I first wrote about PPOs in Dental Economics in 2001.1 Dentists were beginning to see the gap grow between production and collections as doctors signed up for more PPO plans, or as plans tightened their fee allowances.
During the last 17 years, the situation for practices has only become worse. For example, the average collection percentage in our area (the upper Midwest) is 82%. This means that doctors are working two months per year for free! And, during the last 15 years, there certainly has not been a reduction in wages, equipment, supplies, or rent.
Being the hard workers they are, dentists feel that they can outrun discounts because they often measure their security and happiness by how busy they are.
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I talk to dentists all over the country about dealing with PPOs and often hear phrases such as, “In our area, it really matters to patients which insurance the office is with,” or “Most people around here find their dentist from the insurance company list,” or “A new PPO came to town and the Anderson family asked us if we participate. They’re great patients and I don’t want to lose them, so I signed up.”
Almost every dentist, no matter how busy, hates to lose even one patient. The PPOs know this, and they use this psychology to compel dentists to sign up or to scare dentists from leaving.
Every month I receive data from more than 240 dental offices that cumulatively represent more than $30M per month in dental production activity. I have clients with different degrees of participation—some sign up with almost every PPO available, while others are completely non-par.
Comparing practices and statistics
So, to get a perspective on things, we looked into our database and asked, “What are the properties of high new-patient-flow and low new-patient-flow practices?” We identified practices that had the most number of new patients per doctor hour worked. (We used that statistic so we could sensibly compare different-sized practices.) We found that the number of new patients a practice attracts is a collection of factors. Practices with low new-patient flow tend to have some or all of the following properties: little or no insurance participation, poor visibility, poor signage, old equipment and décor, an antiquated or nonexistent website, and untrained or unqualified staff.
Practices with a high number of new patients tend to have: good visibility and signage, PPO/insurance participation, active advertising, a strong web presence, up-to-date equipment and décor, an enthusiastic and well-trained staff, and expanded business hours.
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We found that PPO participation is just one of many factors and not even the main factor. Good visibility and signage in a growing community is by far the most important predictor of high new-patient flow.
We also looked at insurance participation to answer, “Does one see an increase in new patients in proportion to increases in PPO participation?”
In my work with practices, I notice that those who are completely non-par indeed have fewer new patients. However, it seems that practices that sign up with every PPO available don’t have a proportional increase in new patients. The statistics bore this out. At a certain point, additional PPO participation just provides additional discounts, not more new-patient flow. As with many things, it’s a matter of balance. Just like you used to balance your fees, the challenge nowadays is to balance your PPO participation. Maybe you have no choice but to be with the major PPO in your area, but maybe you can cut back on the other PPOs you’ve joined. It’s not an all-or-nothing proposition. Any reduction in PPO participation reduces your write-offs.
Back in the days when dentists actually had control of their fees, most tried to keep their fees about average. Some were higher and some were lower. You likely did not try to have the lowest fees in the area. Nowadays, how you set your fees has less to do with what your actual charges are than with which and how many plans you sign up with. The more plans you join, the lower the fees (in effect). Yes, sometimes you might have lost a patient because he or she found a “better deal” at another office, but demand for dentistry has always been relatively inelastic when it comes to dental fees. That is, doctors who charged less did not see a great increase in patient flow, and doctors who charged more did not see a huge decrease.
It’s important to keep in mind that no insurance company works with all of the providers in your state. Chances are you’re already seeing some patients out-of-network on some plans. If you were to join those PPOs, you’d suffer write-offs on patients you already have without necessarily receiving a worthwhile increase in new-patient flow.
These decisions can add up to thousands of dollars per month. For many of you, PPO write-offs are your biggest expense, right behind wages.
As my 2001 article stated, you can leave a PPO, with proper preparation. Yes, in any PPO transition, you will lose patients, but probably far fewer than you think!
If you’re not already doing so, make sure that you have specific credit adjustment codes for the various insurance companies in which you participate. Most practices have just one catch-all “insurance adjustment.” You don’t need a credit adjustment code for every single PPO, but at least for your major ones. That tells you how much they “cost” you each month. Moreover, tracking this also helps you gauge the activity you have in any particular plan.
Let’s say you have a PPO that represents about 15% of your patient base and allows you just 60% of your normal fees. If you are producing about $100,000 per month, that’s $6,000 per month right off your bottom line. If you handle things right and keep most of the patients, you’ll add nicely to your profits for this year and years to come. Moreover, as you learn how to deal with PPO decisions and transitions, you will have much more control over your practice’s bottom line. Every independent dentist needs to know how to manage PPO participation.
There are three objectives when leaving a PPO:
• To minimize any loss of patients
• To slow down any loss of patients
• To tactfully handle things so that your patients and your staff are comfortable
Before my company takes any practice through a PPO transition, we do a “fitness test”; that is, we look at the practice statistics and make sure that there is enough momentum that the practice will “heal” over the loss of any patients. It’s not enough to just leave a PPO; you also have to be working toward something. In fact, the stimulus of going through a PPO transition can really help you get your act together.
For example, maybe it’s time to spiff up your web presence. Many doctors faint at the idea of spending $5,000 per month in advertising when they are writing off $30,000 per month in PPOs.
When was the last time you had a systems tune-up? That is, when did you really have your continuing care, treatment follow-up, new-patient intake, scheduling, hygiene protocol system, etc., examined and refined? Instead of offering discounts to draw in more people, maybe you and your team can work on doing more for the people you already see. This does not have to be a matter of hard sell. Every qualified management consultant can help you with these issues. Get their help instead of relying on the PPOs to fill your schedule.
Success is not just about hard work
Doctors, remember the courage it took for you to start in practice, buy a practice, build your new facility, buy that equipment, and more? We all know that integrity, hard work, and skill are important to success. So is courage. Courage is something that a private dentist must have to not be under the thumb of the PPOs or other forces in dentistry.
Your dental team members may also have anxiety about leaving a PPO. They’re worried that the practice will lose lots of patients and that it will lead to a decrease in their work hours and security. Or they’re worried they’ll be subject to uncomfortable confrontations with patients.
It helps to set the foundation by discussing questions such as, “Do we really believe that real fees are fair and that we deliver quality dentistry and service to our patients? How do we feel about patients who do not have insurance paying the full fee, while others who happen to have the benefit of insurance are, in effect, paying 40% less?
This even comes down to fairness between insurance companies. If some insurance companies pay you better than others, reward them with your participation, and then don’t enable the insurance companies that want to drive your fees down to the bottom.
Your staff also needs to know how to tactfully address patients through the transition. Even if you write letters (which I don’t generally recommend), patients don’t always read or understand them. Your team needs to be able to deal with patients who have insurance participation questions, just like they need to be able to deal with insurance in general. How they do this can make a big difference between scores of patients lost or saved. Your staff can’t just be handed scripts. They have to really understand the logic of what you are doing, and you also have to believe that what you are doing is fair.
So, in summary, (1) be slow to join PPOs, (2) be methodical in leaving, and balanceyour PPO participation, (3) don’t make decisions based on fear or anger, and (4) remember that you have more power than you think. Use it!
1. Rossi B. Peeling off the PPOs. Dent Econ. 2001;91;68-77.
Bill Rossi is the president of Advanced Practice Management LLC. He has more than 35 years of experience in practice management. Rossi and his team are actively involved in the ongoing management of more than 240 dental practices. He is an ally for private and independent practices in a profession increasingly impinged on by corporate dentistry and PPOs. Contact him at firstname.lastname@example.org, (952) 921-3360, or advancedpracticemanagement.com.