a blog by Chris Barrow

The surgery that loses money - a conundrum

Here's a question for you.

Is it better to run a surgery at a loss or to mothball it?

An example:

Operating cost per Surgery per Day (OCPSPD) - £500

Average Daily Production of associate - £800

Average lab bill - 10%

Average material cost - 5%

Associate remuneration - 50% after lab.


Production - £800

Lab bill - £80

Net production - £720

Payment to associate - £360

Material cost - £40

Net daily loss to practice - £360 - £40 - £500 = £180.

If the associate works 5 days and 45 weeks that represents an annual loss to the business of £40,500.

Given that the majority of associates are grossing an average of £800 per day and that the OCPSPD quoted is also a benchmark - Houston we have a problem.

Even if we run the same numbers on £1,000 a day of average daily production, the numbers look like this:

Production - £1,000

Lab bill - £100

Net production - £900

Payment to associate £450

Material cost - £50

Net daily loss to practice - £450 - £50 - £500 = £100.

Annual loss - £22,500.

These calculations are a normal day at work for me.

The mathematically inclined amongst you will deduce that average daily production of £1,250 will generate break even - a profit of nothing.

Associates generating more than £1,250 a day of production are needles in the haystack.

Faced with this dilemma, what does the owner do?

Try to reduce lab bills - or material costs - or OCPSPD?

That's a BIG challenge with a small result.

Try to reduce the associate pay rate?

That depends on the age of the associate:

  • Under 35 - may be happy to work for 35% if it's a private practice and you offer clinical mentoring

  • Age 35 - 45 - may be happy to work for 40% if you offer plenty of marketing/TCO support and lots of new patients

  • Over 45 - forget it - Moses descended with 11 commandments and the 11th was 50% for associates

Hence my conundrum.

Is it better to carry on suffering these losses (because staff keep their jobs, patients get seen and the owner can focus on higher value work) or is it better to mothball the surgery?

Please discuss.

(p.s. - a skilled dental therapist will gross an average of £950 per day and work for 35% - just saying)

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