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Professional Courtesy: The PPO Pay Cut by Dr. Thomas Giacobbi

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Professional Courtesy: The PPO Pay Cut

by Thomas Giacobbi, DDS, FAGD, editorial director

December is a time to celebrate the year and to begin thinking about the one ahead. I hope you take the time to celebrate with your teams, because many offices skipped doing so in 2020 thanks to coronavirus-related rules and restrictions. (Last year, our team had a private party at a cooking school, where we learned some new techniques and prepared a delicious meal. As I write this column, our plans for 2021 are still in the works, but I know we’ll find the right venue for a proper celebration.)

The pandemic has been tough on our practices for many reasons and while it is slowing down, the road ahead will hold some very real challenges to our practices’ financial health.

Two items caught my eye reading the paper in the past two weeks: a full-page ad from Bank of America announcing its new $21 hourly minimum wage, with a plan to reach $25 by 2025, and an article indicating the hourly minimum wage at Starbucks will be $15–$23 (based on local market), with a company-wide average of $17. These two companies are competing for the same reliable, customer-focused talent that you need in a dental office. Add the fact they can offer benefits that most offices couldn’t afford, and you have a real challenge finding great people.

You may not need to hire right now, but you should consider raises or adding benefits to stay competitive. You don’t need to look far to see news about worker shortages, inflation and a shortage of many goods (including products we use in our practices). Bottom line: A big chunk of your overhead is going to increase in 2022.

At this point, most practice owners want to know when they’re getting a raise to cover their increased living expenses. The simple answer is raising your fees, but participation in PPO plans makes that solution much less effective. While PPO fee schedules provide some increases over time, they’re often inadequate to keep pace with rising costs. The result is a pay cut for the last person in the practice to get paid—the owner. Looking ahead to 2022, I’ve started taking a deeper dive into my participation with PPOs.

When I started my practice from scratch 20 years ago, participation in PPOs was a necessity to “be found” by the many new residents moving to Phoenix from all over the country. So many communities have seen population shifts because of cost of living, the rise of remote work and other factors. Once you have an established practice, you will fi nd that patients find you more often by other means—neighbors, co-workers and online reviews, to name a few.

The first step in my analysis of the four PPOs I participate in was generating a list of the 20 most frequently used codes and creating a spreadsheet showing the fees allowed by each plan, alongside my full fee. The sum of these 20 items provided an index that let me see the total discount when compared with my office fees. The math was staggering. My resolution for 2022 is to drop one or more PPOs because they have not kept up with the rate of inflation and wage pressures in the marketplace today. I know some patients will leave the practice as a result, which is the most difficult part of my decision because our relationships are more than simple transactions. Beyond the financial pressures, my decision is motivated by the fact that my practice is consistently hitting some capacity limits. Many would tell me to hire more people, add more operatories or move to a bigger building, but in the limited space of this column, I can only say that I’ve contemplated all options and this is the best option for my situation.

I know others are in the same predicament, and I hope this message has provided you with the encouragement to explore your options moving forward. The math is getting more complicated, and the pressures that young dentists face with relation to their ratio of debt to income is scary. Patients may be frustrated in the short term, but at the end of the day, they’ll either decide to pay a bit more to go to a place they love or they’ll accept potentially lower quality for the sake of price. After all, isn’t this what people do when they continue to buy Starbucks each time they increase their prices?

If you have a PPO-dropping story to share, please post it in the comments section of this article below. I can be reached by email at tom@dentaltown.com. Happy New Year!
 

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