Can You Afford to Stay In Network?

For years, the PPO conversation in dentistry has centered around one question: Can I afford to go out of network?

It is a reasonable question. If a significant percentage of your patients have PPO coverage, those contracts can feel like the thing holding the practice together. You have employees to pay, a mortgage, equipment payments, children who insist on eating and probably at least one piece of dental technology you bought at a convention because somebody promised it would change your life. Nobody sensible is going to tell you to gamble all of that on a theory.

But there is another question that has become increasingly important, and I think dentists need to start asking it before the answer becomes painfully obvious.

Can you afford to stay in network?

The problem is not particularly complicated. The cost of running a dental practice has increased enormously. Payroll, supplies, lab fees, rent and technology have all become more expensive. Just about everybody involved in providing dentistry has been able to increase what they charge, while dentists participating with PPOs are often still working from fee schedules that have not kept pace.

If a large percentage of your revenue is governed by PPO contracts, you have given somebody else control over one side of your financial equation while retaining complete responsibility for the other. That arrangement was considerably easier to live with when there was more room in the middle.

Table of Contents

• Where Did the Safety Margin Go?
• Dentistry Is Reaching a Fork in the Road
• If You Stay, You Have to Find the Money You’re Losing
• If You’re Getting Out, Get Ready First
• The Numbers Have to Work Somewhere

Where Did the Safety Margin Go?

I have worked with dentists for decades, and dental practices have never been perfectly run businesses. Neither have restaurants, construction companies, law firms or probably the insurance companies themselves. Businesses are run by human beings. Things get missed.

Years ago, a reasonably successful dental practice could survive quite a bit of imperfection. Hygiene wasn’t always completely full. Some diagnosed treatment never got followed up. The supply budget occasionally wandered off on its own. None of that was good management, but there was often enough margin in the business to absorb those mistakes without putting the practice in financial trouble.

That margin has been disappearing, and the reason is fairly simple. A contractual adjustment does not reduce the cost of providing dentistry. Your assistant does not clock out for the discounted portion of the crown. The lab does not send a note saying, “We noticed this is a

PPO patient, so we knocked 25 percent off our bill.” The landlord does not prorate the rent according to your Delta fee schedule. You simply collect less money for the same work.

Do that across enough procedures and enough patients while expenses continue to rise, and eventually something has to give. For a while, dentists compensated by becoming busier. They added patients, expanded schedules and increased production. But volume has expenses attached to it too, and increasing production does not automatically increase profit.

You can produce a spectacular amount of dentistry and still wonder where all the money went. At some point, you have to ask whether you built a more profitable practice or simply a much busier place to work.

Dentistry Is Reaching a Fork in the Road

I believe many dental practices are approaching a point where they will have to make a serious choice. They can reduce and eventually eliminate their dependence on PPOs, regaining control over what they charge, or they can remain heavily in network and become exceptionally good at managing the financial and operational side of the practice.

My preference should be fairly obvious. I believe the long-term goal should be to get out of PPOs.

There are exceptions. If a plan is paying essentially your private fees, there may be little reason to terminate it. And if a plan is genuinely bringing enough new patients into the practice that the contractual adjustments represent a reasonable marketing expense, I can understand keeping it while that remains true. But those are economic exceptions, not a reason to build your entire business around insurance-company fee schedules.

I also understand that getting out is not something every dentist can do immediately. If you have spent twenty years building a practice around PPO participation, that dependence is real. You cannot simply pretend it doesn’t exist because you have finally decided you don’t like the arrangement.

Until you can change it, however, you have to understand what it means financially. When reimbursement is compressed, the practice has less room for waste, and there is considerably more waste in dentistry than most people realize.

If You Stay, You Have to Find the Money You’re Losing

When I talk about improving profitability, dentists often assume I mean cutting overhead. Certainly, expenses need to be controlled. If you are paying $179 a month for software somebody signed up for in 2019 and nobody remembers the password, you can probably let that one go.

But some of the biggest financial losses in a dental practice never appear as expenses on a profit-and-loss statement.

Consider hygiene. A patient cancels an appointment and nobody fills the opening. The hygienist is still there, the facility is still open and the expenses are still being paid, but the production that should have occupied that time is gone. Now multiply that by the number of openings across a month, and suddenly those little holes in the schedule are not so little anymore.

