Why Offer A Dental Membership Club?
Are all PPOs in your practice profitable? A dental membership club may provide a profitable alternative to a non-profitable PPO. If you participate with any PPO plans in your dental practice, you should evaluate each individual plan annually to determine if it is profitable and, if so, the level of profit it provides. Doing this may result in the decision to end participation with a plan which provides little or no profit to your practice. Offering a membership club is an alternative to plans that are not profitable. Patients pay an upfront fee to join your club. This fee is equal to prepaying their annual hygiene expense, at a discount, and it provides several benefits of membership which include two cleanings and exams for the year.
Some patients actually discover the cost of membership is less than the total cost for their dental insurance, making the dental club a win-win for both patients and the practice. A self-administered club offers additional savings to the practice in the form of less paperwork and hassle to receive payment for services rendered.
How Do You Design Your Membership Club?
To start a membership club in your office, determine the services you will provide and total the associated fees for those services. A typical club offers two cleanings, two exams and select x-rays in a continuous twelve-month period. These services are usually offered at a discount between 10-20%. For example, if the total cost of the services (two cleanings, exams and BWX) using your fees is $300 and you offer a 15% discount, the total annual fee for an individual would be $255. In addition to the discounted services offered in the upfront cost, patients also receive a discount of 10% on most other services you offer.
Some offices offer more than one type of membership. Along with an individual plan, there may be a perio membership or a family membership (for the addition of children to a plan with two adults). The costs for these different levels of membership are determined the same way but the family membership usually offers a larger discount for either the upfront cost and or additional discounts given (12-15% rather than 10%) on services.
Remember, this is your unique membership club(s) and you will design it to offer the services that support your philosophy of care at a lower cost structure for your existing patients of record. You can include (or exclude) any services or products you determine to be a part of the membership offer.
Why Self-Administer It?
There are companies which will administer the club for a fee. This serves to further reduce the profits you receive from your club. If you chose to go with an outside company for administration, examine the total cost of both fees and discounts to determine if this is still profitable and at what level of profits.
Administration of the plan is very easy. Additionally, these are fee for service patients, so there is no added billing or insurance processing to receive payment. At least try self-administration of your club prior to allowing a third party to administrate it for you.
How Does A Fee Increase Impact Your Membership Club?
Most clubs are sold during any month of the year and offer a continuous twelve-month period for membership. When a fee increase occurs, it will immediately impact any new memberships to the club as the membership fee should increase immediately to reflect the new costs to join the club. Review the associated fees and discount to determine the new membership fee. Until their next renewal, members do not see an increase in the cost of membership. However, existing members will use the newly raised fees to determine their current discount for additional products or services with the same 10% discount they are offered as a member. If a patient joins your club and uses the first cleaning, exam and x-rays in January, then subsequently the fees increase in March, the actual savings for the patient is larger on the second cleaning and exam as it was pre-paid at a lesser fee. This is an added advantage of membership. Make sure to point this out to patients when they join.
Why Is Auto Renewal An Essential Feature?
Today, the majority of other memberships are on automatic renewal. Think of any membership you have, such as your fitness club; shopping club; streaming service and more, and most likely you will realize the majority of them, if not all, are on an auto renewal.
Not only are they on auto renewal, usually, they are charged to a credit card on file for the account. Your dental membership club should be no different. Follow the example business has set for maintaining membership and constant cash flow from these fees.
In many dental offices which offer a membership club, the renewal occurs at a dental appointment. Patients are not even billed for the membership a month prior to its due date. In theory, this might work if all patients keep to their recare cycle as prescribed. Unfortunately, the average recare cycle is not six months, as is universally recommended.
If a patient joins your membership club in January and they have the first prophy at that time, they would be due to renew the membership by the next January 1st. Let’s assume they are like a normal recare patient and they are unable to have their second recare visit in July, due to scheduling conflicts. It might be pushed out until August or September. If the second recare occurs early in September, they are now due to return in March. This could easily be pushed out until early May.
With auto renewal, the patients credit card on file would have been charged in January when the payment is due. If the renewal is tied to an appointment, it will be May (in this example) before the renewal is processed. This means every 2-3 years a payment for the membership club is skipped. That is at least an additional 30% discount for the patient, on top of all the discounts they already receive for their membership. If the patient was using traditional dental insurance and they missed the payment, the insurance would have been cancelled. If the patient missed a payment for any other membership, that membership would be cancelled.
This table demonstrates the 10-year impact of an automatically renewing subscription versus tying payment to an appointment:
The membership fees are an important part of your ability to offer discounts for your membership club. If they are not processed in a timely fashion and the practice cannot count on the cash flow they provide, your membership club may not be profitable for your practice. It is important to track the profitability of the membership club just as you track the profitability of all insurances you are in-network with.
With an automatically renewing subscription you reduce the likelihood of the patient pushing out the club membership beyond the agreed twelve-month period, thus making the membership more profitable.
The table below highlights the sequence of actions for automatic membership renewal:
Auto renewal is an easy-to-use feature which offers the added benefit of encouraging patients to keep their appointments in their recommended six-month time frame, as it was prepaid.
Conclusion
Not only do membership clubs allow an alternative to PPO insurance participation, they also offer a more affordable treatment option to fee for service patients. Administration and tacking of the club are easy and can be done in your office with minimal effort. The discounts you offer are easily offset by the ease of implementation and the payment at the time of service or in the case of hygiene visits, the prepayment benefit to the practice. To keep this as a win-win for both the practice and the patients the auto renewal of the membership is essential. It will prevent additional, unintended discounts which decrease or prevent the profitability of your membership club.