PAC Podcast 10-Part 1 of 3: What Do You Need To Think About When You Are Considering Dropping Insurance

In this episode Garrett Caldwell and Dr. Mike discuss some of the considerations of dropping insurance in today's dental practice environment. Dr. Mike shares his experiences and concerns about dropping insurance for the second time. Again, this is the business of dentistry.

For more information contact the Pacific Aesthetic Continuum at https://thepac.org.

Transcript

Dr. Mike: 0:00

Hey everybody. This is going to be a fun series of podcasts. I'm going to share what I was thinking about when we dropped our contracts with the insurance companies that we were taking. So today we are fee for service practice contracted with no insurance companies, but we want to help our patients maximize the use of their insurance. And I think there's a lot of important considerations. I'm not saying everybody should, should, um, Not be contracted. There could be some good contracts with some of my colleagues where they feel that they get a very fair reimbursement. Uh, but many colleagues express their frustration being contracted with insurance. So I hope you enjoy this. This is just some of the ideas that I thought about before I dropped insurance. Thank you very much. Enjoy. So I thought today we would discuss my experience dropping insurance. As I was thinking about it, I had to think way back because I've dropped Delta a couple of times now. And, uh, you know, again, starting practice over 37 years ago, when I started practicing dentistry, I thought everybody took dental insurance, right? That was just something you did. You graduated, you started practice, you became a provider for, in our area, being in Sacramento, Delta was the best. Are the biggest insurance company. So we would sign up for Delta back then. One of the differences, and I don't know if you remember this Garrett, because it's different than today's as a Delta, I guess what they call it today, premier provider, we would submit our fee schedule every year. Delta would apply whatever revisions we want to make to our fees and they would create a weighted fee schedule. Which meant that if you raise whatever procedures that were done, the most, if you raised your fee, let's say 2%, that carried a lot of weight though, because you do a lot of those procedures. And then if there are other procedures you didn't do very often and you raise it 10%, that wouldn't carry as much weight because you didn't do it very often. So they had this whole formula and you never really knew what was going to happen. But what you would do is every year you would take your fee schedule and You have your office print out what your current fees were, and then a column next to it, we would raise our fees, maybe 2%, 3%, we might try 5%, um, just to see what would happen. Then what would happen is Delta would review it according to their weighted formula and they'd kick it back to you approved or not approved. If you weren't approved, you wouldn't know which fees weren't approved. You would just know your whole, the weighted. Totality of your fee schedule wasn't approved. So you have to go back and, okay, I raised this one up five bucks. Let me take it down to an increase of two bucks and then you would resubmit it. And then Delta might say you approved or not approved. And if it wasn't approved. So you don't know what

Garrett: 2:44

category is BM2?