The same thing happens with diagnosed treatment. A doctor spends time examining a patient, identifies necessary dentistry and documents the treatment plan. The patient leaves without scheduling, and six months later the treatment is still sitting in the computer. The practice already invested the time to identify the need, but nobody completed the process of helping the patient move forward.

Then there is the particularly charming situation where the practice actually does the dentistry and still fails to collect what it is legitimately owed. Claims sit aging, incorrect write-offs are posted and patient balances grow because nobody is consistently working them. The dentistry has already been performed. The staff and lab have already been paid. Apparently collecting the money is now an optional final step.

These are not small matters when you are operating on discounted fees. They represent money the practice has already earned or opportunities it has already paid to create.

And none of this means the dentist is somehow at fault for not knowing how to manage every detail of the business. Dentists spent years learning how to diagnose disease and provide excellent dentistry. They were not trained to build organizational systems, manage accounts receivable or run a marketing department. Those are different skills, and they can be learned, taught and delegated.

But somebody in the organization has to know how to do them. If you intend to remain heavily in network, you can no longer afford to let these things happen simply because everyone is busy and nobody noticed.

The old financial margin could cover a multitude of sins. The new one can’t.

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If You’re Getting Out, Get Ready First

The other choice is to stop allowing insurance companies to control so much of what your practice can collect. Personally, I find it a remarkable arrangement that a company that does not own the building, employ the staff, purchase the equipment, perform the dentistry or assume the financial risk can have so much influence over what the dentist is allowed to charge.

But I am not suggesting that you walk into the office Monday morning, announce that you have seen the light and terminate every PPO contract before lunch. That would be reckless, and the objective is to build a stronger practice, not create a financial emergency.

If your practice depends heavily on PPO patients, you need to replace that dependence before you remove it. That means developing a reliable source of new patients that does not depend on insurance directories. It means making sure the patients you already have remain active, that hygiene is productive and that diagnosed treatment is properly presented and followed up.

Your staff also need to be prepared. If a patient calls with a letter from their insurance company and asks whether they can still come to your practice, the person answering the phone needs to understand the situation well enough to answer confidently and accurately. A frightened receptionist can do a remarkable amount of damage to a perfectly reasonable business decision.

You also need to understand your contracts and the actual financial consequences of leaving them. Some patients may leave. Of course they may. But losing patients and losing profit are not necessarily the same thing, particularly when the patients who remain are no longer subject to the same contractual discounts.

Do the preparation, work through the contracts intelligently and begin reducing the dependence. It may take time, but the objective is to reach a point where your practice no longer needs an insurance company to keep its chairs full.

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The Numbers Have to Work Somewhere

A dental practice has to make enough money to remain financially healthy. That is not greed. Profit allows the practice to hire excellent people, use good laboratories, invest in technology and provide the doctor with enough time to deliver excellent care. It creates reserves, provides stability and gives the owner a reasonable return for the enormous investment and risk involved in building the business.

If you surrender control over reimbursement, you have to compensate by running a tighter, more productive and less wasteful organization. If you want to regain the financial breathing room that dentists once enjoyed, you need to start building a practice that can operate without depending on PPOs.

I would do both. Get the practice financially and operationally under control now, because that makes it stronger regardless of its network participation. Then use that strength to steadily reduce the dependence on insurance contracts until you no longer need them.

Dentists were not foolish to join PPOs. The original proposition was attractive: give us a discount and we’ll give you patients. For a dentist trying to build a practice, that could make perfectly good business sense. But an arrangement that made sense twenty years ago does not automatically make sense today, particularly when the economics of providing dentistry have changed so dramatically.

If you are looking at rising expenses, shrinking margins and an increasingly exhausting workday, the answer is not necessarily more patients, more production and running faster. You may simply be trying to make a business model work that no longer leaves you enough money to operate comfortably.

You have a choice. You can become extraordinarily good at running a practice with very little margin for error, or you can build a practice that no longer depends on somebody else’s fee schedule. Ideally, you become excellent at the first while working toward the second.

Because the question facing dentistry is no longer simply whether you can afford to get out of network.

It is whether you can afford to stay in.