A $151,536 Lesson

Author

Mike Gusching
July 03, 2024

May 2024:  Favorite ortho stories, industry insights, and study clubs/events for the local area orthodontists I cover

 

A well-known orthodontist (you probably heard of him) started this by asking:

 “What’s your practice treatment VPV..?”

 Silence.

 “Don’t all start at once..” he joked.

 Sitting there awkwardly, the one person I was sure would get it calmly unmuted her line, cleared her throat, and confidently said:

 “I have no idea what you’re talking about.”

 …And we were off.

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This month, I breakdown how VPV is a $151,536 lesson worth learning in 5 steps.

Taking a simple concept from Gaidge Consulting, highlighting what most miss, and showing how it impacts practices.

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1.

 Ryan Moynihan, the CEO of Gaidge Consulting, has a slide in his AAO presentation that looks like this:

 Most gloss over it…But look again:

 What does that ‘$1 increase’ really mean?

Assume you see 375 starts a year and your orthodontic case is $5500.   

It takes you an average of 20 visits from start to finish. 

5500/20 visits = $275.  

Your value per visit (VPV) is $275.  

 Easy enough.

But what Ryan found in doing a regression analysis (a fancy way of mathematically sorting out practice variables that have the most impact) is that literally each $1 dollar increase in your VPV (from $275 to say …$276, $277, $278 …) equals ~$4.65 back in profits…

… per clinic day.  

 $1 VPV change= ~$4.65 profits   (More for a larger practice, less for a smaller practice)

 He multiplies the numbers by 168 clinical days for annual.

 Ok, so explain more: 

 Let’s say you improve your $5500 cases by just 1 less visit…

 

  • $5500/20 visits = $275 VPV

  • to $5500/to now 19 visits = $289 VPV

 

  • Congrats!....you just improved your VPV by $14! ($289-$275=$14). 

 

  • Take the 14, multiply each dollar increase by $4.65, and your practice is netting $65 more dollars in profit per day.

 

In other words, that 1 less average visit netted you a nice $65 steak dinner. 

 …Every day you worked in the clinic.

 2. 

 Next, Ryan shows a graph of a regular $5500 case being reduced in incremental visits:

 Here a practice has a start for $5500/18 visits = $306 Value Per Visit

· Then it does 17 visits….$324 VPV

· 16.5 visits..$334 VPV

· 15.5 visits..$355 VPV

· 14.75 visits $373 VPV…and so on….

 Subtract the dollar differences, multiply it by $4.65, and you can see the clinical profit for day increase (..in monthly, ..and in annually terms)

3.

So, I did a hypothetical:

 Let’s say an orthodontist does an adult class II div I fixed case for $5500 in 18 visits.  

 $5500/18= $306 would be the VPV.  

 ….but then the practice achieves the Dr. Waldman data of ~7 less visits (Article), or has a Dr. Blake Davis $500 moment in practice

 VPV shoots up to $5500/11 visits = $500.    

$500 minus the original $306 = 194.   

 194 x $4.65 = $902.01 profits per clinical day. 

  ….$902.01 ….  per clinic day.  

 That’s $151,536 a year in practice profitability if cases successfully decrease from 18 visits to 11.

 Not gross production.  

Profit.

 $151,536 of it.

4.    

This is about the time most race ahead to find the assumptions and flaws.

 Yes, there are a few assumptions:

 

  1. This is Gaidge’s data and regression analysis.   Not mine.   

  2. A regression analysis assesses the strength of the relationship between variables – and this simply the core relationship of #visits and practice profit.  

  3. This does not mean you need a completely new appliance to achieve – it’s just more common that (aligners, digital braces) increase VPV vs. showing up to a Tuesday morning huddle and saying, ‘hey team..as of this morning, I’m never, ever repo’ing or bending a wire again.’

  4. Lab fees do impact this (…but lab fees were considered in this analysis). 

    • Gaidge goes further into Margin/Visit data on a separate slide.

  5. When you maximize your VPV, (assuming the case still turns out as great), other variables naturally align themselves to more profitability.    

 5.

Increasing value per visit isn’t just for increasing a doctor’s bottom line – convenience still ranks #1-3 on why an orthodontic practice is chosen over others in 2024 on patient surveys. 

VPV differentiates.  Differentiation is marketing.  Marketing leads to profits..

 Efficacy with efficiency should always be a race to the top.    

It’s important to the practices I work with that they come out ahead.   Digital needs to make sense economically, not just clinically.

 Value Per Visit:    Every $1 up is $4.65 back.

  Ryan’s last slide:

If differentiation, chair time, VPV, case setups to minimize appointments is an area of further interest – Ryan helped build a new model, including diving further into the importance of VPV for driving earnings – we can dive further next time we connect in person.  

 *Special thanks and credit to Ryan Moynihan and the Gaidge Consulting team.