Are your lab costs a little too high? In this episode, Kirk Behrendt brings back Robyn Theisen, one of ACT’s amazing coaches, to continue the series on overhead and break down lab percentage. They explain what it is, how it impacts your practice, and what to do to maintain a healthy lab percentage. To learn how to lower your lab costs the smart way, listen to Episode 991 of The Best Practices Show!
Are your lab costs a little too high? In this episode, Kirk Behrendt brings back Robyn Theisen, one of ACT’s amazing coaches, to continue the series on overhead and break down lab percentage. They explain what it is, how it impacts your practice, and what to do to maintain a healthy lab percentage. To learn how to lower your lab costs the smart way, listen to Episode 991 of The Best Practices Show!
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Episode Resources:
Main Takeaways:
Quotes:
“[Lab expenses] are critical expenses to produce the dentistry. This metric tells you how efficiently you're managing the outsourced clinical costs related to restorative or prost care. Typically, back in the day, if it was too low, that would indicate that the dentist isn't doing enough comprehensive work. If it was too high, you would say that their fees aren't in the right place. But there are a lot of things that have changed in recent times, just like there's more digital dentistry. Now, there's CEREC. Now, there's in-house milling. Now, there are blocks that are associated with that.” (1:49—2:29) -Kirk
“[Lab percentage] directly impacts profitability. So, a healthy lab percentage reflects a balanced case mix. It is the appropriate lab selection from a cost perspective, and it is also measuring how efficient and effective your clinical systems are. So, it's taking into consideration all those things into that one metric. If the percentage climbs too high, some questions could be, is it the right lab selection? Are there excessive remakes? Are we having to redo things over and over again? Is the high fee lab corresponding with the value, and is that also corresponding with what the production mix is within your practice or your selection of PPO or fee-for-service? Some of those things play into that as well.” (2:37—3:24) -Robyn
“When you have a high lab percentage, you should be producing in correlation with that — and collecting. Let's say that also, too. If you have a lot of PPOs, you're writing off 40%. That's going to be even harder. It's going to reduce the margins, causing a lot of inflation in this overhead.” (3:28—3:46) -Kirk
“[A healthy lab percentage] used to be 10%. Now, with the efficiency — you used the word remakes. I remember, back in the day, remakes were a big deal. This was when people were doing vinyl polysiloxane, sending cases out, sending them back. They didn't have the right assistant, and they didn't know how to take impressions. Now, digital has changed a lot of that. So, a healthy lab percentage is 8%.” (3:50—4:09) -Kirk
“I have a couple of offices that I work with who happen to be CEREC offices. They use a lot of CEREC, so when they're buying blocks and things, that ends up going as a dental supply cost. When I'm looking at offices that use digital, or they're using the CEREC piece, I combine the dental supplies and the lab together to look at, if we want the overhead for your lab to be 8% and dental supplies at 5%, I combine those two categories to have them be at 13% to take into consideration the costs associated with the supplies of being that type of office. That wouldn't necessarily show up in the lab piece.” (4:20—5:01) -Robyn
“A lot of times, people are looking for a cheap lab. Not typically the clients that we work with — they're looking for a more expensive lab. So, they have challenges on the other side. It does require that you do somewhat of a fee analysis at the end of the year. And keep in mind, there are a lot of things that you do that don't have a relationship with the lab costs that have fees associated with them. So, it is really good on a regular basis, whether it be with an amazing coach like Robyn or with your team, to sit down on a quarterly basis and take a look at these expenses in lab and how they correlate to your production.” (5:21—5:56) -Kirk
“You never want to compromise your clinical care or the outcome that you're getting. But you do want to make smart decisions that put you in a position to have it make sense in your production picture in the overall story. So, it's good to be aware of what those costs are. Tracking remakes, I think that's one thing that offices could really do to be able to know how to impact the metric. Do you really know how many you do a year? How much is that playing into it? That could be a big part of it.” (7:09—7:39) -Robyn
“Track your remakes. How is that impacting the practice? Look at your clinical protocols. What are you doing in terms of your impressions? Are you reducing costly errors in supplies there? And the time that it takes you, how can you tighten some of those things up? I also think that it is good to review your lab partnerships. What are the costs? What is their turnaround time? Does it match what your standard of care is? Does it match who you are and what your goals are in the practice? Be able to have some of those conversations with your partners.” (8:25—8:56) -Robyn
“Finding the right lab partner is one of the best relationships you're ever going to find. It's not about cost. It’s about creating a relationship in which you serve patients and finding the right lab tech. You will also find that they become a great coach for you. They will push you to be a better clinician, and they will give you honest feedback. So, when you look at this, don't go on the cheap. Think about this. This is one of those categories that I really consider an investment instead of an expense. It's an investment that should have an ROI not only financially but also clinically and for the patient. It's a triple win here.” (9:07—9:45) -Kirk
Snippets:
0:00 Introduction.
1:22 Lab percentage, explained.
2:32 How lab percentage impacts the practice.
4:07 Combine dental supply costs and lab costs.
6:48 Make smart decisions around lab costs.
8:10 What you can do to impact this metric.
8:57 How Smile Source can help your practice.
9:54 ACT’s BPA.
Robyn Theisen Bio:
Robyn Theisen brings an entire life and legacy of dental experience to the team and every team with which she works as the daughter and sister of dentists. With almost 20 years of experience in dentistry, her roles ranged from practice management to operations at Patterson Dental to coaching teams. Robyn’s passion is empowering teams to realize that they can dramatically impact the lives of the people they serve by implementing skills and systems to remove barriers to life-changing dental treatment. She has done it for decades and does it every day with dental teams.
Outside of coaching, she enjoys time with her husband, Rob, and two daughters, Emerson and Ruby. She loves traveling, music, fitness, and cheering on the Michigan State Spartans.