The rise of in-house dental plans

There are many advantages to developing an in-house membership program for your dental practice. Some of the main advantages are keeping up cash flow during slow times and developing a loyal patient base.

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Jordon Comstock

In-house membership programs can enhance your dental practice, allowing for less dependence on insurance providers while generating patients who become loyal to your practice.

According to the US Surgeon General, over 108 million Americans lacked dental insurance in 2012.1 I’ve heard estimates that today more than 55% of Americans have no dental insurance. While more people need dental care, fewer are receiving adequate treatment. To help increase the number of dental visits, many dentists are implementing in-house membership plans, which are on the rise.

Whether you’re new to the dental industry or a seasoned veteran, in-house membership programs are excellent for attracting new patients, retaining current patients, and offering high-quality dental care to patients who don’t have dental insurance. If you rely only on insurance companies to drive patients to your practice, you’re in for peaks and valleys of unpredictability. You want to help your patients while also building a fiscally healthy business, and in-house membership plans can help you accomplish these goals.

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What is an in-house membership program?

An in-house membership program is a specific set of plans that you offer your patients, and this includes discounted dental care for a low monthly or yearly subscription fee. Once patients subscribe, they benefit from free prophys plus a discount on their other needs. Dental insurance is confusing and often doesn’t cover many services, so offering patients a plan that applies to their needs is helpful and less restrictive.

The most significant myth perpetuated by the dental industry is that to grow your practice, you need to accept dental insurance and go the PPO route. Not so! Starting a business and partnering with a third-party company that says you need to cut your profits by more than 60% to succeed doesn’t sound like a good business model to me. In fact, it sounds risky. This is why in-house membership programs are the way of the future.

Eliminate the hassle of working with insurance companies

Working with insurance companies can be difficult for your staff and patients. Insurance companies require waiting periods and work with PPO providers that control your profits. Additionally, claim submission and payment processing is a headache, and often you need one staff member to be dedicated solely to dealing with insurance companies. These problems ultimately directly affect your cash flow.

An in-house membership plan doesn’t eliminate the need for managing payments. But it does come with a wealth of resources, such as membership software solutions, which help automate payments and make it easy for your office to create and manage plans and members.


Increase patient loyalty

When patients belong to your membership program, they’re more likely to spend money with you for their dental services. They’re also more likely to return for regular prophys and routine maintenance exams. Members who pay membership fees are also less likely to cancel appointments.

Let’s look at Amazon Prime as a model membership program. According to Morning Star, a market research provider, the average non-Prime Amazon member spends only $505 annually with Amazon. However, the average Amazon Prime member spends approximately $1,224 per year with the company. 2 An in-house membership program aims to boost patient loyalty by offering a monetary discount toward dental services.

Brady Frank, DDS, advertises his plan to encourage patient loyalty. He finds that 80% of his in-house membership signups come from discussing necessary dental work estimates with patients. His office uses a two-column approach. One column includes the customary out-of-pocket dental prices, and the second column highlights the cost-saving benefits of the dental plan. On average, members who require dental work will save $800 to $3,000 per year.

By using the high-cost to low-cost approach, patients will see that you’re trying to save them money, which provides them with reassurance in your skills and boosts their long-term loyalty.

Increase case acceptance

Patients are looking for discounts, especially if they don’t have dental insurance. This is a good thing for practices, as the psychology of wanting a discount can increase case acceptance. According to Robert Cialdini, PhD, the author of Influence, showing patients a high price and then showing them the low membership price and discounts increases the number of patients saying yes to treatment. This is called the “contrast principle,” and it’s used to help patients buy.3 When patients buy a membership or savings plan, they feel invested in the practice and are more likely to accept your treatment plans. Much like an Amazon Prime or Costco membership, patients will keep coming to the practice and buying because of the psychology behind in-house membership programs.

Develop a predictable revenue stream for your practice

Patient cancellations and lulls in the economy affect your practice’s income. It can be challenging at times to manage a successful practice, especially if revenue is inconsistent. A membership program can provide you with a stable stream of recurring revenue.

For example, if your office offers a membership plan for $35 a month and you gain 1,000 subscribers, you’ll generate $35,000 per month in predictable recurring revenue. This steady stream of income offers your practice more security during slow times. Many dentists say the same good things about instituting an in-house membership program, agreeing that it helps even out their practices’ cash flow.

Recurring revenue develops higher practice valuation

Recurring revenue contributes to a financially secure dental practice, which is essential if you want to sell your business. In-house membership plans play a central role in creating monthly and annual revenue streams, which makes them an essential component when developing a reliable business model.

According to John Warrillow, the author of The Automatic Customer–Creating a Subscription Business in Any Industry, businesses with predictable recurring revenue streams are more likely to value their business at a multiple of 24 to 96 times monthly recurring revenue instead of a discounted cash flow valuation.4

How to create a successful in-house savings plan

I’ve seen many practices try and fail to create a membership program. Here are some quick tips to help you successfully start and grow a program in your practice:

  • Automate payments—Payment management can quickly become time consuming for your practice. Automate payments from the beginning and as you grow, this solid foundation will help your program grow.


  • Automate renewals—You ideally want to sell your program once and then automatically have patients renew each year. This is the best way to streamline your program.


  • Create a patient agreement—Most states require an agreement. This is good business practice and will help protect you and your patients.


  • Use software tools—Most practices try to run these programs manually. This can create an administrative burden for your staff.


  • Focus on external marketing—Marketing is essential to getting new patients and having them sign up for your plan. Use the membership program or savings plan as an offer to attract new patients, retain patients, and increase case acceptance.


  • Keep your plans simple—Many practices that fail complicate the plan process. Dental insurance is already complicated for patients and practices. Don’t fall into the trap of also making your plans complicated. Remember that less is more.


  • Get your whole office on board—It is critical that your team should implement any type of system together. If your staff is not on board, your program will fail.


Conclusion

There are many benefits for practices that have healthy recurring revenue streams. Lack of cash flow can have a negative impact on a practice, including stunting your ability to attract the best staff. The benefits to instituting an in-house membership program far outweigh the challenges, especially if you use an automated management program. Professional programs make it easy to eliminate errors, and they simplify billing, boost revenue, and make patients happy.

The five top benefits of instituting in-house membership programs are

  • watching your cash flow increase;


  • attracting patients who do not have dental insurance;


  • focusing on patient retention;


  • having a great case acceptance tool; and


  • reducing dependence on dental insurance.


References

1. Evans C, Kleinman D, Maas W, et al. Oral Health in America: A Report of the Surgeon General (Executive Summary). National Institute of Dental and Craniofacial Research website. https://www.nidcr.nih.gov/DataStatistics/SurgeonGeneral/Report/ExecutiveSummary.htm. Published March 7, 2014. Accessed January 29, 2018.

2. Tuttle B. Amazon Prime: Bigger, More Powerful, More Profitable than Anyone Imagined. Time website. http://business.time.com/2013/03/18/amazon-prime-bigger-more-powerful-more-profitable-than-anyone-imagined/. Published March 18, 2013. Accessed January 28, 2018.

3. Cialdini R. Weapons of Influence. In: Influence: The Psychology of Persuasion. 2nd ed. New York: Harper Collins; 2006.

4. Warrillow J. The Automatic Customer. In: The Automatic Customer–Creating a Subscription Business in Any Industry. New York: Portfolio Books; 2015:29.


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Jordon Comstock is the founder of BoomCloud Apps, a software company that allows dental offices to easily create, organize, track, and automate an in-house membership program. Contact BoomCloud at (385) 225-9364, or download a free e-book about membership programs at boomcloudapps.com/economics.

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