Dr. Mike: 2:45

It was this game. It was a game we played, but the thing about it was every year you could raise your fees a little bit. So it was like, there was this cost of living increase kind of built in. And. So it was, you know, it was a game and it was something that dentists did. So, um, you know, I, and I think, uh, I started taking Delta Premier back in the 1980s. I dropped Delta Premier to go fee for service in early 2000, either 1999 or 2000. And then I bought a practice where I practice today. And when I bought that practice, it was not Delta Premier anymore. It was Delta Premier. PPO. So we had different levels. You have premier, which is the best level to be at for the dentist. As far as reimbursement, then you have the PPO. And then the worst is the HMO. Again, going back to what you're teaching us in these podcasts, try to run your business like a business. So you'd have all your expenses and your advice would be. Let's say, let's take a round number. If you make a hundred thousand dollars a month, 5, 000 or 5 percent of that or 5, 000 should be maybe a rent and maybe material costs should be 5 percent and your team salary should be 25%, so 25, 000. And what I found was I was working really hard. Our schedule was booked out a month in advance. So you look at the schedule and you feel pretty confident you were going to stay in business. But it will really wasn't the truth. What was happening was it was a lot of activity going on and very little profitability. So the production was there, your collection numbers were there, but after you deducted all the expenses of doing the business, it was very, it was a struggle. And I think that's where. Some dentists are today, they're struggling with the finances and that's why they decide it's better to sell to a DSO because then I get out from underneath all the debt. So one of the options we have is to get out of the business of our practice, turn it over to somebody else, sell it or turn it over to DSO that I can then work within the business. Or go fee for service. If you go anywhere in between that, I think a lot of clinicians find that they struggle. Back then when we were taking Delta, my, even my team wages, ideally, I wanted it to be about 27 to 30 percent California, maybe a little bit higher. So 30%, but I was struggling because it was starting to get to 40%. And so we didn't have a lot of team members and I don't think we were overstaffed and we were busy and we had to have enough team to take care of the business issue. But because our reimbursements were so low, our percentages were way out of whack. I was trying to figure out how to control expenses. So back in 2013, I believe it was, I joined a buyer's group and I was telling doctors, you need to join a buyer's group. And what a buyer's group was like a DSO is they would take a bunch of practices and go to a Distributor and say, can you give us a special deal, but we're bringing a hundred practice practices to you or 300. And so I did that and it cut my expenses by about 4, 000 a month. And this was back in 2013. I was going out and I would lecture to the doctors. I go, you have to join these buyer groups. You have to join a buyer group because you basically get the same service, but you save money. And a lot of the docs would say, buddy, I've got my Patterson or my Shine rep. And we're very loyal to that rep, which I felt that too. But if you're saving, let's say 4, 000 a month in material expenses from your, uh, supplier, that's almost 50, 000 a year. And so I was telling the docs, I go, if you really like your, uh, salesperson from Shine or Patterson, because yeah, we get to be friends with them. They're coming in every week, making sure that you're okay. Well, at the end of the year, sign them a check for 20, 000. They'd be happy to take that 20, 000 and you still are up 30, 000. And it was still because dentists, I don't know why it's hard to change their behavior, even when you point out the advantages. And I would go to my colleagues and say, this is what I'm doing. And I think you should do this. And they still wouldn't do it. And it's just one of those things about dentistry that kind of befuddles me. But what I finally did is I had my front desk. I went to my front desk and I just said, you know what? I'm just having a hard time making these numbers meet up. So can you print out for me just our common procedures, like a filling, a prophy, an X ray, a crown, just a couple of the procedures. And besides that, can you print out what we're being reimbursed by our PPO plan? And some of the procedures were where you would think you'd be, uh, your PPO fee was 35 percent less than your UCR. But some of them surprised me, we're at 65 percent less, 85 percent less. And I looked at my front desk and see our profitability. We're not making 30%, 25 percent because at the time I'd bought the practice. We were investing in technology. So I had all of these different pieces of equipment, CEREC and all tissue laser and CBCT. So we had all these expenses. And I said, our profitability is not that high. So every time we see the patients with these fees, we're losing money. So basically what was happening is I was paying our patients to come and see us. And because I had dropped Delta about a decade before that, I said, okay, that's what we have to do again, is we have to figure out how to get out from underneath all the insurance plans that we have, just so we have our fair compensation, our UCR fee. And again, a fair fee is what. A patient is willing to pay what the practice is willing to accept, and neither party has remorse for that, for paying that fee or accepting that fee. Everybody feels it's fair. As in our practice, I don't think we have high fees. We're not charging 2, 500 for a crown or anything like that, but I think we have a fair fee. So that's, that's where you wanted to keep it. So when I really liked it, the business of dentistry, I was saying, well, okay, our profit margins aren't 90%. So if I give away 85%, I can squeeze out 5%. You know, I wish that was the way our business worked, but it was no, nowhere close to that. So when I talked to my colleagues and they go, well, can I drop Delta? I go, well, it depends because if you look at what Delta is, Delta is paying you a large part of your revenue every month. In exchange for that, you are taking a discount off of your customary fee. So if your crown's a thousand dollars, you might tell Delta, I'll take 650 for that. I'll write off, I'll take a write down of 35%, but in return, what Delta is doing is they are signing up subscribers that have now enrolled. Patients that are looking for practices like yours that are close to them. So it really becomes your marketing strategy is when you take insurance. So I tell the doctors, a couple of things is one, you