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Good morning everybody and welcome. Today my guest is Bill Rossi who is a practice management consultant in Minnesota and a couple of states in that area. Bill, how are you doing?
Bill Rossi:
Doing good, Woody. Thank you.
Woody:
The reason we wanted to do a call with you is you work with I think over 200 practices and those practices are doing over $20 million a month in total. You see a lot as far as what is going on with insurance and PPOs. And all the dentists I talk to, the people in my coaching program, they’re really concerned about insurance, the growing number of PPOs and what is going on with Delta Dental.
We thought it would be a great idea with all your expertise to talk to us about what is going on and what we need to do, some strategies as far as how to select which groups to participate in, etc. I thought we’ll let you run wild and if there is anything I don’t understand or think the listeners might not understand, I’ll interrupt you and we’ll go from there.
Bill Rossi:
Please do. Yes, we’re kind of on a mission about this. My main thing is I’m a management consultant like you said and we’re involved in the ongoing management of over 200 practices here and in the Upper Midwest area, although we occasionally do missions elsewhere if we really feel it’s a case where we really can do some good.
For example, dealing with some of these insurance issues we get calls on, and it’s a mission of ours through our work with our clients, these questions about insurance or PPO participation come up all the time. Because of that and because in our state Delta has historically been quite powerful, this has been a training ground, a tough neighborhood. In some ways, many of the concerns you’re hearing about from dentists across the country we’ve been dealing with for years.
So we’re a little ahead of the curve on that and I try to learn from every client I work with every month so that dentists have an ally in working with PPOs. Like I say, it’s not adversarial but the PPOs are looking out for themselves and their customers and not necessarily you. We’re trying to kind of keep a balance of power there.
What I see, Woody, is that a lot of times dentists will sometimes hastily make decisions about either joining or leaving a PPO. They’ll hear that a new PPO is coming to town and one patient asks about it and they think gosh, I have to sign up. Or they will get ticked off one day because they get a letter from whomever…by the way, I might say Delta or PPOs or MetLife but what I’m talking about is any agreement you have with an insurance company where you take a reduction in fees to keep or attract patients.
Delta will say they’re not technically a PPO but for all practical purposes that’s what I’m talking about and I don’t have any particular vendetta against anyone. Insurance does a lot of good for dentistry as we all know.
Woody:
Right.
Bill Rossi:
It’s just that we don’t have to roll over for everything the insurance companies are doing either. So the main thing is on everything we’ve ever done on this, Woody, and we’ve had many conversations about it and it’s to be rational about it and prepare for it. If you are, it will make tens of thousands of dollars’ worth of difference. I have clients collecting $10,000, $15,000 and $20,000 more a month than they were a few years ago just from dealing with the PPO situation right, and many who picked up a few thousand here and there by just making smart plays.
That is what I want to get across to folks and so here are the types of things that come up. I don’t want to endlessly hedge everything I say; different areas have different insurance mixes and different economic realities. The principles I talk about here will work almost everywhere, Woody, but no one should make blanket statements about how one should drop or join Delta or anything like that. It’s just too dangerous and risky.
These are the most scary, expensive and potentially rewarding decisions any of your dentists can make, and so let’s make good ones. Okay?
Woody:
Right.
Bill Rossi:
So here are the kinds of things I deal with all the time. A client calls me and says, hey, a new PPO is coming to town. Should I join? Or a little more scary, let’s say they have a major employer in town that is now offering a new PPO. For example, previously they had Delta with which the client had a 12% or 15% write-off, and now they signed up with MetLife where the write-off might be 25% or 30% or that sort of thing. Again, the specific insurance company doesn’t matter, but when do you join or not?
If you’re starting or buying a new practice, what is the smart way to play things? If you are participating in PPOs, which is inevitable for 90% of your listeners that they will participate in PPOs or PPO-like deals where they have to take a write-off, how to do that in such a way that you get the most amount of revenue that you can and not have it hurt you. Does that make sense?
Woody:
Absolutely.
Bill Rossi:
Let’s use this example: you have a factory in town, it’s a small town, the factory had more or less Delta which is pretty common, but now they signed up with another insurance company where there are deeper discounts. This actually happens fairly often and I’ll deal with this three or four times a year in this area.
The Doctor will call me and say, he had a patient tell him that they’re going to offer, let’s call it XYZ Life, and he doesn’t want to lose these families so he’s going to sign up. I’ll say hold on. Have you lost any patients yet because of this? No. Well, how many patients do you already have who work for that factory? Maybe 100 or so. I don’t want to lose 100 patients. No, I don’t think anyone does, but you might be leaping to conclusions.
Have you checked on what the out-of-network benefits are going to be for people with this plan? No, what are you talking about? Here is where I’m coming from. If you already have 100 patients in the practice from that factory and you sign up for XYZ Life and now you’re taking a 25% or 30% discount, you get the discounts right away and maybe you didn’t need to do that.
What I tell clients is there is always a chance to sign up with a PPO later but don’t duck before the punch is thrown. Let’s see if you really do lose people. Now they check and find out about the out-of-network benefits, and most listeners should know about benefit grids, meaning the front desk is entering a patient and they can access that company’s website and look at whether the benefits are in- or out-of-network.
So in-network might say the coverage is 100% of benefits and it ended up 90% on fillings and 50% on major…and that’s pretty common, right?
Woody:
Right.
Bill Rossi:
You might look and see which would be the case: 80% or more of the time the benefits out-of- network will be the same thing. In other words, if the benefits for out-of-network aren’t punitive, meaning there is no preventative coverage or the preventative coverage is slashed in half or something like that, most patients are pretty loyal to their dentist. I know every dentist listening has lost patients and sometimes lost patients who you came in for on Christmas Eve to help and then lose them, and then others will stay with you for years who you don’t think are that loyal.
