Dental Procedure Profitability: Are You Losing Money?
By Spiro Leunes, CPA | CEO, MRL Advisory Group – New Jersey and New York
Dental CPAs
A dental practice can collect $1.5 million annually, have a full schedule, and still watch profitability decline.
When this happens, most dentists look at payroll, dental supplies, or laboratory expenses. Those are worth reviewing, but what if the bigger problem is that the practice isn't getting paid enough for the procedures it's performing?
You know what you charge for a crown. You probably know what your largest PPO reimburses for it. But do you know what your practice actually makes on that crown after paying the laboratory, clinical staff, supplies, and the dentist?
Most practice owners don't analyze their numbers at this level. When PPO reimbursements are stagnant while operating costs continue to increase, that can become an expensive oversight.
Production Is Not Profit
Production and collections are important numbers, but neither tells you how much money the practice earns on an individual procedure.
Let's say your standard fee for a crown is $1,500. One PPO reimburses $925, while another pays $1,225.
Same procedure, same dentist, same clinical time, but a $300 difference in reimbursement. Multiply that difference over hundreds of procedures, and you're talking about real money.
I've written about how to drop unprofitable PPO plans without losing patients. But before you start terminating insurance contracts, you need to do the math and understand which procedures and PPOs are actually hurting your profitability.
You may discover that certain procedures generate substantially less profit than you assumed.
What Does It Really Cost to Perform a Procedure?
There are five costs or revenue figures I would examine.
1. Actual collections. Start with what you're entitled to collect under the PPO agreement and verify that you're actually receiving it. If your standard fee is $1,500 but the PPO allows $925, that's your starting point. Underpayments, denials, and uncollected patient balances can reduce the amount further.
2. Laboratory fees. These are usually easy to identify. But don't forget remakes, shipping, and other expenses associated with completing the procedure. A $185 laboratory bill versus a $275 bill makes a difference when you're performing hundreds of crowns annually.
3. Clinical supplies. Anesthetic, bonding agents, restorative materials, impression materials, and other disposable supplies all cost money. You don't need to account for every cotton roll, but you should have a reasonable estimate of what your most frequently performed procedures cost.
4. Clinical staff. Calculate what your assistant actually costs per hour, including wages, payroll taxes, and benefits. If that number is $44 per hour and a procedure requires 75 minutes of assistance, you've allocated $55 of labor to that procedure. Remember that this is an allocated cost. If the employee is already on payroll, eliminating the appointment may not save you $55.
5. Dentist compensation. This is particularly important if you employ associates. An associate receiving 30% of collections costs the practice $300 on a $1,000 procedure, before additional employer costs. If you're the owner performing the procedure, your time also has an economic value. Otherwise, you could conclude that your practice is more profitable than it really is.
Do the Math: One Crown, Two PPO Plans
Assume an associate dentist performs the same crown procedure under two different insurance plans.
The associate receives 30% of collections. Both procedures require 75 minutes, the same assistant, and the same laboratory.
Financial Component | PPO A | PPO B |
Actual collections | $925.00 | $1,225.00 |
Laboratory fee | ($185.00) | ($185.00) |
Dental supplies | ($55.00) | ($55.00) |
Other transaction costs | ($10.00) | ($10.00) |
Associate compensation (30%) | ($277.50) | ($367.50) |
Contribution after variable costs | $397.50 | $607.50 |
Allocated assistant labor | ($55.00) | ($55.00) |
Remaining for overhead and profit | $342.50 | $552.50 |
Remaining per clinical hour | $274 | $442 |
Illustrative figures. The calculation excludes general office overhead, additional employer costs on associate compensation, and other unallocated expenses. The assistant's allocated labor expense is not necessarily avoidable.
PPO B leaves the practice $210 more for the same procedure.
Suppose you're performing 20 of these crowns every month under PPO A's reimbursement schedule. That $210 difference amounts to $4,200 per month, or $50,400 annually.
Am I suggesting that dropping PPO A will automatically increase your profits by $50,400? No. You may lose patients, and there is no guarantee that you'll replace them with patients paying higher fees.
