Leveraging dental insurance benefits

Dental insurance is complicated. Annual maximums, benefit periods, exclusions, participating versus non-participating, usual and customary, claim submission, narratives, explanation of benefits, deductibles, coverage levels, and writeoffs. Through all the complexity, hundreds or thousands of dollars of each patient's household budget are at stake.

Many insurance companies provide ready access to details of patients’ insurance benefits. Rather than assume each patient has generic benefits, dentists can leverage insurance benefit information to design treatment plans that better leverage patients’ dental insurance benefits. By taking account of variation in patients’ insurance benefits, dentists can produce one hundred or more dollars per day of highly profitable dentistry while providing better dental care to patients. Just one hundred dollars per day adds $10,000 or more profit for the dentist over the course of a year. What’s best, insurance companies pay for the extra production.

While insurance benefits would be irrelevant in a utopian world of “ideal treatment”, financial considerations are relevant in the real world. If economics were irrelevant, why would so many people – especially in poorer countries - continue to walk around with imperfect smiles? Why would employers put so much money and effort into providing dental insurance benefits? Why would patient financing programs such as Care Credit exist? Why would Americans seek dental care in Mexico or other countries?

The principle of Patient Autonomy in the ADA Code states, “The dentist’s primary obligations include involving patients in treatment decisions in a meaningful way, with due consideration being given to patient’s needs, desires, and abilities.” Finances are not only a justifiable, but a required consideration for dental treatment under the ADA Code.

With detailed information about patients' dental insurance benefits, dentists are armed to provide optimal care for real-world patients who face constraints on their household budgets.

Dental fees for profitability part 1

I often find an opportunity for dentists to painlessly increase their profit by $10,000 to $30,000 just by updating their fees. I'm not talking about an across the board fee increase that can drive cost-conscious patients away. (If you have room to increase your fees without driving too many patients away, what are you waiting for?) Rather, dentists often fail to keep fees for lower profile procedures updated to reflect market conditions. For example, a dentist may set fees for exams, prophy's, fillings and crowns near median levels while fees for root canals and periodontal procedures are below 25th percentile. I am repeatedly surprised how much money is left on the table by a handful of fees that are set too low.

Proveer Practice Management now offers a dental fee balancing service with a guaranteed 1,000% return.

Dental treatment philosophy

Do you expect dental patients to accept your recommendations regardless of financial or other patient circumstances? Or, do you try to educate patients about dental and non-dental health implications and leave the decision to the patient? Something in between? Comments welcome.

Detect missing money

I visited a practice in which collections according to the practice management software wasn’t making it to the bank account. Further investigation revealed a number of discrepancies in the records.

Bad news: The practice faces the labor intensive task of correcting a number of patient accounts.

Good news: By comparing the numbers in the practice management software and the accounting records, we identified problems early.

Discrepancies between your practice management software and your accounting system serve as an easy warning sign that something is wrong. The problem can be innocent - systematic or one-time record keeping errors - or fraudulent.

Business stress in dentistry

I had a conversation with a first year dental student over the weekend. Her dental education is preparing her for a life of clinical excellence, which is good for patients. But her dental education (perhaps not deliberately) is also sending her signals that dental practice ownership can be a stressful and sometimes overwhelming endeavor, which is not good for anyone.

Her response to the stress of private practice, “Screw this. I’m just going to hire you Greg.” Of course that was music to my ears. But the comment made me wonder why so many dentists choose a go it alone route on the business side of dentistry – an area of expertise completely distinct from their clinical training. Not only is stress at stake, but millions of dollars over the career of the dentist.

A few dentists grow a passion for and expertise in the business side of dentistry. I commend these dentists. But for others the business stuff seems to be a nuisance that just comes with the “freedom” of owning a practice.

Any insight from readers is welcome.

Dental bonus plans

An optimal dental office bonus plan depends on the objective of the bonus plan. Possible objectives include:

1) Share the financial success of the practice with staff members
2) Motivate general performance
3) Motivate specific performance

Consider how three different dental practices with different bonus systems accomplish and the objectives above with varying success.

In Practice #1, the staff has a general sense they get paid more when the practice does better, but they do not know how their bonus is calculated. The office manager states, “It’s a complicated formula and the doc just tells us our bonus every quarter.” In Practice #1, the bonus system serves to share the financial success of the practice with staff members and indirectly motivate staff to contribute to the success of the practice. The bonus system does not, however, motivate staff performance in any specific areas because the staff does not understand the link between their performance and their pay.

