In dental school, the number that often has the biggest
impact on one’s future is the “clinical procedure unit count”. Called by different names at different
schools, the unit count is the number of clinical procedure “units” required
for graduation. While there will be
several other requirements necessary for graduation, completing the required
number of clinical units is the total focus for most dental students during the
last two years of dental school.
Sometimes these units are numbers of individual, different
types of procedures; other times they represent periods of time that one must
spend in the different disciplines of dentistry. Until these units are accomplished, however, the
new dentist cannot graduate from dental school and move on in his or her dental
As one enters into practice following dental school, he or
she will encounter another “most important number”. This number is the “active patient count” or
“active patient base”. What makes this
number so important is that it sets the parameters for the operation of the
business aspects of the clinical practice.
Knowledge of and about this number has equal importance to the dental
practice owner and the new dentist who is considering an associateship
opportunity. As important as it is, it
is estimated that less than five percent of all practicing general dentists
actually know their current “active patient count”.
Defining the Active
Before discussing why this number is important and how it is
used, it is important to explain what the term “active patient count” is and
how it is defined. The active patient
count is defined as “the number of ‘different individuals seen’ in the practice
during the prior ‘specified’ time period”.
Depending on the approach used by the consultant, this time period
should be 12, 18, or 24 months. Part of
this variation is due to the availability of information caused by limitations
of various dental software programs.
Many programs cannot scan for the number of different individuals seen
during the prior 18 months but can provide either 12- or 24-month reports.
Another reason for this variation surrounds the definition
of “different individuals seen” versus why
they were seen and/or for what type of procedure they were seen. Some consultants only want to use patients
who either were seen as a new patient with a complete new patient examination
or were seen for at least one recall exam during that period. Others will use any patient seen, including
those who have only come in on an emergency basis but have not actually
returned for routine, ongoing care as of the date of the scan.
It can also be useful, however, to define a “different
individual seen” as any patient seen for
any reason. This definition can be
useful because it aids one in determining, among other things, hygiene staffing
needs. While it is true that a few of
these patients will only be seen on an emergency basis, their numbers will not
significantly affect the overall projections.
And if the practice is well managed, most of these individuals will be
converted to regular patients, subsequently enter the recall system, and become
part of the active patient count.
Therefore, for the purposes of this discussion, the active
patient count is the number of different individuals seen for any procedure
during the prior 18 months. The critical
point here is not whether 12, 18, or 24 months are used, or whether the
patients were seen for a complete examination or were only seen for an
emergency. The critical point is that
the active patient count is calculated and the information gained is actually used.
Role in a Practice
The primary purpose of purchasing an existing practice is to
acquire the active patient base. It is
the most important asset purchased, and it is the asset that has the most value--whether
this is a total purchase or the acquisition of a partnership interest.
The value is not dependent on how the original owner
acquired this patient base. What gives this
patient base value is the time it has
taken to develop the patient base and what this patient base does.
The current patient base in any dental office has taken 7 to 15 years to
build. Even if the current patient base
was originally purchased by the current owner, the time factor was invested by
the prior, original developer of the practice.
Once built, the active patient base represents instant and
ongoing cash flow to the dental practice.
Conversely, the asset with the least value (typically only 10 to 20
percent of the overall practice value) is the equipment. While expensive, dental equipment can be
acquired in 60 to 90 days, whereas it can take years to build a patient base--hence
The dollar value assigned to the active patients is called
“goodwill”. While there are a variety of
items constituting the “goodwill” of the practice, none come close to the value
and importance of the active patient base.
This goodwill represents the value of the fact that the majority of this
active patient base will return year-after-year to this office to continue to
receive and pay for their dental care needs regardless of whether the original
owner is the practicing dentist.
The reason this happens is fairly easy to understand. Generally speaking, there is only one thing
more frightening to a patient than having to change dentists--having to change his
or her dentist and the location for
their future dental care. While the
current dentist may change, at least the patient knows the staff, where the
office is, where the parking is, where the elevator is, etc.
