Maximize your Dental Practice’s Profitability

Key Takeaways:
  • Evaluate your practice data and carrier adjustments to make informed decisions about your dental insurance contracts.
  • Consider the risks of dropping a PPO plan and create a patient communication plan to mitigate potential losses.
  • Choose a dental insurance strategy that aligns with your practice goals and patient needs for long-term success.

 

Throughout their careers, many dentists will consider either adding or dropping a dental insurance contract. If you search online, you’ll find plenty of strong opinions asserting that dental insurances are prohibiting offices from delivering the high standard of care they want to give their patients. Some see the large adjustments and assume their best bet is to drop all dental Preferred Provider Organizations (PPOs). Before you make any rash decisions, evaluate your data and consider the consequences of both options. 

Evaluate your Practice Numbers 

Do you know what your adjustments are for each of the dental insurance plans with which you contract? Your first step is to find this information. Run a report from your practice management software that tells you the total adjustments broken down by carrier. You want to separate these so that you know which carriers are carrying most of your adjustments versus which ones have more digestible fees. In some cases, you may need to run multiple reports to calculate this answer. 

What you’re looking for in these reports is the gap between your gross production and net production. The gap signifies the total adjustments you’ve made due to insurance fee schedules. Don’t be surprised if you see carrier adjustments in excess of 40%. That is very common when you contract with PPO dental plans. 

If you find your adjustment percentage is much lower than 30-40%, that’s good! However, you should also check a few more things before you finish your evaluation. 

  • First, your practice should submit your full fee on insurance claims. Do not submit contracted fees. Doing so will not allow you to see the adjustments, and your insurance carriers will likely not raise their fees in the future.  
  • Second, evaluate your standard (or master) fee schedule. If your adjustments are low, it could be because your fees are much lower than your area’s average. You may even find instances where your standard fees are less than the carrier’s fees. This is why it’s important to have a structured process of evaluating your fees annually. 
  • Outside of your software reports, you should also calculate your gross profit margin for some of the most common procedures you perform. How much does a crown cost you to complete? What about an implant or dentures? Knowing how much each of these procedures costs you will also help you determine the point at which you either break even or begin to lose money on a service. 

Now that you have a good idea of your carrier adjustments and profit margins, it’s time to decide if you should continue or terminate your contract. Remember, you don’t have to go all-in one way or the other. Be strategic about which dental PPO plans work for your office. Consider the number of patients with each plan, as well as large employers in your area. Terminating a contract with a carrier only a few patients use is much less risky than one a third of your patients use. 

Mitigating Carrier Termination Risks 

If you’ve decided to terminate a contract with a carrier, you should understand the risks associated with that decision and make a plan to retain as many patients as possible. 

The most important piece of this process is to communicate with your patients early. When you tell the carrier you are terminating your contract, they will send a letter to all of your patients who have that plan to let them know about the change and encourage them to switch to a different PPO provider. Your patients should not learn that news from the insurance company. 

Instead, make a 12-month plan. Begin talking to your patients about the change when you see them in the office for their preventive or restorative appointments. Let them know why you’re making the change, when it will happen and how it will impact them. If you’re not sure how the carrier will reimburse you when you go out-of-network, let the patient know you’ll work with them. You may find the out-of-network fees are much closer to your standard fees, and therefore won’t cause much disruption. You can also offer alternative options like membership plans, cash discounts and financing options. 

While the hope is that you’ve established enough rapport and trust with your patients that they will continue to see you even if you drop their insurance plan that won’t be the case for everyone. Plan for the worst and assume you’ll lose around 30% of your patients who have that particular plan. How will you replace those patients? Do you have a marketing plan that draws enough new patients? 

Are Dental PPOs for you? 

There is no right or wrong answer when it comes to contracting with insurance carriers. Some practices are happy to accept the adjustments if it means they can help more patients. Others would rather be more strategic in choosing their insurance allies. Both ways can contribute to your success – you just need to decide which one works best for you. 

If you’d like to talk to an advisor about your dental insurance contracts, reach out to the dental accountant team at Adams Brown. We can help you evaluate your adjustments and show you how they’re impacting your profitability. Whatever you decide to do with that information, we can help.