Everyone talks about healthcare. Almost nobody understands the economics. Here’s the truth — unfiltered.
Hamza Asumah, MD MBA, MPH
I’ve been in rooms where brilliant clinicians — people who can diagnose a rare condition from a single lab value — stare blankly when someone asks about their practice’s EBITDA margin.
That’s not incompetence. That’s what happens when you spend a decade training for one extraordinarily difficult skill set — and nobody bothers to teach you anything about the financial engine underneath your work.
Today, that changes. Let’s talk about where the money in healthcare actually goes — because if you’re building, running, or even just working inside a healthcare business, you need to understand this.
The System Was Designed to Keep You Confused
The complexity of healthcare finance — the billing codes, payer contracts, fee schedules, RVUs, prior authorizations — isn’t accidental. It’s structural. And it consistently benefits the parties who understand it most.
Here’s the uncomfortable truth: payers, hospital systems, and large DSOs employ teams of financial strategists whose entire job is to optimize the money flow in their favor. Most independent clinicians and small practice owners are navigating the same system with a fraction of that firepower.
You don’t have to become a CFO. But you do have to stop treating finance as someone else’s department.
The good news? Once you understand the mechanics, you can engineer better outcomes. The money isn’t hiding — it’s just flowing around you instead of through you.
How Money Actually Moves in a Dental Group
Let me use the dental industry as our case study, because the numbers are clean and the principles apply broadly.
Your revenue starts with production — the clinical procedures your providers complete. But here’s what most practice owners misunderstand: production is not revenue. Production is what you charge. Revenue is what you actually collect.
| THE PRODUCTION-TO-COLLECTION GAP Gross production: $120,000 Insurance adjustments and write-offs: -$12,000 to $18,000 Net collectible revenue: $102,000 to $108,000 That 10–15% gap is contractual — baked into your payer agreements. Most practice owners track production. The smart ones track the gap. |
Then comes overhead. In a well-run dental practice, here’s roughly where your collected revenue goes:
- Staff costs: 25–30%
- Facility and utilities: 8–12%
- Clinical supplies and lab fees: 8–10%
- Doctor compensation: 20–25%
- Administrative costs and software: 3–5%
- Marketing: 2–5%
What remains — ideally — is your EBITDA margin. In an efficiently run dental practice, that’s somewhere between 15 and 25%.
In a poorly run practice? It can be 5%. Or negative.
Why That EBITDA Number Is Everything
Here’s where the math becomes genuinely life-changing — especially if you’re building toward any kind of exit or valuation event.
Private equity firms and strategic acquirers value healthcare businesses using an EBITDA multiple. In the dental DSO space, well-run groups have been commanding 12 to 15 times EBITDA. That means every additional dollar of annual EBITDA you create is worth $12 to $15 in enterprise value at exit.
A 5-location dental group leaving $200,000 in EBITDA on the table annually isn’t losing $200K. At a 12x multiple, they’re leaving $2.4 million in exit value on the table. Every single year.
That’s not a hypothetical. That’s the arithmetic of healthcare business valuation. And once you internalize it, you start looking at every operational inefficiency differently.
The 5 Profit Leaks You’re Probably Not Tracking
Let me walk you through the five most common places I see money silently leaving healthcare businesses. These apply across dental, primary care, and specialty — because the underlying dynamics are universal.
1. Staffing Inefficiency
Labor is your single largest controllable overhead line — and in most practices, it’s managed reactively rather than strategically. The problem isn’t always headcount; it’s alignment between staffing hours and productive clinical time. If your support staff is scheduled for eight hours in a location that only produces six hours of meaningful clinical activity, you’re carrying a 25% labor inefficiency that compounds across every working day of the year.
2. Payer Mix Mismanagement
Not all insurance revenue is created equal. Depending on your payer contracts, you might be collecting 85 cents on the dollar from one insurer and 55 cents from another — for the exact same clinical work. Most practice owners accept their payer mix as fixed. It isn’t. Actively managing your payer mix — phasing out the lowest-reimbursing contracts while growing fee-for-service volume — is one of the highest-leverage, lowest-investment revenue strategies available to you.
3. Untapped Chair Utilization
In dentistry, every empty chair-hour is permanently lost revenue. It cannot be recovered. If a five-operatory practice runs at 80% chair utilization with an average hourly production of $400 per chair, the 20% utilization gap costs roughly $400 per unused chair-hour. Across a full year, in a reasonably sized group, that adds up to hundreds of thousands of dollars in lost production — from capacity that already exists and is already paid for.
4. Treatment Acceptance Leakage
Your providers are diagnosing treatment. Patients are declining it. And almost nobody is tracking the gap systematically. In a high-performing practice, you measure diagnosed production versus accepted production. That gap is your conversion rate — and it’s a direct measure of your case presentation effectiveness, your patient financing options, and ultimately, the trust your team has built with your patient base.
5. AR Aging Beyond 90 Days
Money sitting in accounts receivable beyond 90 days is unlikely to be collected at full value — and in many cases, it won’t be collected at all. I’ve walked into practices with six figures sitting in 90-plus-day AR that nobody was actively pursuing. That’s not a billing problem. It’s a management attention problem. And it’s costing more than the balance itself suggests, because old AR ties up your finance team’s time and distorts your financial picture.
The DSO Multiple: How Groups Hit 12–15x
One more thing I want you to understand — because this is where the macro picture becomes personally relevant.
Why do well-managed DSOs command 12 to 15 times EBITDA in private equity transactions, when a solo practice might get four or five? The answer is not clinical quality. Buyers assume clinical quality. What they’re paying a premium for is:
- Predictability — consistent financial performance that doesn’t depend on any single individual
- Scalability — systems and infrastructure that can be replicated across new locations
- Management depth — a leadership bench that exists independent of the founder
- Diversification — multiple revenue streams, multiple providers, multiple payer relationships
- Growth trajectory — evidence of acceleration, not plateau
Every one of these factors is buildable. None of them happen by accident. And all of them start with understanding the financial mechanics underneath your business.
What This Means for You
Whether you’re running a solo practice, building a multi-location group, or thinking about an eventual exit — the principles above are your foundation. The money is there. Healthcare is one of the most cash-rich sectors in the global economy.
The question is whether it flows through your organization or around it.
Understanding the mechanics doesn’t make you a businessperson instead of a clinician. It makes you a clinician who can build something that lasts.
That’s what we’re building here at Think Clinical. Start with the money. Everything else follows.
Dr. Hamza Asumah 
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