Howard Speaks Accepting Medicare Won’t Help Your Practice by Dr. Howard Farran

Reimbursement rates drop when insurance companies compete—so why do we accept so many plans?

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine

In mid-February, the California Dental Association sent out a release that suggested dentists could really help their practices if they signed up for Medicare Advantage. My problem with that is when you make an error with the government, it doesn’t care if you’re a good person, and it won’t take the time to come out and learn that you had a new employee who was untrained and made a billing mistake—it just tries to put you in jail. I came across two stories about that in a single day in February and posted them on my LinkedIn account.

Another example involves a former friend of mine—let’s call him George. George’s wife decided she wanted to “help out” in the office. Well, she made a ton of Medicaid mistakes, which eventually led to an audit. George couldn’t believe it, so he hired the best attorney in his town to work on the case. After a year and $100,000 in fees, the attorney said, “These guys are psycho. You’re going to go to jail for 10 years.”

What did George do? He and his wife left the country. He died just a few months ago in Mexico.

That’s the case with more dentists than you might realize. Anytime I go to another country, I try to visit every dental office I can—what Anthony Bourdain did with kitchens, I do with dental practices. And when I’d visit any of them—even in Cambodia or Malaysia—I’d meet former U.S. dentists who’d decamped for other countries for one of two reasons: Medicaid billing problems or drug addiction. These guys were all looking at 5, 10, 20 years in jail, and they said “To hell with it” and ran off to Cabo, Kuala Lumpur or wherever.

Overregulation raises costs

Health care is expensive. Government regulates it until it’s completely broken, and then says, “Because it’s broken, we’ve got to take over.” You can’t take an X-ray unless you’re X-ray certified. You can’t do anything without all of these government pieces of paper, which makes it so expensive to do business. Think of all the city, county, state and U.S. licensing paperwork you do every year. And the CDA wants you to start taking Medicare? Medicare pays maybe 40% of the cost of doing business, and one-third of that cost is related to paperwork.

If my fee is $100, Medicare wants to pay $40. But thanks to the costs of paperwork, I’ve already lost $30, so I see only $70. The numbers don’t add up. If you lose money on each Medicare patient, you’re not going to make it up in volume. I talked about this in my February column: Why won’t the government and insurers give up this crippling addiction to costly paperwork? If the nation’s banks can release apps that let their customers take a photo of a check to deposit it into their bank accounts, why can’t Medicare release an equivalent app for dental insurance coverage and services?

Here’s why: Because that’s not how government works.

Meanwhile, government doesn’t want—or need—to try to make things easier

In trade or business, customers voluntarily give businesses money in exchange for getting services. People know how much they need to pay if they want to buy a cup of coffee, a new garage door or a dental checkup.

In comparison, let’s look at how we pay taxes: The government says, “If you don’t pay your taxes, we’re going to throw you in jail!” You say, “OK, how much do I owe you?” and the IRS and the states reply, “Damned if we know! Go run off to accountants, CPAs, law firms, whoever—but you’d better find out, because if you don’t, we’re going to arrest you and put you in a cage.”

Dental speaker Roy Shelburne has made an entire career lecturing about what not to do with dealing with Medicare and Medicaid—how even the smallest coding and records-keeping mistakes can spell doom for a practice. One morning, his office manager called and asked, “Are you on your way? Because there are some government authorities here about Medicare.” Roy wasn’t concerned about it because he thought it was a clear overreaction, but they found a litany of entry mistakes, prosecuted him and, after five years of legal hassle, he was sentenced to 19 months in federal prison. After he was released, he began speaking about systems that help protect other doctors from facing the same troubles.

Do not get in bed with your government! Don’t do Medicaid, don’t do Medicare. Remember, the people who are suggesting you do this are the same people who were utterly shocked two years ago when, after they raised Medicare prices 10%, they got 10% more dentists to sign up. How could they have been surprised? That’s a textbook example of price elasticity at work.

Work on lowering your costs

If you want more market share, lower your costs, so you can lower your patient fees.

When I ask a dentist what his favorite procedure is and he says a crown, I ask what he’s going to do with the price of a crown. “Well, next year I’d like to raise it 10%,” he says, but doing that is raising an economic barrier to entry—if he really liked doing crowns and wanted to do more of them, he’d lower the price to attract more patients.

Along those same lines, why are you gouging your non-insured patients with high fees, even though treating them involves none of the insurance paperwork and gives you a higher return?

We realized that even though Delta reimburses only $720 for a crown, my practice was still charging cash patients the full-fee $1,280, because we thought we were “making up” the money we were losing on insured patients. But by charging cash patients $500 more for a crown, we were punishing our best patients! They don’t require predeterminations, they don’t need insurance forms—they’re easy-peasy—and it was a rude awakening to realize we’d been penalizing them for it all this time. You’re my most loyal customer who gives me the fewest headaches? Great, pay me 70% more.

The only secret to lower prices is lower costs. You probably already know that means not paying a $40-an-hour hygienist to set up your rooms when a $20-an-hour assistant could do that work instead.

It also means not signing up with government plans that require tons of paperwork, pay you too little and still run giant financial risks. Life in Cabo San Lucas may sound great, but this isn’t the way you want to get there.