The dental practice runs according to a simple financial model I have labelled ‘The Profit Equation’. It goes as follows: profit per surgery equals income minus clinician costs minus surgery overheads. Written as an equation that’s:
P = I – CC – OH
In private practice overheads per surgery range from £450 to £900 a day but on a standard deviation curve the most common cost is £550 per day. This figure is calculated by adding all costs other than clinician costs (so nurses, reception staff, rent, rates, lab, marketing and anything else) and dividing by the number of surgeries in your practice and your trading days in the year. NHS overheads are lower because practices have less investment and less staff cost. They range from £300 to £600 per surgery per day and the average is around £400.
You can’t change your overheads much unless you have buying power. Because of this it’s likely that NHS practices will become the preserve of corporates, as there is nothing else to tickle in our equation. A similar thing happened through the noughties to independent corner shops and petrol stations, which were bought up en masse by a few supermarket chains that brought their weight to bear on the supply chain, passing on cost savings to consumers. You’ve bought into consolidation if you’ve ever taken a detour to get cheaper fuel at a supermarket and grabbed some milk and a paper at the same time.
Consolidation makes it increasingly difficult for independent operators to survive. It might therefore be seen as distasteful, especially now, during a government-induced cull of independent businesses that is disfiguring the economic landscape. Whether oligopolies are fair or not, NHS dentistry is going that way. At the same time, NHS practice owners acknowledge that NHS dentistry isn’t the kind of work they want to do. It just happens to be their marketing machine, the way they get customers in who they can upsell private dentistry to. It functions as their loss leader. The question is, how much of a loss is OK?
For a clue, we might look at what happened in NHS dentistry in 2020. In response to lockdown, NHS practices were told they would be paid their contract fee (minus an adjustment for lower overheads) if they serviced a minimum of 20% of their contract. Anecdotally I can say that, unsurprisingly perhaps, NHS practices responded by doing 20% on the nose. Now they are being asked to make it a minimum of 45%, and there has been pushback, with BDA Chair Eddie Crouch saying: “There has been no agreement nor could there be. The facts are government will be imposing targets that will threaten practices and undermine patient care. This is not the approach we need or expect during a pandemic.”
Whether cognisant of it or not, Mr Crouch is hastening the oligopoly along nicely. Of course this is hard, and doing your job as a dentist and a practice owner has become tougher with Covid fallow times and protocols. But go into any dental practice (pre or post-Covid) and ask the receptionist how it’s going and they will invariably tell you they’re too busy and need another receptionist. It always looks that way from the inside looking out, but it doesn’t mean it’s true. Private dental practices don’t have the luxury of servicing just 45% of their patient lists. If they did they’d have all been out of business before the last leaf fell this autumn. They adapted. How do you reconcile what Mr Crouch is saying with the fact that our clients are seeing turnover of between 80% and 150% of pre-Covid levels? Actually, don’t bother. Just go back to our equation;
P = I – CC – OH
As we said above, you can’t do much about overheads unless you have buying power. That means that as an independent practice owner, then, the major markers to shift your bottom line are raising income and cutting clinician costs. If you are an NHS operator it’s likely that your clinician costs are already low. And you can’t move your NHS income up. In fact it might be unexpectedly moved down, as happened last year to orthodontic practice owners who were asked to re-tender with significantly lower guideline fees. This is a risky business model indeed. You are vulnerable all the way around; you can’t control your income, you don’t know when the rug might be pulled, and even if it’s not, you don’t know if you’ll “win” your contract again. Meanwhile, you are dealing with patients who have been systematically let down, so they are not going to be very happy.
Thankfully you are free to move away from this situation towards something more commercially sensible. You have the freedom to reconcile the numbers in your equation without the government or Mr Crouch holding your hand (and holding you back). If you’re interested in exploring how to do this, register to join our NHS conversion programme by emailing: firstname.lastname@example.org. I get that it’s not necessarily the logic of what I’ve discussed here that is stopping you. It could be that you simply don’t know where to start because your whole career has been in the NHS. Change is scary. The good news is there is a world of opportunity out there, as proven by our clients, and you don’t have to do it alone.
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