APRIL 2023 ISSUE APRIL 1, 2023
Source | By Bill Rossi

With inflation running rampant, doctors have been hard-pressed to maintain their profitability. Unfortunately, the most commonly overlooked strategy is also the most lucrative—decreasing your practice’s participation in reduced-fee PPO plans. Below, practice management expert Bill Rossi* discusses six profit-robbing mistakes doctors routinely make and how to avoid them.

  1. Not tracking PPO adjustments (write-offs) – Some doctors claim they have no PPO write-offs. While that’s true for practices that are 100% fee-for-service, it’s not for all others that are enrolled with Delta, CIGNA, Aetna, or other PPO plans. In many cases, these doctors have no PPO adjustments simply because they are charging out all procedures at the reduced PPO fee, masking the problem. Rossi recommends charging out each procedure at the regular (full) fee, then recording a production adjustment to reduce the net production down to the allowable PPO fee. Following this recommendation allows doctors to track their total production adjustments by insurance plan, providing valuable, actionable data.
  2. Not monitoring PPO adjustments recorded – Even the doctors that do record their PPO adjustments often don’t review them on a regular basis. Rather, they keep their “head in the sand,” too afraid to look at their massive write-offs.In many cases, these doctors complain that their overhead is too high and devote disproportionate time and energy trying to squeeze minuscule savings from their lab and supply costs. And, wages are going up no matter what they do! Meanwhile, some are collecting 75% (or less!) of their total production, which results in up to $250,000 or more of losses on $1,000,000 in production. These doctors don’t have an overhead problem—they have a PPO problem!
  3. Thinking PPO adjustments are unavoidable – Like death and taxes, many doctors mistakenly believe that PPO adjustments are inevitable and that they’re powerless to fight them. But you have more power than you think, says Rossi. He’s helped scores of doctors reduce or eliminate their PPO adjustments, in most cases gaining tens of thousands of dollars annually in the process.
  4. Misunderstanding PPO economics – For example, if Aetna has a 45% write-off and you drop them, but keep 55% or more of the patients, you’ll come out ahead. However, Rossi says with good planning, a well-trained staff will retain 75% of the patients in most PPO transitions. In many cases it’s easy to replace lost collections, especially if your practice is booked out and operating at full (100%) capacity. So, in this example, if you produced $100,000 with $45,000 in write-offs, you could produce $75,000 with no write-offs and come out $20,000 ahead.
  5. Overestimating the risk and potential losses from going out-of-network – Many doctors mistakenly believe that PPO patients like their insurance company more than they like your practice. So, they reason that if they go out-of-network, all patients in the plan will simply move to another PPO provider. Rossi says that’s NOT TRUE! The “magic” that has made your practice successful doesn’t come from its PPO participation, but rather from the trust created through the personal relationships you’ve developed with your patients. That’s why most new patients come from patient referrals, not insurance company lists.Rossi notes that there is always some risk from making a move to go out-of-network. However, it’s much less risky than other decisions you’ve previously made, such as going into debt to open a cold start, purchase a practice, or build or buy a new office building. Moreover, those decisions are irreversible, while going out-of-network is reversible in most cases, since you can choose to rejoin the plan. While it’s very unlikely you will, just knowing you can makes it easier to pull the trigger.If the transition to out-of-network is handled correctly, the doctor can “lose the discounts and keep 70-80% or more of the patients” says Rossi. And if the practice is too busy, there’s actually very little risk, explains Rossi. “What the doctor often fails to consider are all the patients he’s not currently seeing (with a higher reimbursement) because they can’t “get in.”
  6. Participating in multiple umbrella groups – Recent years have seen a rise in the number of “umbrella PPO plans,” like Connection, Dentemax, Zelis, and Premier PPOs. When the doctor signs up with an umbrella group, their practice participates in several underlying plans. These plans often have a very similar collection of PPOs. The insurance industry has designed these groups so that whichever PPOs/Umbrellas you participate with, the one with the lower fee schedule will apply. So, why participate with a lower paying umbrella group? If your practice is involved in more than one of these umbrella groups, that’s probably a mistake that’s draining your practice profits.

Rossi says that many practices can dramatically increase their profits by thousands of dollars annually by reducing or eliminating PPO plan participation. But it’s not right for every practice. Deciding to join or leave PPOs are serious decisions to be approached thoughtfully. Every smart practice owner must analyze and actively manage their PPO situation.