Mustafa Shah-Khan, DDS
Dentistry is an ever-changing profession. Whether the changes are in materials, technology, or clinical or business operations, we are forced to remain current or be left behind in our practices.
Over the years, a statistic that I’ve closely followed is the average annual income for general dentists. According to Marko Vujicic’s ADA Health Policy Institute article, an average general dentist’s income declined from $219,738 in 2005 to $174,780 in 2014. In inflation-adjusted terms, the income level in 2014 is comparable to what dentists made 17 years earlier in 1997.1
Most professions hope to slightly increase their compensation each year. As I conducted research for this article, I found the usual explanations for the decreases in dental income—fewer adults are visiting the dentist; there’s a lack of discretionary income; and there are a growing number of practitioners in the profession. These are factors that have been discussed ad nauseam.
The element that is not often discussed is that we are now seeing a statistically significant change in repayment rates by private insurance companies. Most percent of practitioners across the country participate in at least one dental plan. As a result, these practitioners are contractually bound to accept established repayment rates set forth by the insurance companies. Dr. Vujicic, along with the ADA Health Policy Institute and the National Association of Dental Plans, analyzed over 23 million claims of the 10 most frequently used dental codes. The results stated, “Nationally, there was a 10.4% reduction” in repayment rates by private carriers between 2005 and 2014. The largest reduction was in New York State, with 26.2%. Dr. Vujicic summarized that there was a 77% correlation between dentists who participate in PPO networks and the reduction of repayment rates.1
As a result of this, I examined the relatively new phenomenon of reimbursement specialists. These groups serve to conduct PPO negotiations as well as usual, customary, and reasonable (UCR) fee schedule and coding analysis for dental practices. With the national reduction in repayment rates, it would seem natural for dentists to negotiate PPO rates to see if we can improve the fees that insurance companies pay us.
Like many practitioners, I thought I understood the model and how it could help doctors. However, I realized that I could not quantify or even define what the services are, nor what their ROIs are. I reached out to Harold Gornbein of Apex Reimbursement Specialists and asked him to explain it so that my seventh-grade dental mind could grasp it. Here is how he explained.
Let’s take a $1 million practice that is 50% fee-for-service and 50% PPO and insurance. Of the 50% that has PPO participation, approximately half of the PPO networks will negotiate on rates. This results in $250,000 of reimbursement revenue that can be negotiated. PPO negotiations tend to result in 10% increase in reimbursement. The result is a $25,000 annual increase in revenue each year.
PPO negotiation companies typically give doctors the option of a flat fee charged per PPO schedule that they improve or charge based on a shared revenue model. With either option, the doctor pays a fee only if revenue improves. Flat fee options can carry a fee of $1,400 per schedule improved, while a shared revenue option may carry a 38% fee for a 24-month period.
To further quantify, with flat fee, if five PPO schedules are improved at $1,400 per schedule, the total fee is $7,000, increasing annual revenue by $25,000. Over a 24-month period, the doctor sees increased revenue of $50,000 minus a $7,000 fee, which results in a net gain of $43,000.
With shared revenue, on the same $50,000 in increased revenue, the doctor pays a 38% fee equaling $19,000 and resulting in a net gain of $31,000.
With doctors experiencing a 10% reduction in PPO rates during the last 10 years, it seems beneficial to be able to negotiate with insurance companies. Additionally, a UCR fee schedule and coding analysis can have significant effects. Many practices have been reluctant to raise fees or understand where their fees lie in the market. By analyzing and updating a UCR fee schedule, practices tend to see a 5% increase in their fee-for-service revenue. In the example I discussed, 5% of $500,000 results in an additional $25,000 in annual revenue.
As ADA codes evolve, many practices do not code procedures correctly. They may use a code that only carries a 60% reimbursement, while an alternate code might be reimbursed at 100%. A typical coding analysis can carry a $1,500 fee but a great return on investment. By having correct and efficient coding, a practice could see improved annual revenue.
When we examine the three services together over 24 months,
- PPO negotiation (flat fee) has a fee of $7,000 and a net benefit of $43,000;
- UCR fee schedule analysis has a fee of $185 and a net benefit of $49,815; and
- Coding analysis has a fee of $1,500 and a net benefit of $43,500.
Over 24 months, this is a net benefit to a practice of $136,315, which comes to roughly $68,000 in additional revenue for a year (figure 1). If savings are invested, the benefits are substantial (figure 2). When doctor incomes have dropped roughly $45,000 from 2005 to 2014, based in part to workforce dynamics and repayment rates, it seems reasonable to explore the opportunity to increase revenue by $68,000. PPO negotiations and UCR, and coding analyses are a source of increased revenue that is not the result of seeing more patients or doing more procedures. This is simply applying efficiency and having a net increase on the same gross practice numbers, which in layman’s terms means getting paid more for what you already do. The first part to implementing this type of service is to understand the market dynamics, while the second part involves understanding what these terms and their ROI truly mean to your practice.
1. Munson B, Vujicic M; American Dental Association Health Policy Institute. General practitioner dentst earnings down slightly in 2014. ADA website. http://www.ada.org/en/publications/ada-news/2016-archive/january/health-policy-institute-reports-dentists-earnings-as-stagnant. Published November 2016. Accessed October 12, 2017.
Mustafa Shah-Khan, DDS, is a graduate of the University of North Carolina School of Dentistry, where he served on the board of directors for the dental alumni association. He is CEO and founder of Synergy Dental Partners, and maintains a private practice emphasizing cosmetic reconstructive dentistry in Charlotte, North Carolina. He can be reached at [email protected].