have to find procedures that patients want, that they value that are higher revenue procedures, like aesthetics, implants, things like that. And by doing that, you're going to attract a patient willing to pay these higher fees. Your profitability will go up and you have to find services that kind of set you apart. So part of your marketing is that you provide implants or you provide aesthetics and you have to create a brand. And through that brand, the patients put a higher value on seeing you versus going to see somebody who just takes their insurance. And like we talked to before we started this, in some cases they may pay a little bit more. In some cases they may pay the same. And in some cases they may even pay less. If what? The Delta contract would normally pay out for a procedure if the, if your practice fee is less than that, that may allow the patient to actually pay less than going to Delta provider. So it's really hard when you're not a provider, you can't call Delta up and say, Hey, what's the allowances for this? They'll just say, we can't tell you because you're not a contracted provider. So it really is a game and they, they make it hard on purpose to help your patients. So going back to 30 years ago, I mean, our marketing was maybe a yellow page ad, but a lot of it back then was word of mouth. You had a hundred patients and those hundred patients would tell their friends or their family, and you'd end up with the next year with 200 patients. And then the next year you'd have 400 patients and it kept growing exponentially and you didn't have a lot of people leaving your practice. Today it's different. When I look at medicine. In medicine, we used to have a physician when we were growing up as a child. And then we'd outgrow that physician. We'd have our adult physician, or at least our primary, and they might take care of us for the next 40, 50 years. They knew us inside and out literally. Whereas today with medical insurance, if your company changes insurance or their offerings, and you sign up for a new insurance company, then you usually find a physician within that network and you go to that physician. So people are used to changing physicians. And I think it's gained to be that way a little bit with. Dentists, although I, I hate seeing that happen, but, um, you know, what I did back then, this was, uh, 25 years ago, I guess, is I saw that there were some practices that were dropping insurance and I said, well, that's an interesting concept. Everybody else is taking insurance and yet there were a small percentage of practices that could actually drop insurance and do very well. I was trying to figure out what set those practices apart. And they were the practices that were doing different procedures. Maybe they're doing more aesthetics or maybe they're doing more comprehensive, full mouth restorative cases. So I started to figure out that, okay, with the skills that I graduated with from dental school, I could not be that kind of practitioner. So I started to take courses, peer Dawson's courses, courses at LVI, just different courses to learn how to do different things. And I think that's what kind of gave us the, The ability to begin to set our practice aside and I dropped Delta Dental for the first time it was in 1999 and for the next decade, I wasn't contracted with any insurance companies and then, as I mentioned before, I bought the practice where I am today, and that was back in 2011, 2013, we bought a practice and that was a PPO provider. And so that was difficult. And so we ran our numbers, UCR versus our PPO reimbursement. And this is another tidbit of advice I would give the doctors. The next thing I did is I had my front desk, another report, and that report was how much revenue were we getting off of our Delta. Patients, right? Because if I talked to doctors, when I lectured through different parts of the country, and I just mentioned, Oh, we dropped out the dental. And some of them think that's no big thing. I go back and ask them, I go in Sacramento. I think most practices are probably 60, 80 percent Delta. And so that's why it's a big thing. And when I'm talking to doctors from different parts of the country, they go, Oh yeah, we take Delta, but Delta is like 5 percent of our practice or 10%. That's very small. But what I did is I had my front desk run a report to figure out how much of our revenue has come from Delta dental. And it was over 65 percent because we're in the midtown, we're downtown. So we have a lot of the state workers and everything like that at the time. So that was another thing that we had to figure out is I said, worst case scenario, if I were to lose all my Delta patients. And so now instead of having a hundred percent of my patients, I have 35 percent of the patients I have now, could I survive? And it goes back to that old Kodak analysis that if you're, if you have your UCR fee, like a thousand dollars for your crown, the cost of providing that crown, let's say is 250 with all the material left and everything like that. So you're, you're profit 750. Well, my contract, if you with an insurance company is let's say 650. The cost of getting that crown done is the same. So now my profit is down to 400. So I've gone from 750 down to 400. So let's just round out the numbers. I'm making twice as much profit when I get my UCR than when I'm taking a PPO reimbursement, at least the fees that we're talking about. So if my profit goes up, I could lose half of my patients 50 percent and have the same collections during that year. And that's provided. Nothing else changed. So I'd be much less busy, which means my cost, my variable costs would be going down. My team costs could actually go down and that actually worked out because we dropped insurance and then COVID hit. And then through nutrition, we did lose some team members. So what happened was we were able to get our UCR fee, which was a higher reimbursement. We cut down our team numbers, didn't fire anybody, but during COVID we lost some of our team. So now we've got a right size team. And I was a little concerned about that because we dropped Delta right before COVID hit, and we're trying to get our patients to understand, uh, what we're doing and they're all confused and, and then COVID hit and I was worried about that. So that's just a very tenuous time financially for the practice. But in the long run, a year later, I said, it's probably one of the best things that happened because we were able to right size this team. Our team size without firing anybody, just through the attrition are now we're getting a UCR fee and yeah, now the numbers are better than they were when we were with Delta, just our total production and collections. And the margins are better because we're not taking that extreme markdown on what we're. So Mike,

