gives a patient base value is the “time” it takes to develop a base (7-15 years). An active patient base represents an instant and ongoing cash flow. In comparison, equipment is the least valuable asset of the practice, since it can be acquired quickly (e.g., 60-90 days) and depreciates in value. The dollar value assigned to the active patients is called “goodwill.” Whether it is called “goodwill” or the value of the patient files, knowing the active patient count allows you to calculate this value.
Role as a Practice Management Tool
Knowing the patient count is invaluable to the ongoing management and operation of the practice. The first area the active patient count comes into play is in calculating and monitoring of the practice production potential. By multiplying the average gross revenue per patient times the number of active patients, you can estimate the gross receipts. The active patient count allows analysis of required staffing needs, especially from a hygiene perspective. The average hygienist sees ten patients per eight-hour day, equaling, (with a six-month recall schedule), 250 recall patients for each weekly hygiene day. This is if a practice undergoes a normal attrition rate of about 17% (due to relocations, deaths, etc.). To grow, a practice must replace these patients with 20–25 new patients per month. If the number of available hygiene days is not continuously increased, the inability of patients to be seen in hygiene will seriously limit the growth of the practice and its future income.
The active patient count also determines whether a practice can support a full or part-time associate in addition to the owner. A new dentist considering joining a practice should inquire about the active patient count. A practice with a sole practitioner attempting to incorporate a full-time associate requires a patient count of at least 1,800 active patients. A lower count indicates the practice will have difficulty supporting two full-time doctors. In a well-run practice, 70%–80% of new patient referrals come from the existing active patient count. Without patient referrals, the practice will need to rely on external marketing, which is more expensive, time consuming, and less predictable.
Calculating the Active Patient Count
There are several ways to determine the active patient count. One way is to run a software scan, but few offices have the software and capability. A second method is to physically audit (count) the charts seen during a defined period. A third method is to estimate the active patient count by conducting a “partial chart audit” and then estimating the total number of charts based on the sample that was counted representing a percentage of the total. One might also estimate the active count based on the number of available hygiene appointments. The number of hygiene days in a week is multiplied by the number of patients seen per day times twenty-five weeks (one six-month recall cycle). Normally, more than one method is used to validate the results, and then the results are stated as a range.
Prediction for Success
No matter how the active patient count is calculated, it should be done when considering an opportunity. It is also a management tool with a number of uses and applications and is critical to the long-term success of a practice. Once the initial number is determined, it is relatively easy to monitor and track. For a newly acquired dental practice, the active patient value should increase from 10% to 20% per year during the first couple of years of ownership. These larger initial increases are typically due to increasing fees to proper levels (if behind market rates), increased marketing, and the increased enthusiasm that a new dentist owner often brings to the practice. After the first couple of years, this number must increase according to the annual dental inflation rate. The active patient count coupled with the annual gross receipts is something that takes seconds to calculate on an annual basis, but is critical to the success of any dental practice.
Thomas Snyder, DMD, MBA