The active patient count is the primary tool for measuring the goodwill of a dental practice. It has great importance for both the owner and the buyer of a dental practice. The active patient count is defined as the number of different individuals seen in the practice during a prior specified time period (typically 12-24 months). As important as this factor can be, many selling dentists do not know their active patient count or realize its significance. There are two main roles to consider when it comes to the active patient count.
The Role of the “Active Patient Count” During the Purchase
One of the primary reasons for purchasing an existing practice is to acquire the active patient base. When we break down and prioritize the value of the different assets that comprise a dental practice, dental equipment can often be of less value than other components. Expensive dental equipment can be acquired in a short time, and can be the one asset within the practice that actually loses value over time. However, it can take years to build a patient base. The active patient base simply represents current and future cash-flow to the practice. It can be the single most important asset and usually has the most value. What contributes to the value of the patient base is the actual length of time it has taken to develop. The patient base in a typical general dental office can take up to 7+ years to build. If the transition is structured properly, the idea is that the majority of the active patients will continue to receive and pay for services. This represents future cash-flow for the new owner. There are a variety of items constituting the “goodwill” of the practice, but the active patient base is the most significant.
The Role of the “Active Patient Count” as a Practice-Management Tool
This active patient count is also valuable in the ongoing management and operation of the practice. The active patient count is helpful in calculating and monitoring the practice’s potential. For example, a well-running dental practice with an estimated $400 “benefit” per year per patient, and an active base of 2500 patients grosses receipts of about $1,000,000. Comparing these estimates to what practices are doing elsewhere, both locally and nationally, will help to provide an indicator and show areas that may need improvement.
The active patient count will reveal whether the practice can support a full or part-time associate. A solo practice attempting to incorporate a full-time associate requires a minimum of at least 2,000 active patients. Fewer than this number can show that the practice will have difficulty supporting more than one doctor.
The active patient count also helps with analysis of other staffing needs, especially from a hygiene perspective. The average, fully booked hygienist sees 10 patients per day, equaling (with a six-month recall schedule) 250 recall patients for each weekly hygiene day. If a practice undergoes a normal attrition rate, they will experience approximately a 15% erosion of their active patient base each year as patients relocate, change providers, etc. In a healthy and growing practice, the practice will 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 may limit the growth of the practice and its future income.
In a well-run practice, statistics show that 70%–80% of new patient referrals come from the existing active patient count. Therefore, relying on the practice’s existing patient base as the primary marketing tool requires carefully reviewing the active patient count. Without the patients, the only other source for new patients is an external marketing program. Without a doubt, increasing the patient count will do wonders for your overall bottom line. If the practice is booked for weeks or even months out due to an effective patient-retention and hygiene recall program. Then, it can be argued that this will lower the overall overhead while increasing the bottom line for the owner. This will undoubtedly improve the bottom-line for the owner-dentist while helping to reduce the need for an expensive external marketing program.
Whether used as a management tool for owner-dentists or as an evaluation tool for buyers; knowing the active patient count and its various uses and applications is critical to the long-term success of the dental practice. Once the initial number is determined, it is relatively easy to monitor and track. 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.
