Case study / Practice finance
A practice that looked unprofitable was collecting badly.
Production was strong, but write-offs, collection costs, and provider compensation were weighing on the financial results. The first step was to make those costs visible.
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
The practice was writing off a large share of its billings and paying additional costs to collect. Together, bad debt and collection expense consumed about 13% of collections. Professional and hygiene salaries added another 28%. The schedule was full and production was strong, but the financial statements showed a loss.
The approach
Make the costs visible. Keep them on the agenda.
Separate reporting and a recurring owner conversation made revenue-cycle costs and compensation easier to examine together.
Report write-offs on their own lines
Separate bad debt and collection expense from general overhead. Report both each month as a share of collections so their size is clear to the owner.
Review the revenue cycle every month
Treat collections as a standing owner-review topic rather than a one-time project. Follow the expense lines month by month as the process changes.
Measure compensation against collections
Assess provider pay against what the practice collects, not only what it produces. Review the gap between those two numbers before making compensation decisions.
The outcome
Collections grew while write-offs came down.
Collections increased from $3,395,944 to $4,128,676, about 22%. Operating income moved from an $82,302 loss to a $1,283,284 profit. Bad debt and collection expense fell from a combined 13.2% to 0.1% of collections. The same correction was also applied to a sister practice in the group.
- Write-offs and collection expense reported separately
- Revenue cycle kept on the monthly owner-review agenda
- Provider pay measured against collections rather than production
- The same correction applied to a sister practice
- Bad debt: 8.2% → 0.0% of collections
- Collection expense: 5.0% → 0.1%
- Professional salaries: 19.6% → 9.8%
- Hygiene salaries: 8.4% → 2.1%
A next question
Put your own practice in context.
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