The True Cost of PPOs and Reducing Your Dependency on Them

Welcome back. We are in fuel cell number three. Be explosively successful as a new practice owner. I want to talk with you about one of the most important subjects that if I were a new dentist, I would be thinking about pretty much every day. And that's how to deal with the PPOs. And the PPOs have such an intense hold on dental practices that they are able to dictate terms on their reimbursements. Well, why do so many dentists take so many PPOs, particularly Delta PPO? And if you're a new practice owner over the past 10 years in most states, you realize that when you bought the practice, you didn't get Delta Premier right rates, which might have been $1,100 for a crown. You are forced into Delta PPO rates even though you might still accept Delta Premier. You're only being reimbursed on the PPO rates, which might be $600 on a crown or even less, when your UCR might be $1,300. So why in the world would you be open or even embracing of these PPOs that are cutting your UCRS in half or even more when all of your cost structure to service that treatment is still the same? Well, it's because it's easy to get people in the chair and you intuitively know that you're like the airlines and you need just like they do. Your success depends on filling the chairs. And the easiest way to fill the chairs is just sign up for a bunch of PPOs, easiest thing in the world because they're just going to come flocking. But you're going to work really hard over the years. Your neck is going to hurt, your back is going to hurt. You're going to say, I'm putting in this amount of input for that amount of output doesn't feel like a fair equation for me. And that's because you're not dictating your relationship with your patients and the culture and why they're coming in and creating the, creating a sense of value to your patients. Instead, you're letting the insurance companies do that. And I want you to think really intelligently about a strategy to become less dependent on the insurance companies in your practice. And I'll admit it doesn't happen overnight and it's not even necessarily easy. It takes a deliberate step by step approach to do that. Now, in this module, I want to give you some reason to do so. Number one, by showing you a few numbers. Number two, outline the basics of maybe a plan to reduce your dependency on the insurance companies and There are practice management consultants who are going to be able to help you. There's some great ones out there that can consult you through this process. But you got to have faith in yourself. You got to faith in your team. And not only do you have to have faith in yourself and your team, but, but you have to be a proactive leader and communicator in a way that perhaps you haven't done yet. You focus so much on the clinical and getting all that awesome training which you need, that is baseline to do the type of treatment you want to do. And know that you're doing the type of dentistry that you can put your head on the pillow every night and feel really good about and that you have this sort of really good, honest relationship with your patients. I encourage that.

You have to. That's, that's almost. That goes without saying for me. But that doesn't mean that you have to take PPOs and accept a fee that is half or less of what your normal UCR fee is. You don't have to do that. And there are people out there who will pay for your full UCR if they perceive the value as being worth it. So let's jump into this a little bit. Let's start off with the numbers. If you are a, let's say Delta pp, I'm going to use Delta. I'm going to pick on Delta a bit here because Delta, their reimbursement rates are so low and that is causing a lot of heartache and financial distress for so many of my clients who come to us and we try to work through this issue. But let's look at these numbers. I'm not going to say this is a lot of crowns or little crowns. That depends on your practice and your goals. But let's just say that the quantity of crowns in a given month is 30. Under a PPO crown, you're getting a lot more people in the chair, so it's easier to do more crowns and you do 30. Let's say you're running a practice that's a fee for service practice. Or maybe you're out of network with Delta and because of that, you're going to have some attrition. You're going to lose some patience, you'll lose some, no doubt about it. And let's say you only get 20 crowns that you're doing for that given month. But your collections on the Crown for the PPO treatment is $600. Your collections on the fee for service crown, $1,300 over twice that. So what is your collections for the month under the PPO crowns, it's $18,000. For those 30 crowns on the fee for service crowns, it's $26,000. So that is point number one. Just that right there should be motivating enough to say, I really, I really can't park this idea or this concept. I need to take this seriously. But now it even gets more important in more of a reason. When you start to look at your overhead, your fixed costs are going to be the same. You've got facility costs, you got your front office that you're paying to schedule these appointments. Are they getting paid any less because you're getting paid less by the insurance company? No, they're getting paid your front office, your assistant, even generally your hygienist. They're typically still getting paid the same amount. Now if you have an associate, you're paying them on collections. Granted, you'll pay the associate less. But let's just factor out the associate and say in your general practice, this is, your overhead is going to be what it is for either of these PPO or fee for service style practice. Now, your variable costs interestingly are higher under your PPO model because you did 30 crowns instead of 20 crowns. So you did 50% more crowns under the PPO model. And so you're going to see a 50% increase on your labs and supplies. Now, if you're a fee for service crown, maybe you're using a little higher end lab that costs a little bit more, I don't know. And so maybe it's not a full 50% increase, but you get my point that you're still doing the same amount of lab and supply work, that your expenses actually go up for doing PPO crowns. So now what's your net? Well, under the PPO model, Your net is $9,500. And under the fee for service model, you're making $19,000. And so your profit margin is a lot higher at 19,000. 19,000 divided by 26,000 is 73% where 9,500 divided by your 18,000 is 53%. So even your profit margins have fallen by 20% and your net profit is cut literally in half from 19,000 to 19,000 to $9,500. And you yet you did more work, you were in the office more and less balance and you got paid a lot less. It is a significant financial detriment to be a PPO driven practice. It's very difficult to really thrive and have the balance in life that you would like to have. And deserve after all those years in dental school and all the hard work and being a business owner to taking on the risk of being an employer and all the debt that you've taken on. The equation sometimes just doesn't feel fair and the PPO is one of the causes for that not feeling fair. I don't mean to be hard on the insurance companies, their businesses trying to run successfully just as you are. That doesn't mean that you should just concede to whatever their rates are. I predict in the future, by the way, that there's going to be a lot more.