But patients don’t understand dental insurance much more than we do and they don’t pour over their benefits booklets. If you wanted to put me to sleep just give me an insurance document to read; most patients veer away from it.
So what I’m saying is the smart money, the smart way to play it, is you don’t join and maybe you do lose a family or two, but you don’t get a bunch of discounts. You can sign up and all of a sudden you have $3,000 or $4,000 less income a month, but you’re working just as hard. Now you make a few decisions like that and all of a sudden you say, how come I’m not making my $380,000 a year? Well, you can’t keep signing up for these write-off things…they’re expensive.
But most dentists would rather lose money than patients. It’s psychological. You ask a dentist what is important to them…I think I mentioned this before to you, Woody, but I’ve worked with dentists for more than 30 years and I always ask them when I first start: what are they proudest of? I’ve not had one dentist say how much money he or she makes. They all say I’m proud of the way I treat my patients or the relationship I have with my patients and staff or the way I practice. It’s not a money thing. Most dentists when you ask what is important to them is to keep busy.
Woody:
Right.
Bill Rossi:
So the weirdness about this is a doctor will sign up with a PPO and have $4,000 to $5,000 more a month in write-offs on patients he already has and that doesn’t faze them. But if you said to him, look, spend $2,000 a month on advertising or hire a consultant or get a new piece of equipment, etc., they go well, that’s real money. You tell them those write-offs are real money but it’s less painful if it’s just written off and you never see it. You write a check and somehow a $1,000 check written is less painful than $10,000 worth of write-offs to doctors.
Anyway, let’s say you don’t join. Then you might find you keep most of the patients. I had a situation where, as usual, I wish I had perfect compliance and I bet you wish your patients listen to everything you told them. Well, I told a client in this one small town, do not sign up for that program. They went ahead and signed up anyway and then the doctor is calling me a few months later saying, God, these write-offs are killing me. I said yes…will you get off the program? He said he’s going to lose these people. I said no, not if you do it right you won’t.
He got off the program and he had some loss of patients; there is always some loss but not nearly as much as the write-offs were costing, and he’s living happily ever after.
Here is another point: you can always join. Let’s say you decide not to sign up right away and wait and see. You can join later. The PPOs like to have a network and I’ll tell you that I want the
doctors listening to know how the PPO guys think. You need to know that because you’re bargaining with them and need to know where they’re coming from and most docs don’t, I think.
So you can, at that point, say I’m losing too many patients and I think I do need to sign up. If that happens, before you sign up you negotiate. I think your listeners know this but if they don’t they’ve got to know this. So you call the insurance company and say, how much will you pay? They send you a fee schedule and a lot of doctors assume that’s written in stone and it isn’t. If they’re looking for providers they will bargain with you.
So when you’re dealing with these guys and thinking about signing up or threatening to drop, then you want to say things like: is this the best you can do? Are you paying others more for this procedure? Do you have any room at all to move on this? Can’t you do better? I’d like to work with you and I know my patients would be happy if they could go to the dentist of their choice, but come on…even other insurance companies like XYZ and YZX are paying more than you’re offering. Can’t you at least match what the other guys are paying?
Those are all killer statements and…
Woody:
Bill, we’ve had people on our coaching program in the same city where one is getting a different crown fee than the other from the same insurance company.
Bill Rossi:
Exactly. And we see that all the time here. The insurance companies will put on a front and say no, no, we don’t bargain and have different fee schedules. I know they do because I collect those. In fact, one of the things we do here is we collect fee schedules as we see them and that way we can tell when a client gets offered something by a PPO whether it’s their top dollar or not.
Now I suppose we have to be a little careful here but if I were a dentist and had friends who were dentists around town, I’d say, guys, if you’re an XYZ provider what are you getting paid? Let’s compare the fee schedules because the insurance companies have all the information. Information is power. What you’ll find is you’ll see a difference and that puts fire in your belly so when you call a guy you say, I think you can do better.
I’ll give you an example. There is a company in this area and let’s call it Wigna and they’re making a big push to sign up providers. You can sense when this is happening because doctors will get letters all over. Now they went from having like 20% of the dentists in this area to having 35% in one year. Now they’re making a big push to get providers and I would go to a dental office that wasn’t a provider and they’d be offered almost their total fee schedule. They’re told we’ll pay your fees…just sign up, okay?
Woody:
Wow.
Bill Rossi:
Then I go to a guy who is already with them and getting a crappy fee. I’ll say, call them up and say look, you’d like as much as they’re giving the new guys. The guy says, how would I know that another doctor is getting offered more? I said good point, how would you know? That is part of what they rely on me for, but also if you’re in touch with your buddies and share information you can have some knowledge.
Woody:
That’s one of the problems I see with dentists. You go to the dental meetings and everybody is keeping their cards close to their vests. They think it’s illegal to talk about fees and I’ve never understood that. I’ve always been open enough to ask something: what is your crown fee?
Bill Rossi:
Yes, and I suppose if you got dentists together and said we’re going to bargain and…it’s too bad you can’t actually. In a way that’s what the big companies like up here, Midwest Dental…there are about 100 offices and there are Heartland and others. We know they negotiated with these insurance companies. I know sometimes they get better reimbursements than Dr. Joe Average. But, if Dr. Joe Average gets together with 12 others doctors that’s collusion.
Well, if you’re sharing information and not collective bargaining and not saying, hey, let’s all drop at once or do some collusion like that, then you’re fine. It’s a free country. Dentists will say, I can’t show you the fee schedule because Delta said it’s confidential. I say I’m working for you so I can look at the fee schedule.
Woody:
Right.