Garrett: 16:57

let's, so let me jump in here. So everyone listening is going to ask this question. What was the impacts? The true net impacts of loss of patients.

Dr. Mike: 17:07

I, again, because of COVID, that was a disruptor because a lot of us lost probably some patients during COVID, but now the, some of them are starting to come, come back, even though it's three years later. So I don't know. I haven't run the exact number, but I would anticipate probably about 35%. It wasn't a small number. I mean, it was a big number. And, and it's one of those things where. I tell clinicians, because when I talk to doctors about thinking about dropping Delta, they go, if I drop Delta, all my patients would stay with me. And I go, it's always really interesting because you think that these patients that you know really well would stay with you through all this change. But the reality is, and I told my team this, I said, There's going to be patients that leave because financially they need to leave. They need to stick within Delta with the Delta provider. Cause they feel like that's where they're going to get the best reimbursement. And, and it makes sense if money is tight and you have to make a decision on possibly paying more or staying with your insurance. And you always think I'll just stay with my insurance because I'm going to save money. So I would say my gut feeling is probably about 35%.

Garrett: 18:18

I'm a little bit surprised only because. And maybe we're just older, but my wife still drives 60 miles to get her hair done by the person she got it done to in the Bay area before we moved back from Sacramento, I have many friends that go to their doctor twice a year and drive from Sacramento all the way to San Francisco to see their same doctor. But I think one of the impacts that this whole PPO, this whole insurance impact has had on our industry is it's created a casualness and impersonal Medicine, which is probably the worst thing that has happened. I mean, your barber, you had your St. Barber for 30 or 40 years. You had the same police officers in the community that you knew for an entire career, and you had the same dentist, the same orthodontist that worked on, you know, for two or three generations before they retired. And now I think a lot of that's changed with the times, and I think a lot of it's because of the insurance impact.

