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Freedom from PPOs

Nov. 1, 2020
Dr. Gary Light explains how he moved from PPOs to a fee-for-service dental practice and how you can too.

The COVID-19 pandemic has had a profound impact on dentistry. Early into the crisis, dental offices were forced to shut down for several weeks, resulting in dentists scrambling to obtain proper personal protective equipment (PPE), filing applications for loans, and modifying their offices to conform to guidelines from the Centers for Disease Control and Prevention, the American Dental Association, and the Occupational Safety and Health Administration. It was also a time that gave dentists a chance to reflect and consider how COVID-19 was going to impact their practices going forward.

Some dentists chose to close shop, unwilling to take the risks of exposure or incur the expenses needed to invest in their offices to make everyone safe. Others came back with the understanding that there would be a reduction in income due to the additional PPE required and loss of production. Then, there were those who were willing to come back but with a renewed philosophy and perspective. 

I experienced a similar time of introspection back in 2005 when a fire in my office building put me out of business for eight weeks. At the time, I was a partner in a practice that participated in the two biggest PPOs in the state, and I was totally frustrated and dismayed with their cost-cutting, restrictive reimbursement policies that were negatively impacting my practice of dentistry. It was a defining moment. I decided that when it was time for me to get back in the game, I was going to do so under my own terms. That meant dropping out of PPOs and practicing dentistry the way I was taught in dental school— without the influence of third-party reimbursement policies and the undue influence of managed care. 

Why should you drop PPOs?

The question I get asked the most is, “How did you do it?” It was a stepwise process and a recipe that I have shared with many other dentists who also wished to be free from PPOs. But before I go into the methodology, I want to address why you should consider it.

Like any other business, the key to a successful practice is its profitability. Yes, dentistry yields many intrinsic rewards, such as helping people and having a positive influence in their lives as well as the feeling of accomplishment with the completion of every procedure, but at the end of the day it’s the bottom line that is the just reward.

With that said, there are only two ways to increase profit—by decreasing expenses and increasing production. Decreasing expenses has limited impact. The top three expenses in dentistry are payroll, laboratory costs, and supplies, and the first two are challenging enough to reduce without having an adverse effect on the quality and delivery of patient care. You need a certain number of personnel to function efficiently, and laboratory expenses can be a reflection on the quality of work you produce. Regarding supplies, even a 10% reduction, which is likely to be the most that can be achieved without compromising the quality of materials used, is going to have a nominal result.

The only way to significantly impact your bottom line is to increase production. And if you are already working at capacity—which is the case with most dentists—the only way to increase revenue is to increase fees. This is difficult to do as a participating provider in a PPO, because you are limited to the terms and reimbursement schedule by contract. That is the justification for dropping out of PPOs. 

“How did you do it?”

Now, I’ll address how I did it and how you can do it too. Basically, it is a three-step process: (1) analyze your practice, (2) develop and implement a business plan, and (3) sustain that business plan.

Analyze your practice—Analyzing your practice involves collecting data to understand your financial status. For this, you must know your average daily production, collection, adjustment to collection due to insurance, the number and type of procedures done most often, and the total number of active patients broken down by percentage of those associated with PPOs versus those who are fee-for-service. It is also important to know your patient base with regard to patient loyalty and how much they value the treatment you provide, your referral network, and your source of new patients so that you can adequately assess the consequences of dropping PPOs. 

Formulate a business plan—The next step is to formulate a business plan. The plan starts with getting your staff on board with the new office policy and training them on how to inform patients of the change and explain why it will ultimately benefit them with regard to quality of care. Rehearsed answers to anticipated questions should be part of the training. Educating your patients about the costs associated with PPE to assure their safety, investing in new equipment, and keeping up with technology helps everyone understand the justification for the added cost of dental care. It is important to be transparent in all financial transactions as to what the patient’s financial responsibility is by providing pretreatment estimates. And most importantly, even though you may no longer be a participating provider in a PPO plan, it is important to let patients know that their dental insurance can still be applicable to their treatment costs as long as it provides benefits to nonparticipating providers.

Sustain your business plan—The last step pertains to patient retention and growth. Dentistry is a service business, and the key to patient retention is making sure your patients value the services you provide. If there is a perceived value, patients will be willing to pay for it. Periodic reinforcement of what makes your practice unique and what you do to deliver the highest quality of care helps patients perceive value. It is also important to have a strategy to attract new patients and cultivate referrals, which could include incentives for existing patients to encourage referrals, networking with specialists, and advertising or using marketing tools such as social media. Remember, new patients are a valuable asset because they come to your office knowing in advance that you are a fee-for-service office.

Self-limiting beliefs

There are many self-limiting beliefs that keep dentists from initiating the process of moving toward fee-for-service care, just as there are many barriers to success. Predominant factors include fear of change or losing patients. Dentists often panic at the thought of not having patients to treat. Failure to succeed is another concern.

Success requires that you silence the “inner critic,” transform the “half a loaf is better than no loaf” mindset into a belief that the treatment you provide is unique and valuable, and acknowledge that you deserve to be paid a fair fee for the treatment you provide to your patients. I can tell you from experience that those who are motivated and stay focused on their goal will ultimately succeed and enjoy a fulfilling career along with the financial rewards that accompany it.  

Gary D. Light, DMD, FICD, has been a practicing dentist for 35 years. He successfully transformed a practice dominated by PPOs into a thriving fee-for-service business. Dr. Light is a graduate of the Harvard School of Dental Medicine and a certified leadership and performance coach. He is deeply motivated to support other health-care professionals in achieving financial independence, enhanced patient care, and professional and emotional satisfaction. Contact him at [email protected].

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