Specialist accountants Dodd & Co in Cumbria, who serve dentists & medics throughout the UK, have recently released their 2009 profit figures for both NHS and private practice dentists.
They covered the findings in their recent newsletter (which I highly recommend you subscribe to, see email link at the end of the article) and have kindly allowed us to reprint it in full.
Over to Dodds…
Each year we compile a profits report summarising the results of our dental clients. We look at both Principals and Associates trading as corporate and non-corporate and analyse the income and expenditure.
This provides us with an effective tool that we can use to benchmark our clients’ figures and compare their performance.
This year’s report includes the earnings of the third full year of the new National Health Service contract, showing the effect that the contract has had on dentists’ net income.
The key results were as follows:
The average net profits generated per Principal practitioner in a typical private dental practice fell in 2009, to £113,576. This was a decrease of £4,415 (3.7%) on the £117,991 average net profit achieved in 2008.
In comparison, the average net profits generated per Principal practitioner in a typical NHS dental practice show a substantial increase to £120,521 from £105,457 in 2008. This is an increase of 14.3%.
If we look at the turnover of the practices, private fee income has exceeded NHS income for another year but the gap between the two has narrowed, with the ratio now being 56.3% private to 43.7% NHS (2008, 62.9% private and 37.1% NHS).
It appears that NHS practices have suffered increases in their direct costs and despite the increase in average fee income this has resulted in a decrease in the net profit percentage (the net profit as a percentage of the total income of the practice) from 56.06% in 2008 to 48.5% in 2009.
Interestingly, the private practices seem to have a much higher turnover than the NHS practices but are only generating a net profit percentage of 35.5% (36.9% in 2008). Possible explanations for the lower net profit percentage in private practices seem to be due to much higher payments made to associates and hygienists.
We must also not forget that NHS practices receive reimbursements for certain premises expenses which inevitably will reduce costs.
Possible reasons for the variances above are:
1. The polarisation of NHS services has resulted in larger NHS practices, where associates and therapists are delivering an increasing amount of the contract value and thus we are seeing fewer clawbacks being deducted from the monthly income schedules. This has resulted in the net profits per Principal increasing.
2. The recession is influencing patients’ choices in regard to the treatments they choose. Patients tend to be opting for the cheaper alternative treatment rather than the “full works”, and thus we are seeing the reduction in net profits in private practices.
3. Some NHS practices have been successful in negotiating new, or extensions to, contracts at higher UDA values than they were previously given.
Whether the NHS practices will see a further continued rise in their profits will depend on the number and value of the UDAs in their contracts, and whether they can achieve any more cost savings.
We have seen UDA values as low as £16.20 and as high as £37.84 this year, with the average being £24.38.
If you would like a full copy of our 2009 statistics (including profit reports for associates and limited company benchmarking) please contact Katie Wicker on 01768 864466 or email. Please also indicate if you would like to receive our newsletters.
