The 10 Million Dollar MistakeAug 17, 2021
How much do you work for free? Is this a question that you have ever asked yourself?
If your practice is heavy in PPO participation, perhaps you should.
I know the argument for, and to be truthful, the benefits your practice may receive from participating in-network with a number of dental insurance plans. As both a practice coach and the manager of a large periodontal practice, I know firsthand that participation can bring patients in the door.
In my practice, I have always been aware of our insurance adjustment numbers and the “cost of doing business” when it came to contracting with insurance companies. I made the argument that this “marketing expense” was well worth it.
As I began to dive deeper into some data, and think big picture, long term, I saw that this “expense” was far beyond what I initially thought.
The Scary Data
The average dentist in the United States will practice for 40 years, producing an average of $750,000 per year. More often than not, practitioners with heavy participation in PPO insurance plans will be writing off 35% of that production.
Are you prepared to part ways with $262,500 per year?
Over 40 years, that’s $10,500,000. Yes, you read that number correctly.
What would you do with an extra $262,000 in a year, or better yet, what would you do with an additional $10,000,000 over the lifetime of your career?
Let’s look at this a different way.
In 2020, the median dental salary in the United States was $159,200, while working an average of 206 days per year. That’s a daily income that averages out at $772.81. So you’re essentially working 340 days for free.
Yes, you are working for FREE for an entire year. I don’t know about you, but I might feel better about just donating that $262,500 to the insurance companies!
Know Your Numbers!
The bottom line here is that you can not simply assume that doing “business” with the insurance company is good business. Know your numbers!
Do an analysis of some key practice indicators over the past years. What are your average production numbers? What about those insurance write-offs?
Now do a bit of forecasting. How long do you plan to practice? What do these numbers look like for the lifetime of your career, not just this quarter or this year?
At ACT, we believe in the power of knowing your numbers and making decisions based on what is accurate, not on what we feel. Kirk always says “Data doesn’t lie” OR “Data removes all emotion”.
Perhaps now is the right time to look at the insurance plans you are contracted with and get a grasp on the true cost of that partnership. How much revenue is it really generating for you? How much are you giving away?
Shifting away from heavy participation in PPO insurance plans is not a choice to be made lightly or overnight. It requires planning for proper execution. For some practices, it makes sense to stay in-network with a few plans. When all was said and done, my office settled on one. We looked at the numbers, analyzed the cost and benefits, and made choices based on the actual numbers.
But please, don’t let fear paralyze you here! If you are not sure where to start, if you need help with a plan, the team at ACT is here to help!
Jenni Poulos is a Lead Practice Coach with ACT Dental