Case study / Practice finance
Already profitable. Then the staffing model changed.
A profitable practice relied on contract labor to cover chairs. Reviewing contract labor alongside payroll revealed the full cost of that staffing model.
These are real results from specific practices over the periods shown. Every practice is different, and these aren’t a prediction of what yours will do. Anonymized practice comparisons supplied by the owner. Figures compare January through September 2024 with the same months in 2026. Operating income is after cost of services and operating expenses, before owner-related and non-operating items. These outcomes are not a forecast or guarantee for another practice.
The challenge
At a 17.1% operating margin, the practice had no obvious crisis prompting a closer look at staffing. Contract labor was 8.4% of collections, but it appeared on a different line from payroll. Read separately, the reports did not show the full cost of covering each chair.
The approach
Put contract labor and payroll side by side.
The transition needed a monthly review, not just an initial hiring decision. Margin fell during the change, and the owner needed to understand why.
Report the two staffing costs together
Bring contract labor and payroll onto one page so the cost of covering a chair can be compared directly.
Model a full year of provider cost
Compare total provider cost across twelve months rather than the rate of a single hire. Model the transition to permanent associates before committing.
Track the transition month by month
Make the temporary margin decline visible so the owner can distinguish the expected transition from an unexpected problem and review the decision with current numbers.
The outcome
A permanent team. Three points of margin.
Collections increased from $3,105,751 to $3,248,995. Operating income rose from $532,257 to $651,541, an improvement of about $119K. Contract labor fell by 7.4 percentage points, while employed-provider cost rose from 13.2% to 21.9% of collections. Laboratory costs and the ad management fee also declined. The practice gained a permanent clinical team, and operating margin increased from 17.1% to 20.1%.
- Contract labor and payroll reported side by side
- Total provider cost modeled across a full year
- A tracked transition plan with the margin decline made visible
- A permanent clinical team in place of agency coverage
- Contract labor: 8.4% → 1.0% of collections
- Employed providers: 13.2% → 21.9%
- Laboratory: 8.8% → 4.8%
- Ad management fee: 3.7% → 0.6%
A next question
Put your own practice in context.
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