How to successfully overcome new PPE costs
By Nick Partridge, founder and president of Five Lakes Dental Practice Solutions
The dental community has showed tremendous resilience, with 97% of practices now operational as of mid-summer. Re-opened practices are being met with much stronger demand than anticipated. So much so, that the ADA Health Policy institute revised upwards their forecasts on dental spending through 2021.
Managing through the pandemic has certainly been and remains trying. We’re all learning on the job implementing workforce reductions based on evolving state mandates, understanding and applying for PPP, implementing remote work for essential staff – and now returning to work.
While many of these concerns presented temporary hurdles, the significant increase in costs to meet new personal protective equipment (PPE) requirements is a more serious issue.
Bearing new costs
In late April, the ADA released a statement urging third-party payers to alter their policies and fees to provide financial relief to dental practices bearing new and significant costs related to PPE requirements. In response, many insurance companies have launched programs to provide assistance. At present, eight dental networks have specific programs for PPE reimbursement based on reimbursing per patient visit. In addition, 10 Delta Dental member organizations comprising more than 61% of the U.S. population are offering programs. These programs vary in duration and benefit. Most programs end the late summer/early fall, but four of the programs are scheduled to run through the end of the year.
In a recent study of a small group practice in Illinois, we identified less than 22% of the patient base was insured by one of the 18 companies reimbursing for PPE. Further we estimated that in a two-month window from June through July based on the specific PPE programs, the practice would net roughly $1,500 in PPE reimbursements on just under 200 patient visits.
With a group practice in Georgia, our analysis revealed that approximately 30% of the patient base was covered by a PPE reimbursing plan. Our estimates for the practice were to expect to collect just under $24,000 on nearly 2,500 visits.
While helpful, this temporary relief is not moving the needle. In both examples, less than one-third of patients were affected. The long-term solution to recovering profit eroded by the spike in PPE costs is to retake control of pricing power at your practice.
Pricing power is your ability to raise prices over time. When we think about our inability to control prices, we immediately think of our insurance contracts. Insurance participation decisions affect reimbursement rates. While there are many benefits to participating in-network, one of the consequences is accepting a discounted rate as payment in full. When you accept a contracted rate, you effectively lose pricing power.
Dental Groups and Dental Service Organizations (DSOs) understand the importance of pricing power as it pertains to aggregating leverage through size. After all, this is one of the primary objectives of affiliating. However, many of these efforts are spent managing down expenses.
Considerably less effort is placed on the more important effort to manage pricing power. If you don’t actively manage pricing, you will be forced to focus on reducing expenses. The cost to deliver services will always increase so long as there are people and property involved.
As a group, below are three important steps to take to more effectively manage pricing power:
- Review your UCR annually
- Manage insurance participation more aggressively
- Improve data management in your practice management system
Annual review of UCR
Every dental group should review the fees they charge to patients annually. In dentistry, most practices price their services based on what others in the area charge. As a result, practices should plan to purchase claims data to benchmark their fees. The best source of information to benchmark your fees is the data from Fair Health. The Fair Health claims database represents over 75% of all dental claims in the U.S. and is the same source of information the insurance companies use to establish fee schedules.
Reviewing your usual, customary and reasonable (UCR) fees allows you to position your pricing according to your business strategy. Your UCR is also the foundation for building a successful in-house membership plan and in your negotiations with payers.
Manage insurance participation more aggressively
Decisions to participate as an in-network provider are made for a variety of reasons. As groups grow through acquisition, it is important to review participation and implement a PPO participation strategy regionally or by practice depending on your model. The single act of developing a strategy will improve revenue cycle functions to ensure payments are made according to the correct fee schedule and consistently across providers. When providers are contracted consistently, in the same plans according to the same fee schedules, the patient gets a better experience.
The decision to participate should be based on:
- The opportunity to attract or retain patients
- Capacity to service those patients
- Financial benefit
- Business goals.
Thus, the need for a well-defined insurance participation strategy. In dentistry today, your participation strategy should be one of the key inputs to your overall business plan. Importantly, the longer you wait to install a PPO participation strategy, the more costly to implement, but also the more disruptive to your business.
Given the importance of insurance participation to most practices, groups must be more focused on managing their insurance participation at a high level.
Improve data management within the practice management system
Implementing documentation best practices will facilitate better decision making when it comes to PPO participation. Dental networks are increasingly segmenting their networks to control claims costs. Your documentation should follow suit. Let’s walk through an example:
Cigna Advantage is Cigna’s bread and butter network. With lower reimbursement rates on average, this network avails providers of all Cigna PPO dental members. However, Cigna DPPO is their secondary network which reimburses providers better, but only applies to members with access to DPPO. DPPO providers are considered out-of-network for Advantage policy holders.
Practice A: Original platform facility. Participates in Cigna Advantage.
Practice B: Newly acquired practice participates in Cigna DPPO.
How can you evaluate which patients have which network when the payor is simply defined as Cigna in the practice management system? Revenue cycle teams must start drilling down and providing additional detail so that reporting can facilitate better decisions regarding PPO participation.
While many insurance companies have provided relief to dentists during this difficult time, all of these programs are temporary. As a result, groups need to think about ways to regain or retain pricing power to build long-term profitability.
Nick Partridge is the founder and president of Five Lakes Dental Practices Solutions, a consulting and technology firm helping dental practices develop, implement and manage a PPO participation strategy to attract and retain patients. Five Lakes has helped over 2,200 practices nationwide. The company is a four-time Inc. 5000 honoree as one of the fastest growing private companies in the United States.
For more than 10 years, Partridge has been an industry leader in understanding and analyzing the impact of dental insurance networks on the financial health of a dental practice. He has been featured as a guest speaker and guest columnist for many events and publications on the topic of dental insurance and dental benefits.