Endo Mastery

THE TRUE COST OF AN UNPLANNED DAY OFF

Sometimes we can’t predict when we need a day off, such as sick days. When these days aren’t planned, there is a financial cost that is higher than you think.

DEBRA MILLER | DIRECTOR OF COACHING

Every doctor sometimes experiences the need to take off a day that would otherwise be dedicated to clinical care. It could be illness, a family emergency, or some kind of short-notice personal or professional need that results in the day being removed from the schedule. Estimating the cost of removing a day is easy from a production perspective. It’s simply your daily average production. However, the true cost is different than that, and it has a much greater impact. Because your fixed expenses do not change as a result of taking unplanned time off, almost the entire production amount is lost from your gross profitsConsider this example: If you are averaging $8,000 a day in production and working 160 days per year, the loss of one day as a percentage of production equals:
  • daily production lost / planned annual production
  • $8,000 / ($8,000 x 160)
  • $8,000 / $1,280,000
  • 625%

Now consider if your practice has a 50% expense overhead, with 42% of that fixed and 8% of that variable for supplies and other production-dependent costs. When you cancel a day, you don’t cancel any of those fixed costs and you only avoid the variable costs (8% of production).

 

That means 92% of the lost production comes directly from your year-end profits. The loss of one day (as a percentage) on your expected gross profits equals:

  • (daily production - variable costs) / planned gross profits
  • ($8,000 - $640) / ($1,280,000 - 50% overhead)
  • $7,360 / $640,000
  • 1.15%

So, in this example, the true cost of an unplanned day off has nearly two times the impact on the bottom line than it does on production. A couple of these days in a year and you may seem a little short on production compared to goal, but your take-home will significantly underperform your goal.

No one likes surprises at the end of the year. For this reason, it’s essential that any unplanned days off are made up for by adding days back into the schedule as soon as possible.