Bill Rossi:
So that is important information because you have a lot more power in negotiating before you sign up than after you sign up, and these plans, Woody, that pay top dollar when you first sign up…well, four years from now they won’t seem that good because they won’t increase the fees. Then after a while that write-off will start showing.
For example, if fees are going up 2% or 3% a year but the PPO isn’t raising its fees, well, in five years you have a 10%-15% discount. That’s another thing: sometimes doctors will sign up for these plans and forget they did. So they will have the plan that pays the full fee…then why not, right? They had a couple of patients ask about it and so they sign up and then all of a sudden I’m coming to their office eight years later asking, why do you have all these write-offs? I don’t know. Are you with PPOs? Hell no! I’ll say yes, you are. Oh, I didn’t know that. Well, okay you are and so let me take you this way. I want doctors to understand the mindset of the PPO people because that’s what you need to know.
PPO networks are like, for want of a better word, wholesalers. For example, big insurance companies like Delta here had their own sales reps and one big network, but other small companies like Aetna, Cigna, Franklin, all these small companies can’t have a sales force in every State. So they go to some PPO organization that says, bundle us up with a bunch of other guys, find us dentists and negotiate a fee schedule with them and in that way we have providers.
So here is where they’re coming from. Why do people have dental insurance at all, Woody? Why does anyone have dental insurance?
Woody:
It’s offered to them by their employers.
Bill Rossi:
Why does the employer offer it to them?
Woody:
It’s a benefit and a way to get them to work at that company.
Bill Rossi:
Right. They want their employees to be happy. So employers get dental insurance for their employees because they want them to be happy. So employers naturally want to have a cost savings and they don’t want to pay too much. But to an employer’s mind it comes from the world of offering other benefits, and dentistry is a cheap benefit. It’s maybe $500 a year but it’s a highly appreciated benefit. Of course, they don’t want to pay too much and so employers have an interest in driving the price down and that’s why there are PPOs because they say, we can negotiate a better price to keep your premiums down.
But keep in mind, the employer wants to have the employee happy. Employees aren’t happy if they can’t go to the dentist of their choice. So it’s not perceived as a benefit and you don’t have happy employees if your network has ten people in it and they have to drive 30 miles to do it, or the office they go to is a huge clinic and they can’t go to Dr. Good Guy they’ve been seeing for ten years.
This is critical to know because that’s some of your power as a doctor in negotiating with these guys. Now some areas, like if you’re in East St. Paul, your Delta is King Kong and they control so much of the market. They can pretty much treat the providers whatever way they want to treat them like.
There are other areas where Delta is not so strong and their shadow isn’t as long, like in Rochester, Minnesota, where they can be dealt with better. It’s the same thing where you can go to some areas where they’re thick with MetLife providers and MetLife won’t deal with you much, and there are other areas where they aren’t, especially in the country, they will negotiate if they want to.
Here is what it looks like from a PPO provider deal. Every doctor they have in their network means money to them, just like patients mean money to a dentist. So when a PPO organizer or network manager in a large company lines up a provider, they’re often compensated based on the dentistry the provider does.
So you can see from their viewpoint that they want lots of providers. I talked to one this morning and the way they’re paid is the difference between the doctor’s normal fees and what the PPO pays…so they have some percent of the difference. So if the PPO is paying 10% less or 12% or 30% less, part of the difference goes to the guy who lines up the providers, whether they’re in-house or their own organization.
I suppose an in-house network provider relations or network provider…how do they put that?
Woody:
Negotiators?
Bill Rossi:
Yes, network manager. And in every insurance company or these groups or warehouses I was talking about, there is a network manager whose interest is to get dentists on the network and keep them on there. And every extra dentist is money to them and you need to know that. And even if they have to negotiate and they don’t get a 15% discount, they get a 10% one. They still get this extra money and you need to know that. Do you see how that gives you a little more power?
Woody:
Oh, yes.
Bill Rossi:
So when you’re getting ready to sign up, it’s really important when you get the fee schedule to look at other fee schedules. So if you’re negotiating with Aetna, then you want to have what you’re getting paid by Delta or MetLife. It’s a market, right? You can compare those things and so you can say, you’re offering me fees even less than Delta and what is the deal with that?
It’s just like bargaining. I can buy this car across town for $2,000 less. How come you can’t match that? That is a really important phrase before you sign up. Once you do sign up, there is a
bunch of stuff to do and once you sign up I’m going to get into this part. You want to make sure you’re negotiating at least every other year if not every year. Every year you have room to call up and say, can you do better?
Woody:
Bill, is this call best made by the doctor?
Bill Rossi:
I think so. I don’t make those calls because if I did the calls then I think the insurance companies would get wise and maybe punish the client to get at me. So I always coach the doctors to call themselves and it’s better than having your office manager call.
Woody:
Right.
Bill Rossi:
We try to coach them and get the info together but you call up and say, look, I have my fee schedule here…and this is real important, Woody, you have to have your front desk take your fees and list the most common stuff — recall, periodic exams for adult and child prophies, your crowns, 2740s or 50s, the stuff you do most often. Then have your fees and have your office manager fill in what the PPO is paying you and what the other PPOs are paying you. So you can see, on a grid, who is the weakest player.
Now, the purpose is to put fire in your belly. When you call up the network manager, you have to say, I’m looking at your fees here and you’re asking me to write off $120 on a crown and heck, even with the other insurance companies it’s only $50. Can’t you do better? Or, versus you call up and say, is this your fee schedule? Yes. That’s it? Yes. Oh, okay.
Woody:
Yes, I see how that works and that’s very valuable information for all listeners. Once again, most people don’t know that you can negotiate with the PPOs and insurance companies.