Whether it is called “goodwill”, or the value of the patient
files and records, or the value of the active patient count, knowing the active
patient count allows this value to be calculated. As a whole, the value of the goodwill of the
practice is generally considered to be one year’s adjusted net practice income. Dividing the adjusted net practice income by
the number of patients in the active patient count yields an individual patient
There are times when only the patient files (ie, the
goodwill associated with each patient record--remember that legally patients
own their records and they cannot be sold) are transferred to the new
owner. In this case, a per-patient
dollar amount must be calculated and the sale price for the goodwill becomes
that value times the number of active patients.
It is commonly understood that this active patient count has
value because of the likelihood that the patients will continue to receive care
and pay for services to the individual or entity that controls the patient’s
files. This active patient count (and
the actual size or number of patients involved) represents the single most
predictable ingredient and factor for the successful operation of the dental
practice. It is so important that many
lenders require a calculation of this number as a condition of making the
dental practice acquisition loan. If
this number is deemed to be too low by the lender, the lender will refuse to
make the loan.
Role as a Practice
Once the value has been determined and the active patient
base is acquired, this number continues to be 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. If, for example, the average active general
dental patient spent approximately $450 per year for dental services, and the
active base acquired was 1,000 patients, this means the gross receipts of the
average practice should be $450,000.
If the practice average patient value for the subject practice
is only $300, that same practice would only be grossing $300,000. Analyzing why the average patient value is
less than the national average could provide the information necessary to raise
that patient value and generate hundreds of thousands of dollars in additional
revenue over the next 10 years.
Conversely, looking at what practices are doing that have an “above
average” active patient value can result in ideas for even more gross and net
The active patient count also allows careful analysis of
required staffing needs, especially from a hygiene perspective. The average hygienist sees 10 patients per
eight hour day. This equals, in a
six-month recall schedule, 250 recall patients for each weekly hygiene
If a practice undergoes a normal attrition rate, the dentist
will experience approximately 17% erosion of his or her active patient base
each year as patients relocate, die, etc.
In a healthy, growing practice, the practice will replace these patients
with 20 to 25 new patients each month.
If the starting active patient count was 1,000 (the maximum number of
recall patients one hygienist can physically see), 170 patients are lost per
year because of attrition while 240 to 300 new patients are added to replace
them. This is a net gain of 70 to 130
patients per year, changing the active patient count from 1,000 to 1,070 – 1,130,
or approximately a net average growth of 10%.
(Continued from page 1 )
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 future income of the practice. It should be noted, the figures used above
were “available hygiene appointments” only.
They did not even calculate hygiene appointments used by the new
patient, or the fact that one patient requiring four quadrants of root-planing
and curettage coupled with a three month re-care schedule would take up an
additional eight appointments per year, i.e., displace three other
two-visit-per year re-care only patients.
The active patient count also determines at what level the
practice can support a full or part-time associate. As the new dentist considers any specific
associate opportunity, he or she should inquire about the active patient
count. A solo practice attempting to
incorporate a full-time associate requires a minimum active patient count of at
least 1,800 active patients. If fewer
than this number are available, the question must be asked relative to the
original practice owner’s intent to personally cut back on the number of
treatment days, or how will this practice support both clinicians.
In a well-run practice, 70 to 80 percent of new patient
referrals come from the existing active patient count. This makes the active patient count the most
important marketing tool in a dental practice.
If the new dentist is relying on the practice’s existing patient base as
the primary marketing tool, it is critical that this active patient count be
carefully reviewed to ascertain what the current count is and whether there are
sufficient active patients to provide sufficient new patients. If there are not enough active patients, the
only other potential source for new patients is an external marketing program,
which must be planned, budgeted for, and executed.
Careful ongoing monitoring of the active patient count is
required to track practice growth (or decline).
