Understanding the Difference Between Production and Adjusted Production in Dentistry

In the dental profession, understanding the financial metrics that drive your practice is crucial. Two key terms often used are “Production” and “Adjusted Production.” While they may sound similar, they serve different purposes and provide distinct insights into the financial health of a dental practice and your productivity as an associate. Let’s break down these two terms to understand their significance and differences.

What is Production?

Production refers to the total “potential” amount of gross revenue generated from all dental services provided by a person or practice. This includes a tally of all completed procedures as if they were performed at their full fee. We call the list of full fees for services kept by a dental practice the “usual and customary fee schedule” (UCF or UCR for short).

There are three reasons to measure production.

• So you can measure your Potential Gross Revenue: Pure “production” represents the gross revenue before any adjustments, discounts, or write-offs.
• So you can keep a Comprehensive tally of all procedures performed: It includes every billable service, regardless of whether the payment has been received or the service has been fully paid for in full.
• It is the best indicator of activity: Production is an essential metric for understanding the volume and types of procedures performed within the practice. In short, the more you produce, the harder you are working.

Example:

If a dentist performs $100,000 worth of procedures in a month, the production for that month is $100,000.

What is Adjusted Production?

Adjusted Production takes the total production figure and modifies it to account for various factors that affect the actual revenue received by the practice. These adjustments can include:

• Accounts for Insurance Write-Offs: Many dental practices accept insurance plans, which often dictate lower reimbursement rates than the practice’s usual and customary fees.
• Accounts for Discounts and Promotions: Any discounts given to patients for various reasons, such as promotional offers or financial hardship.

Example:

Using the same monthly production figure of $100,000, if the practice has $20,000 in insurance write-offs and discounts, the adjusted production would be $80,000.

Key Differences Between Production and Adjusted Production

Understanding the distinction between these two metrics is crucial for effective financial management in a dental practice.

At the heart of the distinction is “potential” revenue vs. real income:

• Production gives a clear picture of the total services provided, potential earnings, and how hard a dentist is working.
• Adjusted Production provides a more accurate representation of the actual income the practice can expect to receive for the work performed.

Let’s Wrap it Up

Both production and adjusted production are important metrics to understand when running a dental practice and signing an associate contract. Understanding the difference between the two allows dental professionals to gain insights into their practice’s performance and make informed financial decisions.

If you have any questions or need further clarification on these concepts, feel free to leave a comment or join our discussion forums on Embrasure Space.