Best practices for making a seamless switch
In the ever-evolving dental healthcare landscape, practice owners are constantly exploring ways to enhance their practice management models. One approach gaining traction in the last several years is the shift from insurance-based reimbursement (PPO model) to a fee-for-service model.
Cain Watters and Associates CPA and Parter, Tim Greaves, says the case for going fee-for-service keeps getting stronger as insurance reimbursements continue to lag behind inflation.
“Insurance reimbursement rates have not kept up with the higher expenses of running a practice, and I don’t see that changing anytime soon,” says Tim. “That’s why, for many private dental practices, adopting a fee-for-service model makes sense.”
According to Tim, it comes down to working smarter, not harder.
As a preferred provider, the onus is on the dentist to see more patients per day to reach profit goals. Not only does this make it difficult to deliver the highest standard of care to every patient, but it can also cause stress among the staff and burnout for the doctor.
Fee-for-service practices, conversely, aren’t beholden to writing off a portion of their fees to meet the cost requirement that the insurance company requires. Dentists are free to set their fees at levels that make the most sense for their patients and the profitability of their practice.
“Even if the practice loses a few patients, we’re seeing that doctors are seeing fewer patients a day, providing more personalized care, and making as much or more in profits,” says Tim.
Changing to a fee-for-service model requires a shift in thinking, as the prospect of losing patients might initially be unsettling for many dentists.
“Are you going to lose some patients? Yes,” says Tim. “Will you have more time to deliver quality care at higher profit margins? If implemented strategically, yes.”
To make a successful transition to fee-for-service, Tim recommends practice owners adopt a methodical and measured approach, starting with taking a deep dive into your numbers.
Evaluate Your Practice
When considering whether fee-for-service is suitable for a practice, the first thing to do is to look at the schedule. Is it full? Is it so full that the practice is booked out for two or three months?
“If you’re a preferred provider and booked out more than a month, you’re losing patients,” says Tim. “The question then becomes, why would you be working so hard and writing off so much when you can see fewer patients and earn the same money?”
The next step is to run reports on gross production vs adjusted production to get a clear idea of how much the practice is writing off, both by individual insurance companies and in total.
“If a practice is doing $500,000 with insurance but is writing off $200,000, the baseline target is $300,000,” says Tim. “This helps clarify how many patients a practice can lose while maintaining the same profit numbers.”
Finally, conducting a detailed market analysis of your competition can help you evaluate where your practice stands among your peers.
“There’s no reason why an endodontist in a town with very little competition should cut their fees by 30-40% by being a preferred provider,” says Tim. “On the other hand, practices in over-saturated markets might have trouble keeping patients when there are 10 other practices within a two-mile radius.”
To offset this, Tim says practice owners should consider ramping up marketing efforts during the transition and offering in-house membership plans to manage the sticker shock some patients may feel.
Take a Measured Approach
Regardless of your competitive landscape, Tim suggests rolling out the fee-for-service model over at least a year.
“This gives you time to get your staff trained, systems in place, and patients educated on the upcoming switch,” says Tim. “Educating staff is a top priority before talking to patients.”
Ensuring that your staff is well-trained to communicate changes to patients and address potential concerns is vital. Staff should be equipped to answer any questions regarding fees and payment options.
He also suggests taking a measured approach to dropping providers, in stages over a year.
“In my experience, it’s best to phase out some of the smaller insurance companies first,” says Tim. “Once a dentist is comfortable that patients are returning, then go for the bigger ones.”
Tim adds that working with a PPO insurance consultant to evaluate your current insurance agreements and plan the roll-out strategy can pay big dividends.
Patient Communication is Key
Clear communication with patients about why you’re switching to a fee-for-service model is crucial. Emphasize the benefits, such as enhanced quality of care, personalized treatment plans, and more time dedicated to each patient. Tim also recommends the doctor take the lead on patient communication.
“It’s critical that the dentist personally talks to each patient prior to sharing any written communication,” says Tim. “Sending a letter to tell patients that their dentist has switched to fee-for-service is a recipe for disaster.”
Patients should also be educated on the letters they will receive from insurance companies once the transition takes effect.
“Some of these letters can be pretty ominous in terms of the language, making the dentist out to be the bad guy,” says Tim. “That’s why each patient must be properly prepared and educated on what to expect.”
Don’t Try to Go It Alone
This is perhaps the most important aspect of making a successful switch, according to Tim. Even if you are 100% sure that your practice is ripe and ready to make the switch, it’s crucial to have a team of trusted experts who help lead you through the process.
“There are a lot of factors that play into making the switch to fee-for-service successful,” says Tim. “Talk to your CPA. Consult with a PPO insurance consultant. Reach out to a colleague who has already made the switch. The last thing you want to do is dive in unprepared.”
If you’re ready to test the fee-for-service waters, we’re happy to help steer you in the right direction. For a real-world example of a dentist who made the break from insurance, check out this episode of our popular Accumulating Wealth podcast.
As always, CWA’s advisors are there to help you reach all your practice and personal financial goals. Contact the CWA team for a free consultation today.
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