But the numbers should get your attention. If you're running a $1.5 million practice, an amount like this can make a meaningful difference in profitability.
And we've only examined one procedure.
Chair Time Is Just as Important as Reimbursement
Another issue dentists need to evaluate is how much clinical time a procedure requires.
You might perform a procedure that generates $600 in contribution after direct costs, but if it takes 90 minutes, is that necessarily more profitable than a procedure generating $350 in 30 minutes?
Procedure A | Procedure B | |
Collections | $600 | $1,100 |
Direct and provider costs | $250 | $500 |
Contribution | $350 | $600 |
Clinical time | 30 minutes | 90 minutes |
Contribution per clinical hour | $700 | $400 |
Procedure B produces more contribution per case. But Procedure A produces 75% more per hour of clinical time.
If your schedule is only 70% full, there's no reason to automatically turn away a clinically appropriate procedure generating a positive contribution. The appointment is helping cover expenses that your practice is already paying.
But if your practice is operating at full capacity, chair time becomes extremely valuable. A 90-minute appointment means you cannot schedule something else during those 90 minutes.
This is why I believe dentists should pay as much attention to the economics of their schedules as they do to total production. I covered the relationship between production, available clinical days, and financial requirements in Dental Daily Production Goal: How to Calculate It.
Of course, I'm not suggesting that dentists choose treatment based on profitability. Appropriate clinical care always comes first. We're examining the financial performance of the practice, not changing clinical treatment decisions.
Don't Ignore the Economics of Hygiene
Hygiene is the backbone of most general dental practices. It supports patient retention, recall, diagnosis, periodontal care, and restorative treatment.
But that doesn't mean every hygiene appointment is profitable.
Let's examine a one-hour recall appointment. Assume your hygienist costs $70 per hour, including wages, payroll taxes, and benefits.
Service | PPO reimbursement |
Prophylaxis | $62 |
Periodic examination | $32 |
Bitewing radiographs | $38 |
Total | $132 |
Hygienist labor | ($70) |
Remaining before other expenses | $62 |
That $62 still has to cover the dentist's examination time, clinical supplies, sterilization, front-desk expenses, rent, and other overhead. And if the patient doesn't require radiographs at that appointment, only $24 remains after the hygienist's compensation.
These figures are illustrative, and actual services and costs will vary by patient.
Does this mean you shouldn't see these patients? No. The hygiene department has enormous value beyond the revenue from an individual appointment. But if a particular PPO consistently reimburses less than the cost of delivering care, you need to know that.
I've seen dentists approach this problem by doing prophies themselves because they don't believe they can afford a hygienist. But now the dentist is spending valuable clinical time performing low-reimbursement procedures instead of performing other treatment.
That's not necessarily solving the problem. You may simply be shifting the cost from the hygienist to the dentist.
The better approach is to understand your hygiene economics, evaluate reimbursement rates, review scheduling efficiency, and determine which insurance plans make financial sense.
Contribution Margin Is Not Net Profit
If a procedure generates $500 after variable costs and provider compensation, that doesn't mean you've earned $500 in net profit.
Your practice still has rent, administrative payroll, insurance, software, and other operating expenses. Those costs have to be paid whether the appointment is profitable or not.
Debt is another consideration. Loan principal payments consume cash, but they don't reduce accounting profit. Interest expense, on the other hand, generally does appear on the income statement. This is why you should look at both profitability and cash flow.
From a business standpoint, I would ask two questions:
Does the procedure generate enough contribution to help cover the practice's overhead?
After considering the overhead and resources required, is the procedure generating a reasonable return?
Don't make the mistake of allocating the same overhead amount to every procedure. A surgical implant case and a routine periodic examination use very different resources.
How Do You Get This Information?
Most dentists already have much of the information they need.
Your practice management software contains procedure counts, fee schedules, insurance adjustments, and collections. Your accounting records contain laboratory costs, dental supplies, payroll, and other operating expenses.
The challenge is getting that information into one meaningful analysis.
I would start with your 10 to 15 most frequently performed CDT codes, along with any procedures that have significant laboratory or supply expenses.
Pull the prior 12 months and review:
Collections by procedure and PPO.
Number of procedures performed.
