Is dental insurance hurting your profits?

Dental insurance is a significant component of the landscape of dentistry in the U.S. In a recent Levin Group survey, we found that 91% of all dental practices participate with at least one dental plan. Despite the desire of many practices to go 100% fee for service, most find it difficult, risky, and in many cases financially impossible.

Understanding the realities of dental insurance reimbursements

Historically, insurance companies reimbursed practices at a high percentage of their usual and customary fee. Practices were happy to add insurance as a marketing opportunity to attract more patients. And they did.

Fast-forward to today. Dental insurance companies have an established pattern of regularly reducing reimbursements. Insurance companies now know that many practices are extremely reliant on the patients covered by that plan and how risky and financially detrimental it could be to successfully exit that plan.

At this point, you may be saying that you don't care, it's unfair, and you're getting out. Just know that if you have a high percentage of a certain plan, you will lose patients and it will take a long time to change your business model. The current business model of many practices has a high dependence on dental-insured patients.

It gets even more complicated.  For most of the past 20 years, practices had the capacity to make up for lower reimbursements by adding more production or adjusting fees for services that were not reimbursed by insurers.

However, in 2022 and 2023, practice overhead rose by approximately 10%, mostly due to increased wages and inflation. Now, many dentists are waking up to the fact that they've worked hard, delivered excellent quality of care for their patients, had a busy and full schedule but are seeing lower profits.

When insurance companies reduce reimbursements in this environment, dentists feel the pinch even more acutely. What worked in the past won't work now. Insurance reimbursements that do not increase, even at the rate of inflation, are effectively a decrease in overall practice profitability.

Where to go from here?

This is not an article about whether you should or should not participate with dental insurance. Most practices have built a business model based on insurance participation, and changing business models is usually slow and/or dangerous. So, what does a practice do?

1. Raise your fees every year. Responsible businesses address increased costs by raising fees to cover those costs.

2. Focus on adding elective services and promoting those to patients. We regularly see excellent practices in terms of busyness and patient flow that are not presenting treatment properly and not getting the right results. Elective services are still not covered or are restricted by dental insurance plans, giving the practice an opportunity to provide beneficial services to insured and noninsured patients. Noninsured patients pay the usual customary fee, and the insured patients have a maximum allowable fee. In essence, a practice today has more than one fee schedule whether it believes that is a fair situation or not. This is determined by the insurance company's maximum allowable fee and not by the practice. The practice needs a combination of fee-for-service profit and insurance company profit to eventually reach the income goals set for the practice. Think of this like retail stores that have regular prices, sale prices, outlet mall prices, all of which are combined to reach the annual profit of that retail store chain.

3. Refine your schedule to allow for a 30% to 50% increase in practice production. Assuming the patient flow is available, this is an excellent strategy. Focus on scheduling to meet certain key performance indicators, including annual production, daily production, production per hour, production per provider, and average production per patient. These statistics will tell you more about your practice than most other statistics.

4. Contact insurers. There had been a strategy for many years of submitting your new fee schedules each year to the insurance companies. We still endorse this concept, although there are certain plans that ignore the submissions. Periodically you may want to even call a dental director at the plan and ask them to review your profile. You'll be surprised that sometimes they will increase it, especially if it's been a number of years.

Summary

Dental insurance needs to be managed. Emotional reactions to whether insurance plans raise, lower, or maintain reimbursements are irrelevant. Practices need to treat dental insurance from a business standpoint, build a business model, understand the risks and rewards of that model, and then manage it.

Strategic steps to better manage the insurance relationship include eliminating poor-paying plans that are a minor percentage of practice revenue, regularly appealing cases, and not simply accepting that the case has been rejected. This is a starting point to better manage dental insurance, which touches all practices regardless of participation.

Dr. Roger P. Levin is CEO of Levin Group, a leading practice management and marketing consulting firm. To contact him or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit LevinGroup.com or email [email protected].

The comments and observations expressed herein do not necessarily reflect the opinions ofDrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.