What is the Lifetime Value of a Dental Patient?

  • Feb 12, 2018, 15:12 PM

The continued expansion of dental service organizations, coupled with poor reimbursement by dental insurance companies, has become the norm. A review of the business literature on the future of dentistry concludes that this contraction of available patient dollars will continue to “squeeze” the dental entrepreneur and threaten profit margins. A survey conducted by The Dentist’s Edge® in 2016 reported the average overhead for a general dentist in the United States was approaching 75 percent. Said another way, the average “solo” practitioner must collect $550,000 to $600,000 to break even. Now, before you decide you want to debate this figure, please understand that I said “average.” Therefore, if this does not apply to you (for example, if your office and equipment are paid off) let me ask you — do you know what your break-even point is? Do you know how much of your money is sitting in insurance coffers waiting to be paid out, ultimately decreasing cash flow? If not, please look into it — the answer may shock you.

Patients have a choice where they seek dental care, and, unfortunately, dentistry has become a commodity-based industry driven by price and dental insurance instead of what is best for the patient. Of course, there are exceptions, and indeed a few full fee-for-service (FFS) dental offices still exist. However, don’t let anybody tell you this is the norm. It isn’t. I travel around the country and review the data of hundreds of offices annually, and seldom is anyone full FFS. Considering that 93 percent of all dentists are in-network with at least one insurance company, I know that at least 93 percent of dentists are not FFS.

Much discussion revolves around the lifetime value of dental patients and the importance of developing rapport, value and trust to ensure your patients don’t go elsewhere. Many of us, including myself, used to believe that our clinical skillsets were the differentiator between a great and an average practice. They are not. In previous blogs, I discussed the importance of five-star customer service, Ritz-Carlton style. I was trained with these principles during my many years at Hilton Hotels Corporation (long before becoming a dentist), and I can assure you the major issues I see across the country that hamper most dentists include the lack of systems, budgets, tracking of data and the inability to under-promise and over-deliver.

While there is not one agreed-upon formula to calculate the lifetime value of a dental patient, it is worth investigating. One can find estimates that range from $1,100 to $35,000 per patient (lifetime value depending upon the variables included when analyzing the metric).   

Below, I have decided to use 15 years as the lifetime of a typical patient in any given dental business. Conservatively, I have estimated that each patient will require one major service/procedure every five years (crown, root canal, implant, etc.). Also, I have estimated that a “happy” patient will refer one new patient to your practice every five years. This is very conservative because a dental business which has been trained and implements The Dentist’s Edge® systems will yield one new patient referral for 50 percent of its patient base annually.

The fee structure that I have applied is very conservative in any dental community in the United States.

Lifetime Value of a Dental Patient

A.        5-year income per dental patient

  1. Income for exams, bitewings and prophy (1 year) = $200 or $1,000 for 5 years
  2. One major service/procedure every 5 years = $1,000
  3. Total income per patient every 5 years = $1,000 + $1,000 = $2,000

B.        15-year income per patient = 3 × $2,000 = $6,000

C.        One referral every 5 years or three referrals every 15 years = 3 × $6,000 = $18,000

D.        Lifetime (15 years) value of a dental patient:

            a) Revenue from referring patient = $6,000

            b) Revenue from 3 referrals = 3 × $6,000 = $18,000

            c) Total lifetime value of a dental patient = $6,000 + $18,000 (from referrals) = $24,000

My objective was to demonstrate how significantly one patient who seldom refers others (only one referral every five years) can help grow your practice. If 50 percent of your annual patients refer new patients, you can grow your practice to $2 million in collections per year — collections, not production! Production means nothing, and collections mean everything.

What are the keys to making this happen?

  • knowing your demographics and acting upon them
  • implementing solid operating systems
  • comprehensive training
  • good clinical dentistry
  • 80 percent internal marketing and 20 percent external marketing
  • social media
  • patient recare
  • patient handoffs
  • listening to each patient and giving them what they want
  • learning how to win the insurance game
  • delivering five-star customer service

Couple these techniques with great leadership and empowered staff members, and you can do anything. If you are not sure how to accomplish the recommendations contained in this article, reach out to experts who can help. 

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