Dr. Mike: 19:19

Right. We have patients that still come from out of state because they put a value on their health care. And last Friday, we had patients that came in from the Bay Area. So we still have a lot of that. We have patients that will drive out. But when you think about, Those patients that are, I think it's those patients that have been driving or flying in for their appointments that are more likely to stay with you because they valued you before and now an insurance change isn't going to make that big of a difference to them. But the way the game's played is as soon as you let, I, cause I had this happen, some of my. Colleagues said he was going to drop Delta. So he did, and he called me kind of in a panic. And he said, you know what? My patients are getting these letters from Delta dental telling them that, Hey, your provider's dropping. They're no longer going to be contracted with us. And it's going to cost you more and you could save money if you go to a Delta contractor provider and it's just the game. One of the things that's going on is right now, because the cost of everything, insurance companies are trying to stay in business, just like all of us. And so they will go to a large employer and say, how much are you paying for Dell insurance every month per employee? And then an employer might say, I'm paying 10 per employee. And the insurance company will come back and say, I'll tell you what, we'll cut it down to. 9 or 8, you'll save 20 percent per employee and, and that, so then that employer signs up for that plan. Then what the insurance company is forced to do is not raise the reimbursement or decrease the reimbursement. Some of the stats that I've seen, and again, this isn't just Delta, but just insurance overall is that, that about 57 percent of providers reported that their reimbursement actually went down. So that's the point that the squeeze on practices.

Garrett: 21:12

So Mike, when you thought, let's talk about, let's stick back, step back for just a second. So there's three ways you can make more money in your business, right? You can increase productivity with the same overheads, you can raise prices, or you can lower overheads.

Dr. Mike: 21:26

Correct.

Garrett: 21:27

That's it. Those are the only three ways that you can do that.

Dr. Mike: 21:29

Yeah.

Garrett: 21:30

Well, if you're a doctor in dentistry and you're not, haven't fully expanded your quiver of expertise to include. What your competitors are doing, which is implants, ortho aesthetic, and all the other specialty things that, that used to be pushed away from the practice from a general practice, you're at, if you're doing that, you're still being squeezed. It'll even if you're not doing that, you're way, way late to the part, but if you're doing all of those things, not those things worked to me, it seems those things worked. Five or six or seven years ago, 10 years ago, decade ago, you had to introduce those things to become profitable. So that's the, that was the first level of fighting back against it. And then the second level was marketing. I'm going to market to those patients with higher revenue returns for those specific specialties. My question is, is Delta now premier PPR HMR, are they covering All of the aesthetic procedures now to a certain degree, are those still all discretionary? It