Bill Rossi:
And yes you can, and most don’t know it and there is the technical part which I’m going to get to next. You don’t always win. If they have a lot of providers, for example, with MetLife it’s been
our experience that they won’t even return the phone calls to the doctor if they have plenty of providers in an area. You can tell by going on the website and looking for providers and if there are 100 providers in ten miles then you don’t have a lot of leverage.
Woody:
Right.
Bill Rossi:
You still have leverage though because there is a person who gets some kind of remuneration for keeping you in the network, or recognition. So if you’re a network manager, you want to have a big network, and you’re either recognized or paid more because of it and so you still have some power. But not as much as if there are only five providers in the area.
Well, if MetLife, for example, returns your call they are probably willing to deal. But sometimes they won’t return your call, and these are all based on actual things. I talked with a client yesterday that there is a certain insurance company, and again not Delta, but another one out there that said when he originally signed up that he would agree to a 12% discount and they would pay a 12% discount.
So he adjusted his fees each year as most doctors do and they kept up with him. They said this year that we’re not going to do this anymore. We only have one fee schedule and you’re going to conform like the rest. He says, oh come on, we had a deal! They answer, no, that’s the way it is. He said, I don’t know if I want to stay with you then. They say, wait a second, send us your latest fees, and they caved. They sent a letter to the doctor and I heard from the office manager yesterday saying it’s okay and they will honor the 12%.
So on these occasions when you do win a negotiation, it’s a huge deal and it’s like very high stakes poker. Sometimes with a phone call to our clients…I wish I could advertise how much money our clients have made by knowing how to go about doing this, but I don’t advertise it because I don’t want the insurance companies to know we’re there.
Woody:
Right.
Bill Rossi:
Even like with these things, and I don’t want too many people doing this, because we don’t want to strip the gears on it. Anyway, sometimes you don’t get the right answer from the guy you’re talking to, or you’re talking to a too low of a level bureaucrat. For example, maybe you’re talking to someone who processes forms or credentialing, but they’re not really the person who is interested in building the network. You want to say, who is in charge of the network? They are more likely to have the power and inclination to deal.
Sometimes, and it’s just like any bureaucracy, you have to be like, who am I talking to…when am I…you have to really keep track of your conversations. So far so good, Woody?
Woody:
Yes. Bill, one thing I might add and one thing we do with our coaching clients is we do a fee analysis. The way most dentists set their fees is they wait for that issue of Dental Economics that
comes out to see what is going on there. Of course, that data is about a year old by the time it gets printed and sent out. But I don’t understand the hesitancy of many doctors to put their fees where they should be.
We like to get at the 90th percentile and I don’t know where this comes from but some dentists think they’re not worth charging what they’re worth. That hurts everybody when you have someone low-balling the fees in an area.
Bill Rossi:
Even the network managers for the PPOs want you to commit your total fees. This guy I was talking with this morning said, I want the insurance companies to raise their maximums in what they reimburse because that affects the network managers too.
The way it is in dentistry, and if you owned a gas station, Woody, if the guy across the street is $4 a gallon and you’re at $3.95, the price mechanism works and you get tons of business. In dentistry it doesn’t work that way. If you charge less than average, you don’t get more than average patient flow unless you charge so much less than average you’re at the 5th or 10th percentile. Likewise, if you charge more than average you don’t tend to see, like a gas station, a big decline in business because of that. So you don’t have the usual price response.
Woody:
Right. Bill, let me throw out a couple of questions that I hear every day. Let’s just call it making the right moves and quicker decisions. One of the first questions is a new PPO is coming town. Should you join? I know you’ve covered a little bit of that but anything else you want to elaborate on?
Bill Rossi:
I would say not at first. You wait. If the PPO is being sold to a place where you already have a bunch of patients that’s an indication of hold off joining. If you have zero patients and it’s a new PPO and you negotiate with them, then maybe you sign up. If I was a young doctor, I would sign with more PPOs because my idea would be to use the PPOs to meet patients and then once I get to a certain level of productivity, then I would peel off a PPO using the techniques we talk about and keep the patients and lose the discounts.
I talked to a doctor yesterday, coincidentally, who was thinking of getting off a PPO and he said, should I stop taking new patients on? I said, hell no! You want to keep meeting people right up to the last minute because you’re going to keep a residue or better than a residue…the more people you meet the more people you have after the transition.
Generally speaking, not right away and you wait and see. If you are going to sign up, you certainly make sure you bargain with them and hold off. They will always take you on board,
and so if you can guarantee a 10% discount, I can make a decision today. If not, I have to think about it. That’s a killer statement too.
Woody:
Another thing you touched on is a dentist who is starting a new practice and they’re trying to decide which PPOs to sign up for. Is there any formula or rule of thumb?
Bill Rossi:
No, I don’t have a formula on that. You can get all analytical like this: one is ‘x’ percent or ‘y’ percent discounts, and you look for the active companies in the area. Generally speaking, if you look at spending money on advertising or signing up for PPOs the cost for a new patient for PPOs is more than advertising. But the cost for advertising isn’t cheap either and advertising is risky and expensive and joining the PPO is just plain expensive.
Woody:
Right.
Bill Rossi:
So there is no magic formula for it, and it’s really just case by case. I generally think that doctors are better off locating well and that sort of thing, all the stuff you talk about all the time: having a marketing plan, locating well, maybe doing direct marketing, and a strong Internet presence…all those things usually have a bigger bang for the buck than signing up for a PPO.
Woody:
Okay, Bill, so you signed up for a PPO and are wondering if it’s still profitable or can you make it more profitable? What do you do?
Bill Rossi:
The negotiation side…and there are a couple of things that we’ll talk about. First, I’m going to stay on the technical side for a bit and then I’ll get general on some pointers. The technical side is this: if you are signed up with PPOs, any doctor in his 30s or 20s, you’ll be negotiating with these guys the rest of your life. You might as well get good at this stuff and if it doesn’t work the first time don’t curse. It’s like fishing and it doesn’t always work, but when it does it can be spectacular.
