If one were to look for a positive outcome of the Great Pause of 2020, in which the majority of the world’s population was asked to shelter-at-home for several weeks, one might consider that people have used this time for introspection. We have reevaluated our priorities in life, what we value and hold dear, and other important philosophical questions that can easily go unasked during the fast pace of our normal lives. But when we do ask ourselves these questions, and I believe we’ve been doing so much more frequently while under lockdown, the answers can lead to a shift in how we spend our money and how we spend our time.
This is especially true for the dental community. As our teams were deemed nonessential and our practices were put on hold, many dentists seized the opportunity for some business introspection. Between candid phone conversations with colleagues and passionate rants in Facebook groups, I must have heard about a dozen bold new ideas that dentists want to implement as soon as they’re able to go back to work.
One idea that received a lot of traction online was to drop underperforming PPOs. While dentists are perpetually frustrated with third party payers, some are choosing this moment to cut ties. The reasons expressed by dentists include:
(1) Increased PPE costs that further eat into the already slimmer profit margins for procedures
(2) Third party payers stating that they won’t cover any additional PPE costs
(3) A slower workflow due to additional precautions (e.g., social distancing, room turnover) means seeing fewer patients a day, which negatively impacts practices that made up lost profit margins with a high volume of patients.
There are legitimate economic and business principles to support the decision to drop a low paying PPO post-COVID.
First is a simple matter of supply and demand. There is pent-up demand for dental care after the Great Pause. The supply of dentists is being constricted as some offices remain closed or have a decreased number of patients who can be seen in a day. In normal markets, when the supply of goods and services goes down and the demand for those goods and services goes up, the price goes up. Suppliers naturally prefer to sell their goods and services to the highest bidders.
Second, the Pareto Principle (aka the 80/20 Rule) states that 80% of effects can be attributed to 20% of the causes. A common application in business is that 80% of your hardships come from 20% of your customers. The solution? Fire the 20% and make more room for the better customers. Hardships include things such as stress, wasted time, and decreased profitability. Choose the hardship you want to overcome and identify and fire the customers who are the cause. While this strategy can be implemented any time, one could argue that it will be more immediately successful when the larger economic forces of supply and demand are favorable.
So, for these reasons I have decided in my practice to drop the PPO with the lowest fee schedule. It’s a move I’ve been contemplating for over a year but now seems like the perfect time. While it’s always hard to tell patients that you are no longer in-network for their plans, I believe the pandemic has provided a legitimate and defensible reason. The cost of operating a practice has increased and I’m limited in how I can provide services, so it is no longer sustainable to participate in certain PPOs.
The Great Pause is a moment for practice introspection. We have an excellent opportunity to make those large or small changes that we’ve been gnawing on for a while. Dropping an underperforming PPO is one of those bold ideas and I think now is the perfect time.
Editor's note: To view DentistryIQ's full coverage of the COVID-19 pandemic, including original news articles and video interviews with dental thought leaders, visit the DentistryIQ COVID-19 Resource Center.
Chris Salierno, DDS, is the chief editor of Dental Economics and the editorial director of the Principles of Practice Management and Group Practice and DSO Digest e-newsletters. He is also a contributing author for DentistryIQ and Perio-Implant Advisory. He lectures and writes about practice management and clinical dentistry. Additional content is available on his blog for dentists at thecuriousdentist.com. Dr. Salierno maintains a private general practice in Melville, New York. You may contact him by e-mail at [email protected].