Income Vs Expense Data

The major indicator of practice health is profit (or loss).¹  The amount of profit a practice exhibits is based on income minus costs (overhead).  When income is greater than overhead, there is a profit.  Conversely, when income is less than overhead, there is a loss.  The amount of income and overhead are determined by a number of factors.  These factors and how they impact on each other are illustrated in Figure 1.

Income is determined by the collection of fees generated through the production of services.  In an ideal world the fees collected would be equal to production.  While few practices exist in this ideal world, many come close.  The amount of production generated is affected by a number of factors.  These include:

• The number of patients (new, current, returning)
• The number of accepted treatment plans
• The quantity and complexity of treatment rendered
• Cancellations and broken appointments
• Fees charged

The amount of fees collected is affected by the amount of production and additional factors.  These factors are:

• Fees
• Successful collection of fees generated by production (accounts receivable management and insurance claim processing).

Practice overhead consists of expenditures for the following:

• Personnel
• Occupancy (rent, mortgage, utilities, repairs)
• Administrative expenses
• Supplies (clinical and clerical)
• Lab expenses
• Equipment (purchase, lease, maintenance)
• Practice promotion
• Doctor compensation

These factors and sub-factors are divided into two groups:  positive statistics and negative statistics.  As the numeric value of a positive statistic increases, the health and growth of the practice increases.  Conversely, as the numeric value of a negative statistic increases, the health and growth of the practice decreases.

Click Here To Navigate Within Article >> Abstract Introduction Income Vs Expense Data Tracking the Data Data Analysis Responding to the Data Steep Decreasing Trends Moderate Decreasing Trends Moderate Increasing Trends Steep Increasing Trends Positive Plateau Trends Conclusion References About the Author
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Citation Number: Vol. 3, No. 1, Page 057