Cost Control by Procedure: Identify Which Treatments Consume More Resources and Reduce Your Profitability

Admin
Jul 16
3 min read

A Practical and Strategic Approach to Calculating Contribution Margin per Dental Service and Making More Profitable Decisions for Your Clinic

Managing costs in a dental clinic goes far beyond analyzing monthly expenses. In a highly competitive market, the real differentiator lies in the ability to understand which procedures consume the most resources while delivering the lowest financial return. A detailed cost control by procedure enables management to make strategic decisions based on concrete data—not on assumptions.

Direct vs. Indirect Costs: Where to Begin?

Direct costs are those directly associated with performing a procedure—such as disposable materials, anesthetics, gloves, professional time, and specific equipment usage. Indirect costs include clinic rent, electricity, administrative salaries, and marketing expenses, which must be proportionally allocated across all services.

Example:

For a teeth whitening procedure priced at US$600, direct costs may total US$120 (kits, barriers, PPE, and dentist's time), while indirect hourly costs could add another US$100. This would bring the total cost to US$220, generating a gross margin of US$380. But does that really mean profit?

Contribution Margin: What Actually Remains?

The contribution margin represents the amount left from each procedure after paying for variable (direct) costs. It is used to cover fixed costs and generate profit. The formula is simple:

Contribution Margin = Procedure Revenue – Variable Costs

A clinic that doesn’t calculate contribution margin per service faces serious financial risk. Many dental offices over-promote low-margin services, unaware that these consume critical resources—such as staff time, room occupancy, and expensive materials—without delivering proportional returns.

How to Accurately Collect the Data

Start by mapping the resources and time required for each procedure. A dental management software can simplify this by integrating scheduling, medical records, and financial data. Create a technical sheet for each service that includes:

Average duration
Materials used
Responsible professional
Frequency of follow-ups or included maintenance
Specialized equipment used

Then, estimate the clinic’s cost per operational hour (dividing fixed costs by the total monthly hours) and apply this to each procedure.

Practical Analysis: Implants vs. Whitening

Consider a clinic that performs:

Dental implants with average revenue of US$4,000 and total cost of US$2,800
Whitening procedures with revenue of US$600 and total cost of US$220

While the gross profit from implants is US$1,200 and from whitening is US$380, if the whitening takes 1 hour and the implant takes 4 hours, the profit per hour may actually favor the whitening. This analysis must also consider factors such as no-show rates, follow-up times, and procedure complexity.

Strategic Decisions Based on Data

When this type of analysis is applied, clinics can:

Adjust pricing for low-margin procedures
Negotiate better terms with suppliers of costly materials
Reduce the offering of time-consuming, low-return services
Create profitable packages by combining procedures with different margins
Redirect marketing efforts toward high-margin services

Clinics that implement this level of cost control often increase their monthly profitability by 15% to 30%, without needing to increase patient volume.

Useful Tools for Immediate Implementation

Automated spreadsheets for calculating margins by procedure
Dental management software with financial integration (e.g., Dental Office, iClinic, Simples Dental)
BI dashboards with cost, time, and revenue data per service

Conclusion

Controlling costs by procedure is one of the smartest ways to professionalize the management of dental clinics. By identifying which services drain resources and which truly generate returns, clinic owners can make informed decisions, maximize profits, and build a more sustainable business model.