Now, when you’re with a PPO you have to watch for glitches. So for example, there is a client I work with that when I was looking at their EOBs I said, do you realize that you’re getting $20 less for every recall exam than others in that network with that plan? She said, no, how would I know? What is going on here?
What we found is that there was a key punch error at the insurance company and instead of paying them $42 for a periodic exam they were paying $24. So we contacted the insurance company and said, what’s the deal here? They say, well, these are the fees you’re submitting. We said no, double-check that because the office didn’t submit that. They checked and what happened is that they had a key punch error and it cost that doctor, in terms of lost reimbursements, more than $10,000 the previous year.
Woody:
Wow.
Bill Rossi:
We caught them on it and called and said we submitted these and you made a mistake; make it good. Now we’re in the middle of that one but we won others like that. What happened here was the front desk person was just writing off that amount and thought that’s the way it is. So you want to tell your front desk person, look, if we’re normally getting a 15% or 20% or whatever discount on this company and if you see individual fees where the discount is huge, bring it to my attention because (a) it could be an error or (b) you can call about it.
For example, let’s say you have a code that is vacant and for years you didn’t do all ceramic crowns and now you have a Cerec and you’re doing it yourself. You may have had a fee schedule that you didn’t keep up because you weren’t doing the procedure, or they may have an input error that is a glitch, and you might be getting way underpaid on certain fees.
You have to look at what you’re getting. Look at a few EOBs or ask your office manager to, and you might go holy cow, we’re getting $75 less on this crown. What the heck is going on here? You can appeal to those guys. Keep in mind the processors make more money by how much they disburse. When you call a mid-range bureaucrat it’s no skin off their back if you get paid fair as long as you’re not a jerk when you talk to them.
So you call them up and say, is this right? Can’t you do better on these particular fees? They might say, we’re not giving any fee increases this year, and that might be true about the general level of fees. For example, Delta for a year or two here didn’t give any fee increases but that doesn’t mean you can’t appeal individual fees.
So you can see that other times doctors will make an agreement with them. Okay network manager, you’re going to pay me 10% discount…yeah, we got a deal. I’ll say double-check because sometimes they didn’t tell their key punchers. You’ll call them and say, didn’t we agree you’re going to pay 10%. Yes, sorry, we slipped up.
I don’t think they personally try to do that, but what I’m getting at is you’re with a PPO and you have to keep your eyes open and watch for glitches because there are glitches and they can be
quite expensive. You can catch them and it can make thousands of dollars’ worth of difference. I had to say that.
Now the other aspects we talked about in our previous discussion is if you do participate and have discounts that range from 7% to 37%, you either have to be able to outrun the discounts. For example, if you have a 30% discount but you’re 30% faster, and there are some doctors who are just wired to move faster and so they can outrun the discount.
Woody:
Right.
Bill Rossi:
You see that all the time. It’s not true that whole thing that gets quoted all the time, the “Kodak Study” or whatever. It isn’t true if you give a 30% discount and have normally a 40% net, but you’re only going to net 25% because it’s on a margin. I have guys who are making $300,000, $400,000 or $500,000 a year with all this PPO activity where technically they shouldn’t be able to do it but they are. So you have to look at profitability on margin.
If you’re joining PPOs you have to have the factors of capacity down, meaning that’s clinical speed, but it’s not the biggest deal. It’s staffing, delegation and teamwork, and that’s only if you have a team that is working well together that you delegate to and can get more done per hour or per day faster than if you don’t. If you have a good facility and equipment, you can get more done. With more room and better equipment is better technology. If you have a good procedure mix, that makes a big difference and that’s coming up next, and if you schedule differently.
So all the stuff you guys do in your seminars, Woody, and in other places. Those things are really important because if you’re going to take the discounts and you’re muscled up enough to outrun them then they don’t hurt as bad. But if you’re a doctor who is taking 1 1/2 hours on every crown prep and talks and eats slowly and does everything slowly, you’re not going to be able to outrun the discounts and you have to be real about it.
The other thing you can do is outgun the discounts, and by that I mean, look at your range of services. For example, most doctors nowadays know that their hygiene department is an important part of the profitability and service to patients. Yet, I’ll go to most clinics and say, well, what percentage of your adults have two or more caries lesions and have sensitivity and poor diet, exposed dentin, etc.? They’ll say, well, 70% to 80%. I’ll say, and what percent of your adult patients get fluoride? They will be at under 5% typically.
Woody:
Right, yes.
Bill Rossi:
And you’ve talked about this a million times. Wendy Briggs, who is going to be speaking again at Destin, talks about this, and I have my hygiene consultant, Matt Lahn, who has been addressing this and other hygiene services for years. So if you haven’t really explored that and you’re with those PPOs, you’re losing out. So if you’re going to take a discount, basically if you’re doing more services, services that you believe in with patients, then you can also outgun the discounts.
Also, obviously, if you’re doing things that aren’t covered by insurance like cosmetic veneers and those things, if you’re good at that, then you can take the hits of the discounts.
One thing I’m big on that we talked about briefly before is Clinical Calibration. That is where the team sits down and decides: when do you crown a tooth and why? Who should be recommended fluorides? When do we treat perio and when do we refer? When do we do an implant or an extraction or bridge? By examining those questions our clients usually are doing more per patient. Now if you’re doing more per patient that helps in a number of ways. If you decide to leave the PPO what happens is you don’t need as many patients because you’re doing more for the patients you’re seeing. Moreover, if you’re advertising to get new patients…if you get a new patient in and do $200 worth of stuff on them on average…it’s a lot harder to spend money on advertising than if you’re averaging $700 or $800 per new patient because you have a range of services.