Contractual adjustments and underpayments.
Average time required to perform the procedure.
Laboratory and supply costs.
Associate and clinical staff compensation.
Remakes and other significant costs.
Not every practice management system will provide this analysis automatically. You may need to combine reports from your practice management software, payroll provider, and accounting system. For appointment time and supplies, representative samples are often sufficient.
Once you have the data, reconcile the results to your financial statements. You need reliable numbers before you can draw reliable conclusions.
Our dental accounting and bookkeeping services help practice owners maintain accurate financial records with separate expense categories for salaries, dental supplies, laboratory costs, and other overhead.
What Should You Do With the Results?
Review your PPO contracts. Don't simply look at the percentage discount off your standard fee. Evaluate actual reimbursements on the procedures you perform most frequently. A plan with a large discount may still make economic sense if it provides strong patient volume and appropriate reimbursement for your procedure mix. Another plan may be costing you significant profitability.
Renegotiate where possible. Before terminating a PPO agreement, see whether the carrier will improve reimbursement. Review the actual contracted fee schedule and don't assume every agreement with a particular carrier pays the same rates.
Examine your laboratory expenses. Saving $25 on 300 cases represents $7,500 annually. That doesn't mean choosing an inferior laboratory. It means reviewing purchasing arrangements, remake rates, and whether you're getting value for what you're spending.
Look at your scheduling. If a procedure is regularly taking 90 minutes when it should reasonably take 60, find out why. Is it the workflow, equipment, staffing, scheduling, or complexity of the cases? Small improvements in clinical efficiency can generate meaningful additional capacity.
Review underpayments. There is a difference between an insurance company paying a low contracted fee and paying less than the amount required by your contract. Underpayments should be investigated and pursued where recoverable under the agreement and applicable deadlines. I've covered the importance of tracking recurring insurance underpayments in 2026 Dental Business Trends: Where Practices Lose Profit.
Be careful before expanding. Before purchasing equipment, hiring another provider, or adding additional procedures, calculate the expected financial return. Higher collections are nice, but they don't necessarily translate into higher profits.
Make This Part of Your Monthly Financial Review
You don't need 40 different KPIs to run a profitable dental practice. But you should regularly monitor the numbers that have the biggest impact on profitability.
For procedure-level analysis, I would concentrate on:
Metric | What to Review |
Collections by CDT code | Which procedures generate your revenue |
Collections by PPO | Which insurance plans contribute the most |
Contribution per clinical hour | How efficiently you're using clinical time |
Laboratory and supply costs | Where direct expenses are increasing |
Insurance adjustments and underpayments | Where reimbursements affect collections |
Procedure mix | Whether changes in services are affecting margins |
You don't have to calculate every procedure's profitability every month. Review your major procedures and investigate meaningful changes.
If you operate a DSO or multiple dental offices, run the same analysis for each location. You may discover that two offices collecting the same amount of revenue have significantly different profit margins because of their procedure mix, associate compensation, staffing, or PPO reimbursement rates.
That's valuable information when deciding where to invest additional resources or which locations need operational attention.
At MRL Advisory Group, our Dental Practice Advisory and CFO Services focus on reviewing the financial and operational numbers that drive profitability, not simply preparing financial statements after the fact. The purpose of the analysis is to identify problems and make adjustments before they become expensive.
Know What Your Procedures Actually Earn
If your dental practice is producing more dentistry but your profits aren't increasing, take a closer look at what you're actually earning on your most common procedures.
You may discover that certain PPOs are paying too little, certain procedures consume more chair time than you realized, or increasing laboratory and clinical costs are quietly reducing your margins.
On a $1.5 million practice, even relatively small improvements can amount to substantial money over the course of a year.
Do the math before you drop insurance plans, hire another provider, or invest in more equipment. Sometimes the best opportunity to improve profitability is already sitting in your existing schedule.
MRL Advisory Group works with dental practices, specialists, and DSOs throughout New Jersey, New York, and nationwide. We provide tax, accounting, and advisory services focused exclusively on the dental industry.
If you're looking to improve your practice's financial performance, contact MRL Advisory Group to discuss your practice.
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