You’ve had enough of the hamster wheel and are brave enough to step-off and say Goodbye to PPO networks!
What it takes:
• A+ customer service
• Strategic planning
• Great communication
• All-in attitude by the team
• Increased marketing
• Cool, level-headed purpose
• A deep dive in practice profitability and EBITDA (Earnings Before
Interest, Taxes, Depreciation, Amortization = Gross Profit)
Let’s get started…
There should be no doubt in your mind that the most harmful business effect of a PPO network is your own profitability. You cannot make up the reduction of profit by…
• seeing more patients
• hiring an associate doctor to help with the load
• building a larger building to increase traffic
• hire and retain a magnificent team who make your day simple
• preform the intricate procedures for which you have studied via
continuing education
…while getting paid the PPO’s percentage reimbursement – which at times, is insulting.
Challenge: Let’s analyze the percentage of active patients which belong to each PPO.
Key: Each software system can give you an accurate headcount of patients who have been in for care – either hygiene or operative care – within the previous 18 mos. This traditional definition is accepted by Consultants, Dental CPA’s, Practice Brokers, etc. Your practice ought to have a consistent reliable method of inactivating patients who no longer come into the practice so you never doubt your accuracy.
You will also be able to query your software for the number of active patients belonging to each specific PPO contract within the practice. A PPO which represents 5% of the active patient base is a different risk than a PPO which represents 35-40% of the patient base. Many practices have a higher than 50% Delta utilization.
Challenge: Let’s analyze the reimbursement paid by each PPO against your actual fee.
Key: Each PPO must have its own PRODUCTION adjustment code so an appropriate evaluation of payment may be determined. Yes, PRODUCTION! As an example, a procedure’s fee is $1000. A PPO contract averages 65% of your fee. Production is decreased by 35% (or $350) net production, $650. Collections are paid 50% at the rate of approximately 50% by the insurance company, $325, with the patient co-payment or $325.
There are only three (3) Collection Adjustments used in dentistry:
• Merchant fees, Visa, MasterCard, American Express, Discover, etc.
• Refunds, overpayment made by the insurance company or patient
• Outside financing fees
Many computer reports stack the adjustments against collections. This however is not the most accurate look at your practice’s productivity.
Challenge: Let’s make sure you have a keen awareness of practice overhead and accurate doctor compensation vs. profit.
Key: Most profit and loss statements are organized alphabetically – contributions come before dental supplies, dental supplies come before marketing, marketing comes before staff compensation.
While it’s easy to follow, it does not help you make decisions as to where your numbers finish as a percentage to net collections nor as a benchmark for success.
In the above discussion of a PPO reimbursing 65%, it looks great unless your practice overhead is 68% – meaning every patient you treat with that specific PPO costs you 3%. Unfortunately, there are zero dollars for Doctor’s compensation. Those dollars were adjusted for the privilege of the PPO contract. You cannot see more of these contracted patients to make up the loss.
Challenge: Let’s make sure you are raising your fees annually to keep up with dental inflation – which is a very different number than social inflation.
Key: Many practices don’t raise fees because insurance companies don’t raise reimbursements for that increase and the adjustment percentage simply gets larger. The problem is that fees lag for several years, once you decide to leave the PPO, your fees are so far behind UCR it feels awkward to increase to the UCR level. A double loss!
Challenge: Let’s ask your team to rake in order of PITA factor each contract you are currently under.
Key: Your office gets paid less than your fee, you are paid less than your overhead, your team will tell you a specific PPO rejects everything the first time through therefore they do double the work resubmitting claims. Once submitted a second time, you can count on being asked for information which is already attached to the claim. Then you wait to be paid -sometimes for months.
Challenge: Let’s study the net effect on your hygiene program should some loyal patients choose to leave the practice. Consider this a reduction of Active Patients.
Key: No one on the team has the job of recare coordinator! Yes, all patients are pre-appointed at their hygiene visit but no one keeps up with those patient who fall through the cracks, ie: perio patients not returning, young people who don’t think a 6-month recare is for them, those patients who cancel their appointments and don’t reschedule, those patients who for whatever reason never get put into the recare cycle. Many practices actually see 60-70% of their active patient base in their hygiene department.
How do you know if you are one of these offices? To prove the logic, pretend you see 25 New Patients each month, pre-appoint them all, in 6 months you see these patients for recare and add 25 NP. Have you added a minimum of 50 slots to the hygiene schedule for the New Patient load? Better yet, you have been in practice for 20 years and still have trouble filling the same two hygiene columns you had 15 years ago. Obviously, patients must fall out of the schedule to allow new patients in.
Challenge: Let’s evaluate your patient relationships and your dedication to your patients.
Key: Dental professionals are super people! Meet most dental professionals and you have a friend for life! This giving and caring attitude has made a great career for you and your family. You enjoy your team and look forward to going to work each morning. What is not working is your retirement account, your team’s bonus, and frankly the disappointment of creating a great career but not feeling well compensated. The Squeeze is not worth the juice!
STOP THE MADNESS – there is a way out!
Your Paragon consultant is well versed in this discussion and will customize a plan of PPO withdrawal that takes into account the two most critical pieces of practice profitability: retention of patients and retention of fees once adjusted per a PPO contract. Call us immediately – we are here to help.
Thank you,
Linda Marek
VICE PRESIDENT