In Practice #2, staff members know exactly how their bonus is calculated -- it happens to be based on collections -- and the bonus gives staff members a clear stake in the game. The doctor states, “Sometimes my staff seems obsessed with the collections number.” In Practice B, the bonus serves both to share the financial success of the practice and to motivate staff to increase collections -- a relatively general measure of practice success. Although the bonus system for Practice #1 and Practice #2 do not differ greatly, the staff’s clear understanding of the link between performance and the bonus in Practice #2 provides additional motivation for the staff.

Practice #3 uses the bonus system to motivate very specific performance. For example, all staff members receive a bonus for new patient referrals. At one point, the doc wanted his hygienist to provide more patient education before he entered the room and offered a bonus based on improvement in this area. While Practice #2 and Practice #3 both use a bonus system to motivate performance, Practice #3 uses the bonus system to target more specific aspects performance.

Outcome: Different practices employ different bonus systems with different outcomes.

Caveat: Bonuses can be powerful. A bonus can motivate targeted behavior at the expense of behavior that does not affect the bonus.

Practice valuations

A Proveer Practice Management client wanted to purchase a practice where he was working as an associate. Before negotiations began, the seller provided a professional valuation that included three assumptions that caused the valuation to be 30% higher than it would have been under the assumptions I thought more appropriate. (The discrepancy led to some interesting discussions, but that’s another story.) Such a discrepancy calls for insight into the limits and uses of a valuation.

Limits of valuations
In this case, a few numbers on paper had a 30% impact on the estimated value of a multi-hundred thousand dollar transaction. The seller wisely stated, “The valuation is just a number.” Ultimately, the price is determined through negotiations between buyer and seller.

Each valuation firm employs its own valuation methods. Somewhat surprisingly, two practice valuation books published by the ADA are inconsistent with each other on some points. Further complicating the matter, the value of a dental practice is context specific. What is the value of the practice to a dentist versus a non-dentist? What is the value if sold as an intact practice versus parted out asset by asset? What is the value to a young dentist versus a dentist near retirement? What is the value to the dentist versus spouse in a divorce? What is the value in an orderly sale versus a fire sale due to death or disability? Such questions suggest there is no such thing as a single “value” for a practice.

Uses of valuations
Nonetheless, the economics and analysis underlying a valuation can provide real insight to a buyer, seller, or dentist who plans to continue running her practice. For example, when working with one client, we used valuation techniques to show he could pay roughly a quarter-million and turn the practice into something worth almost a half-million with some practice management changes. An understanding of the sources of value can also aid management of an ongoing practice or help prepare a practice for sale.

Reduce hours with no decrease in production

While working with a practice open 4 days per week, I observed the doctor had time most days to browse the Internet and meet with me during what was supposed to be time with patients. We considered 4 possible solutions:
1) Get more patients in the door
2) Perform more services per patient
3) Cut doctor hours
4) Do nothing

Although attractive, solution #1 was infeasible in the short-term because we lacked a method to bring an instantaneous flood of patients in the door. After benchmarking the doctor’s procedure frequency against other practices, we determined the doctor was performing a reasonable number of procedures per patient given his treatment philosophy and the type of practice he wanted. Further, any reasonable changes in treatment recommendations were too small to close the gap between the current hours in the office and hours needed to perform procedures. So we ruled out #2. Solution #4 was our last choice.

Through an analysis of the schedule and patient load, we determined the doctor could easily meet the patient demand for services working 3 days per week. However, the single hygienist could not handle the patient load on 3 days per week. Since the doctor had an op available for a second hygienist, we found a hygienist available to work a second hygiene room one day per week.

Outcome: The doc now works 3 days per week instead of 4 with NO decrease in production.

Introduction

As founding partner of Proveer Practice Management (http://www.proveerpm.com/), I work with dentists for a living. I chose this line of work because:
a) Dentists are often business owners but are experts in something other than business.
b) I often observe room for five and six figure improvements in the wealth of my clients.
c) It is fun!

The roughly 100,000 dental practices in the US face some common challenges and there’s no shortage of companies promoting universal solutions – practice management consultants, financial planners, continuing education seminars and institutes, software and equipment vendors, supply reps, and more. However, each dentist has her own values, talents, constraints, ethics, and set of circumstances. Rather than sell universal solutions, I promote the application of good business principles to each unique situation.

Lacking universal solutions and recognizing that teaching good business principles is too big a bite for this blog to chew, I plan to offer a series of stories and comments from my interactions with dentists.

Enjoy!