Net income has been used in the four biennial JCO Orthodontic Practice Studies as the variable that best measures economic success. This is because it takes into account the effects of other key variables such as fees, number of patients, and expenses.
This article will examine factors that seem to differentiate among practices with high, moderate, and low net income. As in previous studies, respondents were arbitrarily divided by net income into three groups of approximately equal numbers for purposes of comparison: high (more than $200,000), moderate ($100,001-150,000), and low ($25,000-89,999). All practices had one orthodontist-owner.
Success by Selected Variables
Number of years in orthodontic practice bore a significant relationship to measurements of practice success (Table 10). Net income, gross income, and number of active cases all increased up to 11-15 years in practice, then declined. Case starts continued to increase up to 16-20 years in practice, then dropped off sharply.
Among the three groups, there was no significant difference in number of satellite offices, percentages of adult or third party patients, or annual hours worked (Table 11). However, the high net income practices generated more than twice the case starts, active cases, and gross income, and about five times the net income, as the low net income practices did in 1986. They also had an overhead rate about 20% lower than that of the low net income practices.
Management Methods
The increased efficiency of the high net income practices, in terms of case starts, can be explained partly by the use of certain management methods (Table 12). For all 26 methods listed, those who used them reported more case starts in 1986 than those who didn't use the methods. The difference was statistically significant for all but nine methods.
High net income practices reported using all but one management method (written practice plan) more than either of the other two groups (Table 13).
Delegation
Delegation also appears to play a role in the efficiency of the high net income practices, who reported about the twice the number of full-time employees but a significantly lower overhead rate than the low net income practices (Table 11). For every task listed, practices that routinely delegated the task reported a significantly higher number of case starts than other practices did (Table 14).
A greater percentage of high net income practices than of the other groups routinely delegated every task except insertion of bonds (8% for both high and low), and the difference was statistically significant for 18 of the 24 tasks (Table 15).
Practice-Building Methods
Many of the practice-building methods listed were used by a majority of all income groups, making comparisons more difficult (Table 16). The methods with the greatest differential between high net income and low net income practices appeared to be change practice location, improve staff management, and patient motivation techniques.
Respondents were asked to rate techniques they had used from 4 (excellent) to 1 (poor); a mean rating of 2.5 would be "average". As might be expected, the more successful practices--those in the high net income group--rated almost every method higher than other practices did. The difference in ratings was statistically significant for participate in community activities, improve scheduling (on time for appointments and ontime case finishing), and improve staff management.
Methods rated highest by the high net income practices were follow-up calls after difficult appointments (also highest for the other two groups), on time for appointments, improve case presentation, on-time case finishing, change practice location, treat adult patients, and improve staff management.
Fees and Financial Policies
High net income practices did report significantly higher fees than the other practices, but only by 6-8% (Table 17). The three groups said they raised their fees by about the same amount in 1985 and 1986. Financial policies appeared to be about the same for the three groups, except that the high net income practices reported a somewhat higher initial payment.
Geographic Region
Most of the nine geographic regions showed a fairly even distribution of high, moderate, and low net income practices (Table 18). The South Atlantic region, which had the highest median net income, also had the highest percentage of high net income practices. On the other hand, the New England, East South Central, and West South Central regions had more practices in the low net income group than in the high net income group.
Although New England practices reported higher median net and gross income in the 1987 Study than in the 1985 Study, fully half the New England practices fell into the low net income category.
Conclusion
Practice success, as measured by income and number of patients, appears to increase up to about 15 years in orthodontic practice. Fees were similar for low, moderate, and high net income practices. Therefore, it appears that the large differential in income must be due to the ability to generate additional cases--at a lower overhead rate. Delegation and use of management methods were the factors in this Study that seemed most related to increased net income and case starts.
(TO BE CONTINUED) 
