Profitable PPO - March/April 2020

March/April 2020

How to AvoidOne of the Most CommonWays Practices Lose Money Every Year

This is so crucial because, when your dental practice is out of an insurance company’s network, the insurance company caps reimbursement at a certain level. But what happens if you are charging less than that? If you are charging lower fees than what insurance reimburses, you are effectively shorting yourself. Let’s say, for example, the insurance company reimburses a dentist $100 on an adult prophy. If you’re only charging $90, then you’re losing out on $10 for every patient. Now imagine how this adds up year after year. Secondly, if you are in the network with a particular PPO plan, then of course you are assigned a fee schedule that represents the maximum you are able to receive on each procedure. Yet here is what we often see: A practice has a UCR fee for a crown of $875, but the agreed- upon PPO fee is $900. When this happens — and it happens regularly with practices that we see — the insurance company gets to choose the LOWER of the two fees, whether that’s the UCR or the PPO fee! That’s $25 of pure profit on that procedure missed out on. It makes me sick to see this happening on a regular basis when we do the first analysis for a new client. We’ve seen practices effectively forfeiting over $40,000 a year by making this mistake! While it’s common to set fees based on what other dentists in your area are charging or what an accountant suggests, definitive resources are available to let you know what fees should be. There’s an entire database that shows procedures by area and fees broken down by percentile. Because we see these challenges affect so many of the offices we work with, we advocate for doctors to take a very measured and scientific approach when it comes to setting their fees and to look at them in relation to their specific type of practice, business, and insurance situation.

Over the years, I’ve been fortunate to visit and work with thousands of dentists. In doing so, I’ve noticed that a handful of errors happen over and over in practices and often result in significant losses in profitability. This isn’t necessarily surprising. Dentists are so focused on caring for patients that some minor details get lost in the day-to-day bustle, but those minor details add up to significant financial impact. A prime example of this comes from an office we recently worked with. We determined that they were shorting themselves nearly $30,000 in profit every year by not setting their office fees higher than their PPO fees. In the flurry of taking care of patients and everything else they do on a daily basis, they simply didn’t realize this was happening. This is one of the errors that I referenced above, and unfortunately, it isn’t uncommon.

This month, I want to address this common challenge and talk about how you can overcome it.

A major barrier to profitable PPO optimization is not setting standard office fees high enough. We see this all the time, and frankly, its one of the very first things we look for and alert clients to. We often see two errors related to office fees. 1. The practice isn’t setting their usual, customary, and reasonable (UCR) fees high enough to maximize reimbursement on out-of- network or uninsured patients.

Don’t let this simple opportunity for optimization — and thousands of dollars along with it — pass you by. Do yourself a favor and remember

to assess your office fees annually or biannually against those two sets of benchmarks: your area averages and the PPO fees assigned to your practice. If you don’t, then you risk unnecessarily forfeiting money to the insurance company, and believe me, we’d rather it be in your pocket than that of the insurance company!

2. The practice isn’t setting their UCR fees higher than their PPO fees.

At least every other year, we recommend that your practice assess fees to determine whether or not they are keeping up with the benchmark fees for your area (this is a service we provide for all of our current and active clients).

– Clint Johnson

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