Once the initial active patient count is determined, adding the monthly
new patient count and subtracting the patients who have moved, failed to
respond to recall attempts and subsequently inactivated, or requested their
records transferred to another office, requires minimal time (literally minutes
to do). But tracking this number on a
monthly basis provides valuable insight into whether the practice is healthy
and growing, or experiencing the alternative, ie, slow and painful regression.
Active Patient Count
Given the definition the active patient count and the
importance of the active patient count, the remaining question is how to
determine the active patient count for a given practice. There are five ways to determine the active
patient count. First, if the practice software system can run the scan, it is
very easy to determine.
The second and equally accurate method of determining the
active patient count is to conduct a chart audit and actually count every
patient who has seen during the defined period.
This means each patient record must be reviewed, and each patient who
has visited the practice during the past 18 months is counted. While clearly the most accurate method, this
method also poses a number of problems.
Most clinicians are personally unwilling to invest the time
to do this, meaning he or she is ultimately paying the staff for several hours
to count accordingly. If this is a
practice the new dentist is interested in acquiring, because of HIPAA
regulations, the new dentist cannot look at the patient charts. This again
necessitates either the senior clinician doing this in the new dentist’s
presence, doing it him or herself, or having a staff member do it.
Because of the time and expense involved in actually counting
active patients, one or more of several alternative estimations are employed to
determine this number. The third method
of determining (actually estimating) the active patient count is a partial
chart audit. A block or continuous group
of 100 patient records are pulled, and each is reviewed to determine whether
the patient has been in during the defined time period. This yields a percentage based on the number
of positive answers. Next, the total
charts are estimated to determine the total chart or patient count. This number, in turn, is multiplied by the
percentage to yield the approximate “active” patient count.
The fourth method of estimating the active patient count
involves using the number of available hygiene appointments. The number of hygiene days in a week are
multiplied by the number of patients seen per day times 25 weeks (ie, one
six-month recall cycle). If the practice
has one hygienist working four days per week and a second working two days,
this is six hygiene days for the week.
Hygiene Days Per Week 6
Times Patients Seen Per Day x 10
Equals No. of Patients Per Week = 60
Times Twenty-five Weeks x 25
Equals Active Patient Count =1500
The final method involves multiplying the number of recall
exams for the prior 12-month period times 50 percent. To this figure is added
the number of new patients seen during that same 12-month period.
Normally, more than one of the methods are used and the
actual estimated active patient count is then stated as a range. This in turn is used to determine the average
of the different values obtained from the different calculated values.
No matter how the active patient count is calculated or
verified, it must be done when one is considering a practice opportunity.
Whether a new dentist or an established dentist, just wanting something to happen, ie, a successful associateship or the
acquisition of a dental practice with unlimited future potential, does not mean
it can happen. If the practice has an insufficient number of
active patients, either situation will be a major struggle at best or an
outright disaster at worst.
As a management tool, knowing the active patient count and
its various uses and applications is critical to the long-term success of
either opportunity. Once the initial
number is determined, it is relatively easy to monitor and track. It will tell the new practice owner when it
is time to add additional staff or a new additional hygiene treatment room. It
will tell the new dentist how their efforts compare with the rest of the dental
Knowing the active patient count will provide the means to
monitor how successful the practice’s case presentation and acceptance rate is
versus previous efforts. This is done
through the monitoring of annual individual patient values, ie, how much does
each active patient spend on an annual basis. Every clinician knows his or her
total prior year practice receipts.
Dividing this number by the active patient count yields the average
patient annual value.
For the newly acquired dental practice, the active patient
value should normally increase 10 to 20 percent per year during the first several
years of ownership. These larger initial
increases are typically due to increasing fees to proper levels coupled with
the increased energy and enthusiasm the new dentist owner will bring to the
practice. After that, this number must
at least be increasing by the annual dental inflation rate. The active patient count, coupled with the
annual gross receipts, is something that takes just seconds to calculate on an
annual basis, but is critical to the monitoring of any dental practice.