Content Dam Diq Online Articles 2018 05 Control Future 1

Fee-for-service vs. managed care: Taking back control of your dental practice

May 7, 2018
There's a trend away from PPOs and HMOs in dentistry back to fee-for-service dentistry. Here are some ways that making the move frees dentists to perform better dentistry.
The payment structure for dental practices has evolved during the last few decades. It wasn’t that long ago that most dental practices operated under a fee-for-service structure: the dentist performed the necessary procedure, recovered as much as he or she could from insurers, and billed the patient the remaining balance.

However, this practice changed with the popularity of health maintenance organizations (HMOs) and preferred provider organizations (PPOs). These insurance plans offered flexibility and price reduction for patients while offering dentists “free” referrals by participating in the networks.

The problem with PPOs and HMOs

The problem with these plans is that they often leave dentists holding the bag when insurers refuse to cover procedures the dentists have already performed. There are also administrative requirements and increased paperwork that eat away at production time. On top of this, dentists must reduce prices up to 30% to meet some plan's requirements.

The only way to remain profitable under this system is to significantly increase the number of patients seen by the practice on a daily basis. This means more chairs, more hygienists, more paperwork, and more hours in a day. Ask most dentists how they feel about this system and their answers are often the same—they dislike decreased focus and control of patient outcomes coupled with increased administrative requirements.

Fee-for-service renaissance

Some dental practices have said enough is enough and have slowly reduced the number of PPOs and HMOs they accept, while shifting their focus to marketing and sales. The logic behind this is simple: if they’re willing to give a PPO 30 cents on the dollar, then they might as well take that 30 cents and move it to advertising. The net effect might be the same but at least the dentists retain control over their practices and how they’re paid.

More dental practices are going back to the model of fee-for-service medicine; however, this shift is not as simple as dropping a few hundred dollars on print and TV ads with the hope of obtaining new business. The landscape has changed and dental services have become a commodity. Patients don’t want your services because you’re a great dentist; they want the peace of mind that their dental procedures will be covered by their insurance.

Rethinking the value proposition

Fee-for-service practices must fundamentally change their patients’ expectations, experiences, and perceptions of dental medicine. This is done by changing the way the phone is answered, the way patients are scheduled, the way the practice is marketed, and even what services are provided. If dental practices are not enhancing patient experiences and expressly stating their value proposition, then patients will not be willing to pay higher fees.

Fee-for-service practices are more profitable, sell for more money, and function more like a business. In order to be a successful fee-for-service practice, a dentist must think more like a business owner and less like a dental professional.

Think like a business owner

Thinking like a business owner is the first step toward building a profitable fee-for-service practice. This involves understanding financial and non-financial metrics and how they impact your bottom line. It’s about marketing your services in a way that will effectively target your ideal patients. It involves a persistence and willingness to focus more time on business processes and functions.

For many dentists, operating a business, managing employees, marketing a practice, developing budgets, benchmarking the practice to industry standards, and keeping compliant with state and local regulations are not things they know how to do well. Caring for patients and developing procedures to enhance the patient experience is what they know well. But these qualities of a successful dental practice should not be mutually exclusive. Developing proper business processes not only increases patient experience but also the practice’s bottom line.

Partnering with people who are familiar with the changing landscape of fee-for-service dentistry is the best way to start thinking like a business owner. It’s easier to seek the help of lawyers, accountants, financial advisors, and business consultants to help grow your fee-for-service practice than trying to obtain a lifetime of business acumen in a few months.

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Jeremias Ramos, CPA, works at a nationally-recognized full-service accounting, tax, and consulting firm with offices located throughout the Northeast. Jeremias is the editor-in-chief of the Daily CPA, an online publication for accounting and tax news. Jeremias specializes in tax and business consulting with focus areas in medical practices. He can be reached at [email protected].