The Unbooked Operatory and Section 179

By Jim Philhower, Director of North American Dental Sales Leadership & Development

Dr. Charles Blair has written and lectured about the “unbooked operatory” for many years. Every dentist realizes that it is easier and less expensive to plumb and run all utilities for current and future operatories when they are building or remodeling an office. The problem arises in the future, when the practice has grown and there is now potential for clinical usage in those plumbed but unequipped operatories that have been used for storing supplies or inactive files.

Most dentists look at equipping the operatory as a cost as opposed to a means to decrease stress, increase productivity, and profitability. Same-day dentistry enhances patient convenience and the overall treatment experience.

Equipping the unbooked operatory is one of the best and easiest things a dentist can do to decrease stress and increase production. The equipped operatory will allow the practice to work in those extra patients with appointments that take just a few minutes; removing sutures, denture adjustments, taking X-rays, etc. Emergencies can be scheduled appropriately by discussing available times during the morning huddle. If the doctor or hygienist is running behind, it allows for the next patient to be seated “on time.” Without the extra operatory, these types of appointments can be a disaster when you are working to maintain the day’s scheduling. This can greatly increase the stress for the doctor and the team. The doctor can provide simple procedures to hygiene patients while the patient is still in the hygiene appointment if the dentist has time in their schedule and the hygienist has an available operatory to see their next patient. This same-day dentistry is much more profitable than having to reappoint the patient, meet, greet, and turn the operatory over again along with filing a new insurance claim and sending another bill. Most dentists look at equipping the operatory as a cost as opposed to a means to decrease stress, increase productivity, and profitability. Same-day dentistry enhances patient convenience and the overall treatment experience. The average doctor’s production per hour is $400–$500. The average hygienist production is $85–$110 per hour. A new, equipped operatory would require an investment of $400–$500 per month. Therefore, if the clinical team were to only work 3–4 hours per month in the new operatory, the investment would easily pay for itself in new production and generate a profit. The average dentist works 200 days per year, so the $400–$500 per month investment breaks down to just $20–$25 per day!

The table on the following page is from the A.D.A. survey of a dental practice. It illustrates the increase in productivity by adding an equipped operatory and then shows what another dental assistant would add in terms of increased productivity. This assumes using the operatory in more of a traditional, fulltime capacity.

The cost of traditional dental equipment has actually decreased in cost when adjusted for inflation over the last 25 years. In 1985 an operatory of equipment could easily cost $20,000. Today that investment has increased to just $20,000 - $25,000, and section 179 makes the purchase of new equipment much more affordable.

Section 179:

IRS’ Section 179 offers up to $250,000 for 2010. Most dental equipment qualifies for a 5-year depreciation writeoff. Section 179 allows the doctor to expense or accelerate that 5-year depreciation schedule up to $250,000 in the tax year for 2010, assuming the Doctor is in a 40% bracket, combining federal and state taxes. This means that $100,000 could be realized in real tax savings for 2010! Or, let’s say the doctor outfitted the unbooked operatory with new equipment at an investment cost of $25,000. The doctor could receive $10,000 in real tax relief ($25,000 x 40 %). The monthly investment in that equipment would be approximately $500, which means the doctor could have the use of that new operatory for approximately the next 20 months without actually tapping into his or her current cash flow!

Example

: Tax Savings: $10,000.00 Divided By Monthly Investment: $500.00 10000/500 = 20 Months!

Assuming the total investment was $25,000.00 to equip the unbooked operatory, the true net cost would be just $15,000.

Example

: $25,000 Investment $10,000 Tax Savings $15,000 Net!

Section 179 is set to return to $25,000 (plus inflation adjustments) in 2011. The new equipment must be delivered, installed and operational by December 31, 2010 to qualify for Section 179.

Ask your CPA about the benefits of Section 179. If your CPA is not familiar with section 179, check with the ADCPA (Academy of Dental CPAs). The ADCPA specializes in the dental profession, and has nearly 7,000 dental offices across the U.S.