490 of our newsletter members responded to our recent survey on practice fees and PPO participation. 65% of our members reported participating in one or more reduced fee PPO plans (including Delta Dental), down slightly from 66% in our May 2019 survey. Below, we outline the proper steps for reducing PPO participation to boost your practice profits.
Track Your Adjustments
Knowledge is power, especially when dealing with insurance companies. That’s why it’s so important to calculate and track the amount of your practice’s PPO adjustments (write-offs). But to do so accurately, your practice must charge out all production at the full (regular) fee for each procedure, regardless of the negotiated fee under the PPO plan involved. Your practice management software can easily calculate the related production adjustment (write-off) necessary to arrive at your net production, based on the discounted PPO fee allowed.
Thereafter, you should review the total production, write-offs, and collections separately for each PPO plan on a monthly basis. This provides a clear illustration of how much PPO participation is costing your practice, since these write-offs often represent the largest “overhead expense” for your practice. Remember, every dollar of PPO write-offs represents $1.00 of lost profit, which in turn results in a $6.00 decline in your practice value, based on current practice valuation metrics. Fortunately, our survey revealed 63% of practices participating in PPO plans are now tracking their write-offs separately for each plan, while 37% are not.
Rank The Plans
The next step is to calculate the write-off percentage for each plan by dividing the total adjustments (write-offs) by the total production for that plan. You can then rank all PPO plans by their write-off percentage, from the lowest to the highest. This provides concrete data you can use to develop a gameplan to reduce, or eliminate, PPO plans until you achieve your goal of operating at optimal capacity while minimizing write-offs.
When selecting which PPOs to eliminate, you should consider not only the fee adjustment, but also the number of patients in each plan, the difficulty with insurance processing, the out-of-network benefits available, and your practice’s momentum and future growth potential, says Bill Rossi*, a leading dental practice management consultant and PPO expert.
While this data is extremely valuable, it won’t add a dollar to your bottom line unless you take action! Fortunately, Rossi reports that he’s received a record number of requests in recent months to analyze practices’ PPOs and develop plans to decrease participation.
During the pandemic shutdown, doctors had the time to reassess their practice, and many decided the growing write- offs, which had dropped collection rates from 97-98% to 80% or below over the past 15 years, were no longer worth it. Many doctors surmised: I got through COVID-19, I can definitely deal with MetLife (or any other insurance company)!
After reopening, many practices are busier than ever. Combined with the effects of current staffing shortages and rapidly rising overhead costs, more doctors are taking decisive action to reduce PPO participation. A record 18% of practices responding to our recent survey reported that they decreased their PPO participation over the past 12 months, up dramatically from the 12% we reported in our 2019 practice profitability survey.
Doing so has dramatically improved their practice profitability. One doctor commented: “Dropping out of PPOs gave us an automatic 30-50% fee increase” since the eliminated write-offs translated into increased profit. Rossi reports his clients’ results are better than ever. He helped one client go out-of-network with several different PPOs and, after implementing these changes, her collections and profits went up by approximately $20,000 a month. Rossi says collection rates typically increase by 10-15 percentage points on average, though some recent clients have recorded significantly better results.
Most practices can reduce their PPO participation, but first need a well thought out coordinated gameplan for doing so. Don’t send a letter announcing your decision to the affected patients unless the PPO is sending one. Or if you do send letters, do so in small batches and follow up with phone calls. It’s best to just discuss this matter with each patient during their next visit.
Rossi often encourages doctors to start by making a low-risk move, such as dumping a relatively small production PPO plan, especially one with a larger write-off percentage. After you enjoy the success from making this small move, you’ll gain increased confidence to drop larger plans next.
Rossi reminds doctors that they have more power than they think. In some cases, after receiving your letter to go out-of-network, PPOs have responded by offering to increase fees if the practice agrees to remain in-network. Though less so than in the past, some PPOs will still negotiate fees, but you may have to drop, or threaten to drop, to get their attention. If you’ve never tried, there’s a good chance you’re leaving money on the table, since it costs nothing to ask and the extra dollars you receive are “free money.”
If your staff is properly trained, you can retain the majority of PPO patients and delay the impact from those that do leave. Most insurance companies have surprisingly good out-of-network benefits, since they want to keep their employees happy and able to see the doctor of their choice, whether in-network or not.
While patient attrition can be limited, and even delayed, you’ll still have some. So, it’s imperative to develop a gameplan to replace the patients lost. Rossi says “You can’t just leave PPOs, you have to be working toward something; more services delivered in house, better continuing care system, and increased marketing and case acceptance for more smooth productive and profitable days.” Boost new patient flow by improving your practice location, increasing signage if possible, adding Google reviews, and upgrading your website to include video testimonials from patients.
Once your gameplan is complete, it’s time to “pull the trigger.” If you can’t do it alone, don’t feel bad—most doctors can’t. Ask for professional help to get the job done. Over the past 20 years, Rossi has helped many good dental practices across the country improve profitability by reducing or eliminating PPO participation. He specializes in training staff and coaching the doctor to make sure PPO decisions are properly planned and implemented. So take action, since reducing PPO participation is the fastest and most cost-effective way to increase your bottom line!
*For more information on his firm’s managed care consulting and other practice management services, contact Rossi at 952.921.3360 or visit www.advancedpracticemanagement.com.[/vc_column_text][/vc_column][/vc_row]