Woody:
Right.
Bill Rossi:
Here is what kills me: you look at Valpak and stuff like that which most dentists will turn their nose up on, and I understand why, but you look at pizza companies and what is the average sale of a pizza, Woody?
Woody:
The guy who started Papa John’s was a patient of mine and it’s incredible.
Bill Rossi:
Really?
Woody:
Yes.
Bill Rossi:
Okay, but their average sale is like $20, right?
Woody:
Yes.
Bill Rossi:
And they are advertising in the same place that dentists can’t afford to advertise. Where you get a patient it is hundreds of dollars and not just $20 and yet these pizza companies and everyone can afford to advertise, but dentists can’t, and so then they wash up on PPO shores.
So my point is all those things about tough practice management, so you get more successful…when we look at clients and have someone who the week before last where they’re collecting $30,000 more a month than they were two years ago because he left a PPO. Their hygiene department is doing $10,000 more a month and they’re doing $10,000 more crown and bridge a month. So all together it’s $30,000 more that they’re bringing in a month; otherwise, the overhead is pretty much exactly the same. Their bottom line is very happy. But if we just did the PPO drop they’d have about a third of the game of doing everything.
So sometimes you want to ramp up a practice and so hire a consultant or get to Continuing Ed or something so that your practice is muscled up. Then you can be with a PPO and do better, or if you leave the PPO, you’re tough enough to survive the transition.
Woody:
One thing Dr. Blair talked about last week when we interviewed him was to stop being a refer-o-dentist. He said there are far too many general dentists who are referring out things that they can be doing themselves, like taking out wisdom teeth and seeing kids, etc. I think that’s another thing that’s very critical: that you have to have a good menu of services so you’re not referring out a lot of income to specialists who oftentimes don’t reciprocate your way.
Bill Rossi:
Yes, that’s interesting. And I know what you’re talking about with Dr. Blair. One thing he does with a client is count how many code activities are used in hygiene or the doctor. I do that too. That is something I’m glad to steal from Charles. You go to an office and the hygienist has a sort of bar menu. They have the small menu versus the dining room, but you want to have a good bar menu as we put it.
If I go and the hygienist has like five procedures they do, I know they’re not keeping up with Continuing Ed and not doing the range of services a hygienist can do. Likewise for the doctor. It’s a crude measurement of how well they umbrella-wise care for their patients, and the number of procedures that are active is interesting. And Blair keeps data on it and so I encourage the listeners to see where their range stacks up.
Now we’re to the transition part if you want to talk about that.
Woody:
Yes, I wanted to talk about how you transition out of a PPO when you realize it’s not working for you.
Bill Rossi:
First, you can analyze but what I always say to doctors is, let’s assume that you have a PPO and it represents 30% of your patient base. That would be a pretty deep penetration for any one PPO. So you ask, when can I change from an in- to out-of-network provider I have. That part of my patient base is at risk. That’s pretty scary.
So there are two objectives, maybe three, but the two main ones are (1) minimize any loss of patients of course and (2) slow down any loss. Your goal is if you have 30% of your patients at risk, I’ll say to a client, okay, you have 30% risk. What if you lost half of them? Usually our clients don’t but I say what if you did? I want them to imagine the worst case scenario. I don’t want my clients to get hurt or blame me if they’re not doing well. I want to take good care of my clients just like you want to take good care of your patients.
I have most of my client’s long term and so what I have to talk about, as I’ve said to you before, when I give advice is has to be real. This is my neighborhood and I can’t blithely commit my clients to any kind of PPO bloodshed. Anyway, you have 15% of your patients at risk but if you lose them over two years that is about 7% or 8% a year. Most healthy practices can heal up over that. So you can lose the discounts right away and if you’re careful whatever patient loss you have will be strung out so you have plenty of time to recoup or grow over it or do other things.
We usually ramp up practices before the PPO drop just so the doctor…just like a motorcycle at a stoplight…can feel the vroom. Okay, I have control and the practice is surging and now I can let go of this PPO and I’ll heal up over any losses because I have momentum.
We usually ramp up things and that really helps the doctor psychologically pull the trigger.
The next thing is when you’re getting ready to do this is to get the benefit grid. You ask your front desk to collect up the benefit grids from the various employers that have that plan.
I worked with a practice in Detroit where the front office person did an excellent job of collecting the benefit grids and I wanted the doctor to see it because you’ll find with most PPOs the out-of-network benefit set is pretty similar to the in-network one and the maximums are often the same.
The deductible might be $50 instead of zero sometimes, or higher or lower, but basically if you can see it with your own eyes that most of the insurance out-of-network is pretty much normal insurance, that really helps you prepare mentally for the transition.
So you’re not looking at benefit grids so you can push them in each patient’s face and say, see the difference? You’re looking at them because if you’re deciding what PPOs to leave, if you have a benefit grid in-network of 100% for preventative and 80% or 90% for fillings and such and 50% for major and it goes from that to 100%, 80% and 50%, for all practical purposes your patients won’t even notice the transition.
Woody:
That makes sense.
Bill Rossi:
But a lot of times doctors get all freaked out. Sometimes you’ll see, for example, with some major groups, and let’s say I was theoretically talking about Delta or MetLife or things like that, and you might see about somewhere 5% and 20% of the patients out-of-network will have 80% coverage preventative and not 100%. In those cases that will be the hardest patient to keep. They are young cash-strapped families and have a co-pay on preventative where they didn’t before, and so you will lose some of those. You’ll keep some too, but that makes you more vulnerable.
For most…that’s why you want to check because if you see for this one insurance company that all the out-of-network benefits for preventative are lousy at 50% or 80% instead of 100%, 80% isn’t lousy but it is more problematic. If the benefit set is identical or close to identical don’t worry.