Dr. Mike: 22:44

depends on why this sex, if it's, if it's just straight veneers, a patient comes in and they just want veneers and that's not going to be covered typically because it's going to be cosmetic. You know, they've got, if they've got old restorations and they have to be replaced and you're going to do veneers because it's a more conservative way of restoring it then Delta may pay. But then you run into the conundrum of. If you are charging, let's say, a thousand dollars for a veneer and you're doing 10 veneers, that's$10,000 and, and the maximum that Delta's gonna pay is gonna be a thousand dollars. And there's a big debate on the legality of this, but some will say when once the insurance company's maximum is met, then you can charge your UCR fee and on the others, and others will say, no, you can't do that. If you are contracted by that provider, do your veneers for a thousand dollars a piece. Then you have to do all 10 for a thousand. You can't do one for a thousand and do the other nine for 1, 500. And, and I, this isn't the place to get into that debate, but that's one of the things is that when you look at the overall costs, if you're doing, let's say you're going to do a 10 veneers at a thousand dollars a piece, and that insurance company is maxed at a thousand dollars, then the patient has to pay the other 9, 000 anyway. And if you aren't a provider contracted with any insurance company, A and an insurance company, maybe just don't worry about dealing with the insurance and just tell the patient straight up, it's going to be 10, 000. But we'll give you the paperwork. You can bill at your insurance company for the 10 veneers and see what you're reimbursed. And if it's. If the insurance company looks at that and go, wow, there were a lot of old restorations in there. We don't usually cover veneers, but we have to restore that tooth. And our fee is 1, 200. And the doc's only billing us out for a thousand. Maybe. Maybe they'll pay it. So it really does become a, a game and it's not always in the best interest of the patients. And I think one of the things that that's important is when practices are having a hard time surviving, that could bias their treatment planning. And I always want to make sure that if I treat plant, it's always like you mentioned earlier that we're doing the best for the patient. We're not trying to. Produce a certain amount or anything like that. It's just what the patient needs. And I think by having a practice that has a good financial foundation, I think we're allowed to do that in a much better way with less stress. Because when you look back at it, I know Garrett, you know, this almost 20 years ago when we were doing veneers, maybe it was more high end procedures back then, but doctors are charging 1200 to 1, 500 a unit. So go up 20 years and what are we charging for veneers, like 1, 200 to 1, 500 a unit. And then I hear other doctors are charging 3, 000 a unit. And some of my colleagues will say, yeah, what are they doing? Why are they overcharging the patient? I mean, that doctor that's charging the 2, 500 to the 3, 000, we need to support those clinicians because they're pushing the ceiling up. So the rest of us can go from 1, 200 to 1, 500, then 1, 800. Because if you look at everything else, when I was growing up, I remember the McDonald's commercial. You give them a dollar, you get a burger, fries, and a drink and change back. Today, being in California with our 20 minimum wage, the. Clickbait was hamburgers are hitting 20 because minimum wage is up to 20 an hour. When you look at other industries, almost everything else has gone up, but. A lot of our dental procedures have not, when you look at dental implants, I think dental implants are starting to become commoditized before you could charge five, 8, 000 to place an implant, restore it. And now you drive by the freeway and on the billboard, there'll be implants for 1895 or whatever. I think when you, and we've talked about this for over 25 years, when it comes to the whole financial game of dentistry. We can blame the insurance companies, but I think the enemy is us, right? Clinicians. We're the ones that say, why is that guy charging more than I'm charging? I can't charge more because my patients won't pay me more. It's that self doubt that dentists, and I run into them all the time, and they'll say, we can't charge that. I go, why not? And sometimes it's because they're contracted with insurance, but even the UCR, I go, why can't you set your UCR at that fee? Oh, there's no way we can get that. And it's just that there's a, there's a saying that you can't become wealthy with a minimum wage, um, mindset. So what we have to do is we have to think about how do we take care of ourselves, our families, our team, and our patients in the best way. And I think like, With anything else, I think it's having a practice or a business that's financially healthy. A lot of marriages break up because there's financial stress between the two spouses. And if they had a stronger financial foundation, they could work through it, and they'd have a much better marriage. I think the same thing happens within our dental practices. Dentists would live longer if they had less financial stress. So, yeah, I think that's one of the things.

Garrett: 27:54

Mike, before I, I want to jump in here. So I'm going to take you back, digress a bit. So step one is look at your income statement. If you don't know what that is, learn what an income statement is. So many doctors work off, I made what I collected, but that doesn't really tell you what your profit is because your collections don't necessarily represent what your profit is. It represents what you can offer at your business offer. So look at your income statement. Run a report, find out what you're really profiting and how many patients you can lose and keep your overheads and profitability the same at your full UCR. That was step one, correct? So, so you could have lost 50, you lost 35. And so you're ahead doing 35 percent less work. In theory, you're making more money. Then of course you would just the overheads for that. The fixed expenses are pretty much going to stay the same, but you might be able to reduce staff.

Dr. Mike: 28:57

We're going to stop there. This is going to probably be the end of part one, a very of a probably three part series. Um, I hope you're enjoying it. We're going to go more into my thoughts and then we're going to talk about some tips that I would think about giving a colleague that was considering. not being contracted with insurance, helping the patients maximize use of insurance, and just getting kind of a fair fee to help their practices survive. All right, thank you very much, and thank you to Garrett again for joining me with this podcast. It's always fun to have Garrett there and to gather his insights too, because this is the business of dentistry.