We’ve recently dealt with both Gross and Net Production, but in between both of those KPIs lies another, incredibly important one: your Write-Off Percentage. Your Net Production is your collectable potential, but your write-offs are one of the factors that impact that potential. They help determine the size of your profit margin, and the higher they are, the more pressure on your margin.
Though simple in concept—the percentage of total charges that are adjusted off due to PPO insurance adjustments, elective patient discounts, or membership discounts—it’s a KPI that many dentists get wrong. Write-offs are climbing, but most clients we’ve coached weren’t aware of their Write-Off percentage, and it’s due to one simple error: they weren’t billing their full fee. If your ledger doesn’t have the full amount you charge for a procedure on the top line, your Write-Off percentage will be inaccurate. Accuracy is critical, because the larger your Write-Off percentage, the more time you’re working for free. There are multiple factors that increase your write offs, and once you’re aware of them, you can start making changes:
- Reduced number of reimbursements from your PPO contracts
- Increased number of active patients who have PPO contracts
- Patients not paying your full fee
The great thing about understanding this KPI is that it’s something you can start working on today! With a simple four-step process, you can take control of your write-offs:
- Calculate your write-offs
- Make sure the number is accurate by verifying that you billed out your full fee
- Calculate how many active patients you have, and how many are in-network vs out-of-network
- Do some math—if you produce X and write off Y, reduce Y by 5% and see what happens to your profit margin
Write-offs are rapidly increasing, causing more and more dentists to work a considerable number of days for free. It’s an anxiety-inducing thought, but you can reduce that anxiety by simply increasing your understanding of this KPI!
