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Howard Speaks: Dental Insurance—It Figures by Dr. Howard Farran

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Categories: Practice Management, HR and Accounting;
Howard Speaks: Dental Insurance—It Figures 

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

Investor Warren Buffett has always taught that you shouldn’t go into a business that requires high capital investment while someone else sets your fees. Well, that’s what all health care is! High-tech equipment, highly regulated and third parties set your fees while you’re locked into their contracts.

An age-old question

For 30 years now, dentists have been asking me if they should go out of network with preferred provider organizations—while at the same time the average dentist is participating with more than six different PPOs!

Here’s why joining a PPO sounds good at first:
  • Americans who have dental benefits are nearly twice as likely to go to the dentist at least annually as those without dental benefits.

  • Lack of dental insurance is the most common reason why people won’t schedule a dental appointment.
So it seems like accepting a lot of PPOs should put you in the patient pipeline—one fewer thing to keep patients from crossing your practice threshold.

But if your prices start going up 20% or 30% like they have for the housing or lumber industries recently, do you think a PPO is going to be accommodating and start increasing allowable fees? Absolutely not, because they’re also locked into three-, four- and five-year contracts with a lot of big companies.

True tabulations

If you made bottled water and each bottle cost 50 cents to make, you’d know to sell it for a dollar and make 50 cents in profit. But if dentists were selling a bottle of water, they’d have to sell it for six to 12 different prices, depending on whichever third-party insurance plan each customer had.

This on top of the fact the dentists probably wouldn’t know how much it cost them to make that bottle in the first place! Every time I ask dentists how much they charge for a filling, for example, they’ll quote me the mental cash fee that they think their price is. But they’re not taking into account that although they “charge” $250 for a filling, the adjusted production was $125 so they actually got only $125. And they don’t know how long the patient was in the room for to get that $125, or what it costs to keep that room open for an hour.

Knowledge is financial power

This decision isn’t about just flatly whether or not to accept PPO plans—it’s about going in clear-eyed about what you’re getting into if you do accept them.

When you don’t know your costs and you get into an inflationary environment where your costs are going up significantly, and rapidly, that’s a recipe for disaster. You thought the pandemic was bad?

Confidence and stability is the foundation of success for almost everything: countries, currencies, economies and last but not least your business. Brands are built on this from the start, and in dentistry that should be the dentist. The opposite of stability is instability, which doesn’t have to bankrupt your business! Instead, the practice could become even stronger thanks to the changes you made to survive, whether you’re reacting to anything from recessions and higher taxes to new demands from your customers or staffers.

But again, you can’t do that smartly if you don’t know your numbers! Uneducated decisions are just hunches or guesses, which can sink your business.

1.5-credit online CE course:
“Should I Be Insurance-Free?”

This course helps viewers answer six questions that help determine the
right way to go in relation to dental insurance, and how to make smooth practice
transitions that position the practice to succeed, either in-network or out. Click here to view the
course for the chance to earn 1.5 CE credits.

 

Support these advertisers included in the June 2021 print edition of Dentaltown magazine.

Click here for an entire list of supporters.

 
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