Woody:
Bill, I know a lot of this is actually talking to the patient because things are changing and the worst thing you can do is send out a letter to your patients.
Bill Rossi:
Absolutely!
Woody:
Yes, so kind of go through the dialogue with the patient that you would recommend.
Bill Rossi:
I’ve got to speak to the letter because often when you sign an offer and tell an insurance company that you’re leaving and, by the way, I do want to make it clear that if you’re dealing with anyone at the insurance company, whether you’re dropping or signing up, always be friendly. They’re just like you. It’s not their fault they work at an insurance company and if you’re nice to them they will be nice to you for the most part.
One thing you’ll get sometimes is a letter that says okay, you’re going to be leaving the network as of this date and it’s up to you to notify patients. And doctors automatically assume that means a letter. No, it doesn’t! You know what it really says? It’s that they’re not going to send a letter.
When you go through a transition it’s important to remember that the insurance company doesn’t want to rock the boat either. So if you don’t get on a high and mighty stance and say we’re righteous and why we’re leaving this program, no self-respecting dentists would stay with Delta or something like that, and you diss the insurance company, you’re creating a war that you don’t need to and creating waves where you don’t want to create waves.
So the letters…I used to help write these letters but mostly they sounded self-serving or pompous and patients got confused by them and thought I can’t go there anymore. It’s the worst thing you can do and I still see dentists do it. If you’re going to leave a network and you think you have to write a letter…don’t. The only time you write letters is if the out-of-network benefits are nil or so awful that you think, I don’t really care, or when you really want to lose patients. If you’re over-busy and really want to lose patients write a letter.
Woody:
Yes.
Bill Rossi:
It is the worst and keep in mind, whatever loss you get with a letter will be accelerated. Not only will you have a deeper loss but a quicker one and it’s just suicide so don’t do it.
Most patients will say, whatever and shrug and that’s it. But the fear of every front desk person is the patient will say, I wish you told me this and now I’m going to go ape out here because I thought you’d be a network provider, and I’m now really ticked off. That is every front desk person’s nightmare.
What happens is if the front desk is visualizing that nightmare they tend to be like a gun-shy dog or something. Anyone who’s had dogs knows if you walk up to a dog with fear they sense it and get aggressive, but if you’re confident, they don’t do it. If you’re trying to tell the patient you left the PPO but you’re worried they’re going to take a swing at you, it won’t come off well.
I tell the front desk people firstly, that it’s going to be okay. But second, in the unlikely event that a patient blows up at the front desk, which is their worst fear, this is when I have to do a lot of psychology on them so they have a form of recovery. Let’s say I told you that, Woody, and you say, if I had known that and why didn’t you tell me…what the hell, I wouldn’t have come in.
In those situations you authorize the front desk to say this, Woody, for most of our patients it is going to work out well. We wanted to talk to you about this face-to-face. That’s true. We wanted to talk to you about this face-to-face and we understand this is a concern for you. So this one time we’ll write off the difference just like if we were still with the PPO, and in the future if you decide to continue here, and we hope you do, I think you’ll find like most patients things work out fine but we’ll take care of it this one time.
So if the front desk knows that with your support they can always recover, there is no reason for the patient to remain ticked off. It works beautifully but it doesn’t happen that much. It’s just important that the front desk knows if old Mrs. Mergatroid has been there for 100 years and starts chewing her that you’re supporting her (a) and (b) that she can make a recovery. You can’t do that long-term and can’t say, we left MetLife so we’re going to give you a 15% discount forever. Insurance companies hate that because that’s like forgetting co-pays. But I’ve never seen a client get in trouble during the transition doing it on a one-time basis because the insurance companies probably don’t want to inconvenience the patients either, and it’s better to tell them face-to-face because you can see their body language and handle their questions. If you send out a letter, you can’t unsend it, and you don’t know how it is being taken.
Woody:
Bill, are there any other things we should know about the transition?
Bill Rossi:
Sometimes I guess what I’m saying is there is always going to be some patient loss with this. Anyone who tells you it’s no big deal…it is a big deal, but again, the stakes are really high. It’s sometimes better to be reactive than proactive. In other words, that’s why it’s better to deal with reacting to the patient’s reaction versus sending out letters, etc. You keep it low key and it’s kind of funny on this but I see this over and over again.
When we go to an office we’ll coach them carefully on how to deal with this and a lot of it is just psychological. You have to have the staff understand that it isn’t exactly fair to have some patient get a 30% or 40% discount while others pay the full fee. When you have a PPO you’re trying to level the playing field. So you have to get the staff so they really get it and get behind the decision. People say, give me the scripts and if you don’t have the underlying belief from the staff that your fees are fair or it’s a fair deal or the patients have decent out-of-network benefits…that sort of thing, if you don’t have that gut feeling it doesn’t matter what script you have.
So on this is real important to be positive with the staff and supportive. What happens, and this is where I was headed, is after a while what happens when I talk to the staff is they end up saying very little. Almost everyone we go through our transition on, they want to know in great detail how to deal with every situation. I check with them two to four months later and say, how is the languaging and everything working? They say, we don’t even deal with it that much and we wait until the patient asks and it works fine.
Woody:
Right.
Bill Rossi:
It is sort of like we end up at the same place if I had just said don’t worry about it or do anything. But if I just did that, no one would believe me and so that’s it. I guess I wanted to wrap up with that.
Woody:
Yes, and I found as far as the scripts too, I’ve seen offices where they memorize the scripts and it comes off phony sometimes anyway.
Bill Rossi:
I think that…I mean there’s a lot to talk about with transitions but I think that is the main stuff. If I can stop any of your listeners from sending letters that would be great. And if they just give their staff power and work through it and get the benefit grids and not so much to talk to the patients about it but just so you know it, they will be ahead of most.
