Leaving Dental Insurance Plans: Could Your Practice Survive?


YOU CAN BE HAPPY with your dental fee schedule. But how often do you receive the full price for a given dental procedure? If you’re like much of the dental profession, the answer isn’t so often due to participation in low-cost dental insurance plans. Plans that have you write off 30%, 40%, or even 50% of your normal fees. Plans that require you to work harder and longer to cover your overhead and (hopefully) make a profit. Plans that have you practicing dentistry at a pace you might not have imagined when you signed up with them.

Since the early 1990s, we have seen the high participation of managed care in the dental industry move from an outlier to the accepted norm. Nowadays, we are at a point where a fully paid practice is the anomaly.

For the anecdote, I can testify to it. I have lectured and met thousands of my colleagues over the past decade. It’s not uncommon, especially when I take on a new client, to see practices where two-thirds or more of their patients have HMO or PPO plans. The reason for the increase in activity is obvious. Doctors join in on the promise of more patients, which answers the question of why doctors worry about dropping plans. They don’t want to lose patients!

I myself was in the same boat years ago. My practice had dropped by 25%. New patients had fallen from 25 to eight per month. I had three PPO plan contracts on my desk. After reading them, I couldn’t reconcile how it would work for my practice. Doing the math, it became clear that I would have to work harder to do the same thing. I considered this 30% write-off as a “participating vendor” as a marketing expense. Then I realized that I would never spend 30% of my income on marketing! So I took another path. Instead of joining diets, I learned to manage and market my practice. I did well and eventually became a partner in the company that trained me.

Over the past 25 years, I have seen thousands of my clients drop out of their insurance plans. Maybe not all of their plans. A write-off of 10% isn’t so bad, but 25%? 30 % ? 40% or more? It just doesn’t work. And in fact, those write-offs as a percentage of revenue give you a bigger marketing budget than Coca-Cola, Walmart, or any big corporation!

Look under the hood

What is easy to see when a firm participates in insurance plans? Volume. The practice is busy. He has more patients and more activity. It might give a doctor hope, but “open the hood” on one of these high turnout desks and take a closer look. A few things are happening.

  • The cost of delivery (equipment, wages, rent, etc.) to fee-for-service and fee-for-service patients is the same, but reimbursement is lower, reducing the margin on all procedures or, in some cases, saving a loss.
  • If the average amortization is 30% on these plans, the office ends up with an overall decrease in fees of 10% for each third of the practice that is managed care – for example, two thirds HMO and PPO would be 20 % overall decrease in firm fees.
  • The doctor works more, harder, and faster for less profit, hoping to make up the difference in volume, which really isn’t a concept that works very well in a service business.

To be clear, I am not criticizing the patients in these plans. Patients are patients. They are not responsible for the rate schedule of their insurance company. I understand why insurance companies have gone this route—it’s cost control. But why would the average doctor submit to working for – in some cases – 50% of his normal fee?

The reason is that we don’t know any better. No one has ever accused us dentists of being big businessmen! I think that needs to change. If you want a successful practice, you need to know how to attract new patients on your own. You need to know how to present the treatment well and create a great customer experience with your team.

look deeper

Let’s do some math. What if a practice that was two-thirds through managed care (with an average of 30% write-off) dropped all of its plans? Sure, the practice would lose some patients, but not all. Some would stay. Some left and came back. The better the doctor’s business skills, the less attrition there will be. That said, how many patients could this office afford to lose by dropping these insurance plans? This is where it gets interesting.

Consider Table 1. In this scenario, we have an office that is two-thirds managed care. It has 3,300 cards, collecting $115,000 per month with an overhead percentage of 70%, and collections per card are $34.85. The cost per patient (overhead divided by graphs) is $24.39, leaving a net profit of $34,500. The doctor is now dropping all insurance plans, resulting in a 20% fee increase, and now watching what happens. Yes, you read correctly. The number of active patients drops from 3,300 to 1,980 (a loss of 1,320 patients), recoveries drop from $115,000 to $82,800, overhead percentage drops from 70% to 58%, and profit remains the same at $34,500 per month.

This doctor could afford to lose 1,320 patients and always maintain the same level of profitability! The doctor would work fewer hours, most likely with greater job satisfaction, and still make the same profit margin.

Now, obviously, I wouldn’t advise doing this without also knowing how to attract more new patients and be able to transition those patients from the plan to paying your normal fees. Done correctly, you can keep up to 80% of these patients. Situationally things can change, of course, but all is not bleak.

If you want to see what this type of scenario might look like for your practice, I’ve created spreadsheets that you can download from raisemyfees.com. You can enter your own numbers and see what would happen if you abandoned the plans and how many patients you could potentially afford to lose.

Again, the focus is not on dropping patients, and insurance company fee schedules are not the fault of patients. It’s about having a sustainable business model, practicing dentistry the way you want, and focus on providing the best possible care. It is also about having economic freedom.

I’ll give you an extreme example from one of our clients in the Midwest. It collects about a million a year and does not participate in any plan. He and his staff work approximately 18 hours a week (three six-hour days). His fees are above the average for the region but not the highest. Its profit margin is 50%. Almost everyone in his neighborhood participates in dental insurance plans, but not him. His point of view is that he’s going to be paid a fair wage, or he’s going to be home with his kids, or doing whatever else he likes.

So it is possible.

I put this concept to you to make you think. I care about our industry and I see a lot of dentists who feel like they work for insurance companies. I want to tell you that there is hope! But you have to be proactive.

How do you want to train in the future? Pay particular attention to acquiring a set of business skills to support your clinical skills. Create the type of practice you really want.

GREGORY A. WINTEREGG, DDS, is an internationally renowned speaker and author on practice management. After transforming his small-town office into one of the nation’s top firms, Dr. Winteregg joined MGE Management Experts as a partner in 1994. Since then, he has personally consulted and lectured to tens of thousands of dentists. Visit mgeonline.com or call (800) 640-1140 to learn more about MGE and the upcoming schedule of CE events in the United States and Canada.


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