Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. – Warren Buffett
Black Holes in the Schedule: A Major Production Killer – Part 1
Although this newsletter discusses examples from information gathered and evaluated for a dental practice, the concepts can be applied to any other healthcare practice scenario (e.g., naturopathic physician, medical physician, chiropractic physician, physical therapy specialist, etc.).
Two years ago, one of our doctor clients asked me a question: How much money do I lose every month because of the holes in my treatment schedule? What a great question. Since our coaching and practice management services are based on a business model called Operational Management which, simply put, is the monitoring, measuring, analyzing, and adjusting of the operations of a practice in order to best manage to the patients’ expectations and the owner/doctor’s goals, this question was vital to us and the owner for understanding production, which relates to the income (revenue), which then relates to paying the bills and having enough left over for the owner (profitability). And, since we pride ourselves in our abilities to measure all forms of production, revenue, and expenses in the office, we realized that we were not evaluating the effects of lost production due to holes in the schedule. Because of this question, we started looking at what caused these holes and what the impact might be on production.
SURPRISE! We never anticipated the magnitude of the impact of these holes on production; it turned out to be huge. We did a survey of our clients; the findings may be of significant value to you. We believe that if you understand why the holes are there, and that, in most cases, these holes contribute to a MAJOR loss of production and, therefore, a loss in subsequent revenue, you need be able to figure out a way of reducing this negative impact on your practice. In addition, most doctors pay their employees on an hourly basis; therefore, if you are paying your employees, especially those who are at a higher pay scale (i.e., the ancillary producers, e.g., associate doctors and hygienists), the goal is to have them producing the entire time for which you are paying them, not sitting around doing nothing or doing other duties that are not as productive – right?
How Do You Get Holes in Your Schedule?
Holes in the treatment schedules originate from one of three sources:
- Broken Appointments – These are appointments for which patients simply do not show up. They are usually impossible to fill since these holes in the schedule happen when the appointment is due. Example: Your scheduler calls a patient who was confirmed but did not show for the appointment. “Hi, Mr. Jones. You missed your appointment with Dr. Smith today.” Mr. Jones responded: “Oh, sorry. Something came up at work. Can you reschedule my appointment?“
- Last Minute Cancellations – These holes result from patients who call the office close enough to their appointments such that the staff is unable to fill the appointment on such short notice. Example: Mrs. White calls your office 15 minutes prior to her appointment and says: “I’m sorry, but I just realized I have another commitment. Can you find me another appointment?“
- Time Slots That Were Never Filled – These are holes that were never filled. These holes can occur because certain times of the day or certain days of the week are unpopular to fill, because of errors that schedulers make with or without purposely doing so, or because there are not enough patients to fill the holes.
Because our clients became very interested in the holes in their schedules and because we saw a need to monitor and analyze this, we have been gathering, monitoring and measuring information on holes that have developed in the schedules of the doctors we coach in different locations in the United States since January 2012.
First, we looked at the sources of production. For example, in a dental practice, production typically comes from the following provider sources (producers): (1) the owner dentists, (2) dentist associates (hired non-owner dentists), and hygienists. Each producer’s production was measured over a period of at least one year and updated on a monthly basis. Values were arrived at by following the number of days each producer worked each month, the number of hours each producer worked in those days worked per month; the results equaled an hourly production average for each producer. For example, if Dr. Smith worked 120 hours (assume 15 8-hour days) in the month monitored, and if he produced $80,000 in that month, his average hourly production would be $667/hour or $5,336/day.
- Hours worked = 120
- 120 / 8-hour days = 15 days
- Monthly Production = $80,000
- Then, $80,000 / 120 hours = $667/hr or $80,000 / 15 days = $5,336/day
Once these values were determined, we assigned an office administrator the task of monitoring the monthly holes in the schedule for each producer in the three categories indicated above, i.e., (1) broken appointments, (2) last minute cancellations, and (3) time slots never filled. We then evaluated the dollars of lost production for each producer, and then totaled the lost production for all producers in that practice on a monthly basis. In the following example, note that the annual lost production due to holes in the schedule was for only the owner/doctor, but these calculations can be carried our for each provider.
By gathering information as noted above, the following example shows that the annual lost production due to holes in the schedule was $70,300 for Dr. Smith:
From this research, we were able to deduce the following overall statistics:
- Of the practices we monitored, the average annual production lost in 2013 ranged from $64,589 in a 1 doctor, 1 hygienist practice to a large practice with 1 owner doctor, 6 associates, and 8 hygienists at $402,210 in 2013. (Surprise: The production lost was higher than we ever anticipated when we started the project.)
- The ratio of the percentage of lost production to total practice production ranged from a low of 8% to a high of 21% (similar to 1 lost day/week in a 5-day week).
- The ratios of the reasons for lost production compared to total lost production:
- Broken Appointments (BAs) at 17% to 30% of total lost production.
- Last Minute Cancellations (CAs) at 9% to 23% of total lost production.
- Time Slots Never Filled at a whopping 49% to 72%. (Another surprise: We expected the majority of holes would come from BAs & last minute CAs.)
Understanding the Statistics Measured
We all agree that some holes in the schedule are inevitable regardless of the precautions used to eliminate or decrease the number of holes. For example, Mrs. Jones had been personally confirmed by phone 48 hours in advance of her appointment. Just before she was getting ready to leave for her appointment in 30 minutes, she received a call from her son’s elementary school telling her that she had to come and pick up her son because he had come down with the flu. We would assume that she either called the office 20 minutes before her appointment and canceled (last minute cancellation) or, because of the excitement from the school’s phone call, she forgot to call altogether (broken appointment). We, as doctors, understand that these things happen and should excuse Mrs. Jones without penalty. But, we also know that patients use a multitude of unwarranted excuses for cancelling at the last minute and for breaking appointments.
It is common to hear practice management gurus preach that one hour of openings (holes) for each producer for each scheduled day should be considered acceptable. I don’t agree since any time lost resulting in dollars lost, without a good reason, is not acceptable.
Start by taking a look at your daily schedule over the past several months. If you think you have an issue with holes (and we have not met an owner doctor who does not have a problem), start thinking about taking control of this situation. After all, any holes are costing you BIG BUCKS.
You need to be able to address the following questions:
- How do you monitor and measure holes?
- How do you address these holes to your staff?
- How should you prepare for the three sources of holes that can develop?
- How can creative scripting by you and your staff reduce the number of holes?
- How can you prepare your staff to utilize the nuances of creative scheduling?
If you feel you have a problem with holes in your schedule, be sure to check out the blog post titled, Black Holes in the Schedule: A Major Production Killer – Part 2, on my website www.trackerenterprises.com, click on Blogs, then click on the title. This blog will discuss ways to decrease the number of holes in your schedule and increase your production. From the example shown above for the multi-doctor, multi-hygienist practice, if you had been the owner in this example who lost $402,210 in lost production due to holes and, if you could have eliminated only 25 – 50% of those holes, what would you have done with that extra $100 to $200K? Hmmm …
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
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