We all have certain habits that are not truly in our best interest. Some of us don’t exercise. Some people are chronically late. There’s even an alarming number of people who text while driving. Unfortunately, your dental practice isn’t immune from bad habits either. Some of these risky habits involve the following mistakes with dental insurance:
- Enrolling in dental insurance plans without fully understanding the reimbursement model.
- Enrolling in dental insurance plans without evaluating how many participating patients are already in the practice or in those plans.
- Not reading dental insurance plan contracts before enrolling.
- Not evaluating the effect of dental insurance plans on the practice each year.
Let’s focus on that last bullet. We are now seeing more and more practices that have certain insurance plans that aren’t in their best interest. Their reimbursements are so low that the practice loses money. Not taking the time to reevaluate or analyze the effect of practice insurance plans annually can have a detrimental effect. Every practice should undergo two steps each year.
First, rank your insurance plans from best to worst.Rank them by reimbursement level, because in this analysis, that’s all that counts. Focus the analysis on the top 10 revenue-producing services that you provide.
Next, identify and evaluate the three worst plans.Determine if the reimbursements for the services you perform most frequently are even meeting your overhead. If they’re not, you are losing money by remaining in that plan.
Also, you may actually be more profitable by treating fewer patients. There are many situations where, by eliminating insurance plans that aren’t a good fit, a practice can have lower production and fewer patients and yet be more profitable.
The reason profitability can increase when eliminating a low reimbursement insurance plan is that the actual (real) overhead that is incurred is relative to your usual fee for the treatment. Once the usual fee is adjusted down to the insurance company’s lower reimbursement, the overhead does not decline and becomes a bigger percentage of the actual revenue you receive.
For example, if a practice does a procedure with a fee of $1,000 and an overhead of $650, the profit on that procedure would be $350. However, if the insurance company reduces the $1,000 fee to $800, the overhead is still $650 and the profit on that treatment is only $150.
Under this scenario, dentists can choose to continue to participate in a low-reimbursement plan that reduces profitability or jettison that plan and find other ways to increase their patient base. It’s a no-brainer.
Every practice should begin to evaluate each plan annually and individually by asking if it should sign up for each plan again. By asking this, you step back and take the time to look at each plan and determine if it’s still a good fit for your office. In analyzing each plan, look at these key factors:
- What is the reimbursed amount versus your usual and customary fee?
- How long is it taking to reimburse the practice?
- Are certain procedures being declined for coverage?
- How many of your patients are in the plan?
- What is the total revenue from the plan?
Many dentists are worried that they will lose patients if they don’t participate in a particular plan, even after they discover the plan is losing them money. While it is true that some patients will leave the practice if you no longer accept their insurance plan, not all patients will leave. Having worked with over 30,000 clients, Levin Group has observed that practices typically retain 60% of patients even when they decide to exit a dental plan.
Habits are very powerful. Once enrolled in a plan, most practices get so used to that plan—for better or worse—that they almost never take the time to reevaluate that plan again. It’s a goodhabit to analyze your insurance strategy annually. Use these tips to check in each year with all of your insurance plans.
Dr. Levin is the CEO and founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on dental practice management and marketing, he has written 67 books and more than 4,000 articles and regularly presents seminars in the United States and around the world. To contact Dr. Levin or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit levingroup.com or email email@example.com.