When you have to make a difficult decision, sometimes it's best to just "go with your gut." But when it comes to dental insurance, that could be a big mistake.
Dental insurance is a complex issue that has many dentists unaware of the impact that their insurance plans have on their practice. Often, practices focus more on the emotional side of participation rather than analyzing the financial aspects. When ignoring financial analysis and data related to specific insurance plans, practices may find themselves in an undesirable situation. Their specific mix of plans has a unique effect on practice production and profitability, which must be fully grasped to make effective decisions.
Analyze the current situation
Roger P. Levin, DDS, is the executive founder of the Dental Business Study Clubs.The first step in understanding dental insurance is to analyze your specific situation. We recently counseled a practice that participated in seven different insurance plans. When interviewing the doctor and office manager, we learned that they had very little knowledge about which plans performed statistically better than others. They had an emotional view of which plans they liked better and a sense of which plans paid better, but didn't know important data such as how many patients were in each plan, the total annual reduction from their usual and customary fees, how many patients from each plan had referred other patients, and whether patients in each of the plans were increasing or decreasing.
5 practical questions
To begin to fully understand your current insurance situation, consider the following five practical questions:
- What are the insurance plan reimbursements relative to the usual and customary practice fee for the six most commonly provided services? I recommend evaluating this both in dollars and percentages.
- How do your insurance plans rank in order of highest reimbursement to lowest reimbursement?
- What has been the total revenue provided for each of the last three years by each insurance plan and the total for all insurance plans?
- What is the total number of patients in each plan and the total of all insurance patients? It is important to determine whether these numbers are growing or declining.
- How many patients in each insurance plan referred other patients with that plan?
In the practice mentioned above, we found that the number of patients in all insurance plans was growing, and growing more heavily in the two plans with the lowest reimbursements. This was having a negative financial effect on the practice, which was also experiencing a higher patient volume and higher levels of stress.
This exercise will take some time and effort, but it's extremely worthwhile. Until you understand the impact of each plan and all the plans of the practice, it's next to impossible to understand how a mixture of fees for different patients in different plans, as well as fee-for-service patients, will roll up into an annual production and profitability number.
After answering the five practical questions listed above, a decision was made to end participation in the insurance plan with the worst reimbursement. The practice understood that some patients would leave if their plan was no longer accepted and focused on acquiring new patients over the next 12 months. The practice also decided to re-evaluate their participation with the second worst reimbursement plan over the next nine months.
Evaluating new plans
This same process should be used before enrolling in any new insurance plan. While the questions may vary and you may have to make estimates, it's important to understand the impact of a new plan because practices sometimes become dependent on those plans and aren't able to leave them without significant financial consequences. Be sure to look at the discount of fees against the practice's usual and customary fees, and how many patients might join the office from that plan. This can be evaluated by the total number of employees in a specific radius relative to the practices that have that insurance.
Of course, practices will find that some of their worst paying insurance plans may have a wide variety of factors that negatively affect the practice. However, using the questions listed above will help practices better analyze and understand their insurance situation and make effective decisions based on financial statistics rather than emotion.
Roger P. Levin, DDS, is the executive founder of the Dental Business Study Clubs.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
