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Understanding Overhead and What It Means to Your Practice

Course Number: 701

Overhead History

Historically, overhead grew very slowly prior to 2022. In 2022, we saw significant inflation due to several factors, including higher staffing costs and accelerating technology expenses. For the first time, many dental practices saw overhead increase by as much as 8%1, which had a direct effect on practice profitability. Prior to 2022, overhead always grew slowly and gradually and predictably. Practices would accommodate small increases in overhead using strategies such as raising fees, increasing patient volume, and other methods that will be discussed later in this course.

Many of the strategies used in other industries are not as effective in dentistry due to the large number of practices participating with one or more dental insurance plans. These plans often do not increase reimbursement for years at a time and some plans even decrease them periodically. As an example, if a practice wanted to increase production by raising fees 5%, and half of practice revenue was derived from insurance plans that did not increase reimbursements regardless of the practice’s fee increase, then the overall effect of a 5% increase in fees relative to total production is 2.5%.