By Kyle L. Summerford
December 18, 2013
Understanding key concepts and strategies when handling patients that may have either of these two major insurance plans can help you effectively implement strategies to increase production and collection. There are a few major differences between PPO Indemnity insurance plans and DHMO Capitation insurance plans. Though it may sound somewhat discriminating, the structures of these two insurance plans typically determine how you should handle each patient. These are the two main factors that you should understand:
- The insurance type (PPO/DHMO)
- How payment is calculated
To help you get a better understanding of these two major insurance plans, I will give a brief explanation of both insurance plans below:
The DHMO Capitation plan
DHMO Capitation plans, also referred to as Dental Health Maintenance Organizations (DHMO), are plans that guarantee a monthly capitation payment to the contracted provider.
How does the DHMO plan payout?
It’s quite simple: the insurance company guarantees a fixed small monthly payment (y) to the primary care provider (PCP), typically $5 to $10 based upon the number of members (x) assigned to you equals the dollar amount of your monthly lump payment.
So in other words:
- (x) Represents # of members assigned
- (y) Represents the fixed monthly payment amount per member
- When multiplied, these two numbers represent your guaranteed monthly payment ($).
How are patients assigned to your office?
Once the patient calls their insurance company to find a dentist in their area, they are then assigned to your office and added to your monthly list of patients, which is also known as the patient roster.
Profit or loss?
Regardless whether you treat this patient or not, you are guaranteed to collect these monthly payments, which are usually made by bulk payment in the beginning of the month. Keep in mind: these amounts do add up quickly, resulting in a large monthly payment. The downside is that as a contracted provider you are now responsible to provide care to all patients that are assigned to your office roster, regardless of the compensation being offered. Typically DHMO plans do not pay even close to a UCR (usual customary rate) and force the patient to take on payments to the provider. These fees the patient pays are set forth in the contractual agreement and are usually way below any usual customary fee. Now, although this sounds like a bad proposition, there is a more hopeful and beneficial side to contracting yourself with this plan, which can help by simply stimulating your patient flow. This, in turn, will hopefully generate new patients with ongoing non-covered and/or cosmetic treatments as well as a lifelong patient.
The Indemnity PPO plan:
This is the most widely available and selected today. Often referred to as preferred provider organizations (PPO), these plans tend to pay a reasonable customary rate per ADA code billed.
How does the plan payout?
The payments can be made directly to the member or to a provider regardless of whether you are contracted with the insurance company. These plans are referred to as fee-for-service (FFS) plans and generally are reimbursed based upon a percentage of the UCR calculated by zip code.
If you are a contracted provider with the insurance company, you would be reimbursed based upon the agreed fee schedule (reduced fee). This is in the contractual agreement you signed with the insurance company and yourself and you will receive reimbursement for services provided at a reasonable rate. If you are not a contracted provider you will receive a higher payment, which is based upon the usual customary rate.
Profit or loss? You be the judge.
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