And some won’t have to drop at all if they know how to negotiate with the insurance company, as we spent the first part of this interview on.
Woody:
Bill, again transitioning out of the PPO, what are the statistics to watch for before and after?
Bill Rossi:
Okay. Thanks for asking that and that’s critical. Everyone knows you’re watching production and I’m real big on tracking exams, recalls, emergency and new patient exams as a way of judging patient flow. Or as Dr. Blair uses prophy equivalents which is adult, child and half your 4910. It’s really important to know what your exam numbers are because you’re going to watch that just as you would the RPMs or your altimeter on your plane.
That says this is your patient volume and so you want to know that. That also tells you how much flow you have because in dentistry if you want to do well you have to deliver more care and we measure care by production. And to deliver more care you either have to see more people, which we measure by exams, or do more for the people you see, which we measure by the production per exam.
Now if your production per exam is about average, it will be in the $500 per exam area. So if you work by expanding your range of services through hygiene and others, you’ll see the production per exam go up. So if your production per exam goes to $550, you can have 10%fewer exams and have the same production and greater profitability.
So we look at those statistics. It’s really important that each doctor set up a credit adjustment to the major insurance companies like Delta or MetLife or Cigna so they see how much those write-offs are costing them. If you put them all in one big credit adjustment code you can’t see it clearly and this way you can say, XYZ PPO is costing me $30,000 a year. It’s not a big deal but I think I can get off that one sort of as a dress rehearsal in the stuff Rossi is talking about, and I’m making $30,000 more a year. That’s a nice European vacation or two.
Woody:
Bill, go through that a little bit on how that would actually be set up. I think a lot of our listeners wouldn’t know how to do that.
Bill Rossi:
The credit adjustment code?
Woody:
Yes.
Bill Rossi:
The front desk knows and you would go to them and say, look, we have credit adjustment codes for insurance or bad debt write-offs, either call software support or set up other codes. For instance, instead of just an insurance generic write-off it’s Delta or MetLife, etc. write-off.
Woody:
Got you.
Bill Rossi:
Then you don’t…a lot of people go, well what percentage of our normal fees, and the main thing is you want to know how much it’s costing you. In this one place I looked at what they were averaging, they had 30 MetLife new patients that year by the time I saw them, and their write-offs year-to-date were $30,000. One way of looking at it is they were paying about $1,000 for every new patient.
Most of these PPOs you take a humongous discount and maybe get four to six more new patients a month, but it does depend. You do want to watch your write-offs or have them categorized. Of course…your new patient…if you’re contemplating leaving you want to make sure, and most people have dental software like EagleSoft or Dentrix, etc. and they all have a way of tracking the source of the new patients.
You want to make sure your staff has set up codes for “saw your sign” or “the Internet” or “your direct mail piece” and so on. So you want to have those codes, and they never do a perfect job but that way you can look and say, how many new patients did we get because we’re on Cigna’s website last year? That you see then you’re getting 20 new patients a month and half are coming because we’re MetLife. You need to know that.
Woody:
That makes sense.
Bill Rossi:
So that’s another key thing. So production, exams, production per exam, new patient and credit adjustments and also your profitability. Most doctors don’t have QuickBooks Pro or they have Pro but don’t have the reports where you can see the bottom line, which is a pet peeve of mine. The doctor’s compensation and benefits are mixed in with the staff, and I can’t see what the bottom line is. This is a great time of year and I guess any time of the year is good to get this in order.
We have a certain format that we like where you can clearly see the bottom line on my website, we have like an overhead survey that is pretty good and it shows a normal percentage, and you need to know if you’re making money. If you’re happily busy and making $400,000a year with PPOs maybe you don’t need to pull the trigger.
Woody:
Right. Bill, as we wrap up, any final thoughts? Then if you would be so kind as to give your website and contact or email address, if anyone has a follow-up question that we didn’t cover in this interview?
Bill Rossi:
Yes. My main thing is that it’s worth it…you guys work really hard and it’s really worth it to play the game. This is like a big game of poker and you’re not powerless. If you get into the game you can sometimes win it, even against the house, and the insurance company is the house. You can do well just by paying attention to the glitches and little things, and it can make thousands and thousands of dollars’ worth of difference.
It’s just some of the most rewarding decisions a doctor can make (and risky). But usually if you do what I talk about, I haven’t had anyone regret these transitions because we go about them in a very logical way.
And most of the people who listen to your series, or I meet when I’m in Destin, most of the clients who listen…these are the people who are thinking and they’re doing Continuing Ed and so on and you can…the insurance companies have a lot of control, but you have more control than they do over your own destiny.
I hear that all the time and doctors say the economy sucks and it doesn’t help, I’ll tell you that. But you have a lot more control over what happens in your practice than even Delta does. I want to sermonize about that and give the doctors a little more faith in themselves about it.
My contact information, my website is www.AdvancedPracticeManagement.com. Or you can just Google my name, Bill Rossi, and I come up in the search pretty well. Or if you want to email me at Bill@AdvancedPracticeManagement.com and my phone number is 952-921-3360. I would be happy to hear from any of your listeners if you’re dealing with these kinds of situations. I’m on a mission about this and happy to talk to your subscribers for a half hour at no charge or anything if they just want to get some information.
I certainly appreciate also hearing from across the country on how things are working.
Woody:
Bill, thanks so much. It was fantastic information and I really appreciate your taking time from your busy schedule to share all this with our dentists. I’m sure it will help a lot of people.
Bill Rossi:
Oh, it was nice talking with you, Woody. Hopefully, we did some good today.
Woody:
I look forward to seeing you in Destin this year.
Bill Rossi:
Okay.
Woody:
Take care.