Management style companies. Sometimes you hear them as DSOs. I'm not talking about the large dental corporations. Those are going to continue to grow, but I'm talking about there will be groups that will help you to centralize some of your cost structure and then also to negotiate on your behalf in a collective group with other dentists to get higher reimbursements. I think that's going to grow in the future and that could be a resource for you. But as it is, you're still going to have to deal with this problem and I'd rather see you in a fee for service practice. So how can we get rid of Delta ppo? Well, number one is you have to go out and network. As soon as you go out and network with Delta, they are going to send your clients a letter and they do it rather quickly and that letter will basically encourage them, very direct language, to go find another dentist because Delta doesn't want to lose that patient. And if that patient stays with you, Delta is going to lose income on that patient, they're going to lose revenue and you've got to beat Delta to the punch on that letter. So you've got to write a letter to your patients stating why you're doing this. Here's an example. Dear patient, our practice is making an important change and we want you to know about it. We have been in network with Delta Dental for years and had hoped to remain in network. However, it has been increasingly difficult to remain in network and continue to provide the level of care that is so important to both you and to us. It's also important that we provide only the treatment that we truly believe you need. Your health is too important to compromise. Consequently, we've decided to no longer be contracted with Delta Dental as of and you put in the date.

That said, you can remain a patient of ours and we will help secure all the insurance benefits that you do have.

The next part of the letter, you will likely receive a letter from Delta Dental in the near future. In not so subtle language, this letter will recommend that you find another dentist. We hope that the experience you've had with us will encourage you to remain with our practice. Please know that we remain deeply committed to you and your oral health. We're happy to answer any questions you have and look forward to your next visit. You send this off in the mail before you cut ties or just before you cut ties with Delta in network. Now, there's some really important elements in this process of detaching from Delta. I'm not saying that every practice can just go do this right away. There are a few factors that will increase the likelihood of success here. I don't have any romantic notions that if you write that letter, boom, everybody stays with you and you're good. You'll see potentially a decline in your traffic and that may not be a bad thing. You need to expect that you're going to lose 10%, 15%. But the statistics are that people are generally retaining 80% or more of their patients if they do this right. And remember, the numbers turn out so much better on even a 60 to 70% fee for service practice than 100% PPO practice, particularly Delta practice here and some of the others. So here are the success factors. Number one is you have a relationship based practice. Can't emphasize how important this is, is that you know your patients, you know them by name, you look up their kid's name, you maybe have a profile on them when they come in, ask how they're son's doing in their soccer tournament. Or you maybe know some of these people on a personal level through your faith organization or your neighborhood, community or sporting events, etc. If you have a relationship based practice, you have a lot more glue or goodwill with them than a transaction based practice where people are just coming in and going out because they want the cheapest cost possible and there isn't much of a relationship there with the doctor. So number one, you really need to build the style of relationships with these patients where it feels connected even though they are PPO in network PPO patients, when you go out of network, that connection is going to help them stay. Number two is your patients need to receive that letter before the Delta Premier letter. You need to head that off. And number three is you follow up the letter with a personal phone call. I know you might have a couple thousand patients and perhaps you don't have to call all of them, but what I would recommend that you do is you just plan to use your evenings and Use your weekends and use your in between appointments and your lunches to be calling people. And even if it's just leaving a voicemail or if you have their phone number, text them. Create that personal connection between you and them that is so valuable and let them know why you're making that change verbally and how much you care about their oral health. Talk about systemic oral relationships that a lot of their overall health depends on really good health, oral health care, and how much that matters to you and how much you value that relationship. Your ideas to sound like a salesperson, your idea is to sound like somebody who cares and that you have a reason for doing this. It allows you to practice dentistry in the way that that more represents or reflects your value system in working with your patients. Couple of things to note if you do go out of network or dropping in network Delta Premier. First is that.

The benefits to the dentist. Delta won't assign benefits to the dentist. They used to, but now, of course, now they will assign the benefit to the patient and they'll send a reimbursement check to the patient. What does that mean? That means you need to collect full payment from the patient at time of service. And I know a lot of you are thinking, Wes, you're telling me I'm going to have to charge them $1,300 when they walk out the door to pay that crown right then and there. That's going to be kind of hard. Well, that's what it means to run your business effectively as a business person. You just delivered the work, you paid all the resources for it. You can now ask that that service be paid for. And so that, so you, so you're made whole for that. And don't be gun shy about that. Don't be timid. As you talk about the treatment and the payment plan, we have to emphasize the value to them. When people feel value in what they're going to buy, the cost and how they pay becomes less relevant to the conversation. It will always be an issue, it will always be some factor, but it can become less of a factor.

Next is Delta will likely send that reimbursement check to the patient before the credit card payment is even due. So it's not like they're out of pocket for months and paying interest on their credit card. And you can let them, you can let them know that. And for maybe some trusted patients, some people you know personally, etcetera, you can. They don't have to pay when you leave. They can endorse the check or they can reimburse you later, but that's typically not what I recommend you want to collect at the time of checkout. So these are a few of the basic instructions when dealing with your Delta ppo. I just want to highlight in all of that that have a plan for that. Be a smart business owner. Don't let them dictate your practice and the style of dentistry that you do and the fees that you receive. Let yourself and your team dictate that by creating a great sense of value with your patients and letting them know that your dental office is just different than the dental office down the street that is taking Delta ppo. That Delta is going to want them to go to your unique practice. It's the only way you can get people to pay your fee for service is if they feel you are unique.