Add a PPO
For many years most areas of our country enjoyed a strong economy. Dentists had a full schedule with less outside advertising and PPO participation wasn’t always needed to get patients in the door. Fast forward a couple of years and economic conditions have many fee-for-service practices questioning how to get their new patient flow rolling. Some areas have weathered the economic storm with barely a blip on the radar but try practicing in an area where many of your patients are involved in the auto industry and you may wonder how things went south so quickly. One question being asked is if it’s a good idea to add PPOs to stimulate practice growth. Sometimes the answer is yes but before you jump on the PPO bandwagon, there’s a few things to consider.
First, and most importantly, you must look to see the effect it will have on your current patient base with patients who are seeing you on an out-of-network basis. Let’s say you are considering becoming a Provider for PPO#1 as you are seeking to gain new patients and PPO#1 is the insurance offered by the largest employer in your area. A quick look at your patient base tells you that you currently have 100 patients utilizing PPO#1 with your office and those patients generated revenues of $60,000 last year, averaging $600 per patient. Should you decide to become a Provider with PPO#1 you will have a negotiated fee schedule that is about 25% less than your fees. Assuming your current patient base generates $60,000 a year in revenue with PPO#1, you will now be giving those patients all a 25% discount if you go in-network. That is $15,000 of lost revenue so you must gain significant new patients to offset the $15,000 loss you are taking. For each new patient that comes to you from PPO#1, remember you will only collect 75% of the $600 average they produce or $450 so you will need to gain 34 new patients from PPO#1 before you offset the loss of the revenue from your current patient base. Plus, you will have additional administrative costs by filing more insurance claims. Often it takes several months to begin realizing new patients from going in-network so it is not a decision to take lightly. The saying “a bird in the hand is worth two in the bush” could be considered applicable to this situation. Although new patient flow is critical to a practice, be sure you recognize the effect on current revenues by patients who have already proven to you that they will see you on an out-of-network basis.
The other factor to consider if you are fee-for-service and considering going in-network to increase new patient flow is to remember you are competing with offices who have already fine tuned their systems to utilize PPOs efficiently. Adding PPOs is not a quick fix solution but rather an overall system of practice management which require strong education skills by your front desk personnel, knowledge of filing insurance claims properly and familiarity with the rules of PPOs. Does your office know that you cannot typically bill a panorex and bitewings on the same day? Do they know that many insurance companies are starting to consider a post as part of a crown and will not pay both procedure codes if they are billed on the same claim? There are many loopholes insurance companies have for not paying claims if they are not billed according to the terms of the contract so be sure you have factored in the learning curve before you jump on board.
Finally, do not underestimate the value of your current patient base that is seeing you on an out-of-network basis. If you are an in-network provider and you drop the PPO to go out-of-network it typically requires hours of time for your front desk to communicate with your patient base about what the difference is and what that means for them. A fee-for-service practice is already composed of patients who have the non-PPO mentality, a very valuable asset for your practice. If, by chance, you try adding in a PPO, get disappointed by the lack of new patients while seeing your current patient revenue downgraded, then drop the PPO after giving it a few months, you then have a patient base who has to be re-educated.
The most likely candidates for successful PPO integration are practices who have open chair time and are able to add PPO plans that the current patient base does not utilize (keeping current patients from getting discounted rates and lost revenues). Although new patients generated this way will have discounted revenues, some revenue is better than no revenue in the eyes of many practices.
In short, PPOs are a potentially valuable way to add new patient flow, but analyzing your current patient revenues is critical. In many cases for an established practice that is having some new patient slow-down it may be better to continue to operate on an out-of-network basis but ramp up marketing in other ways such as web site development, direct mail or radio/tv advertising. In the example mentioned above there was an immediate cost of $15,000 to the current patient base by going in-network. That buys alot of advertising so choose carefully!
We offer complimentary phone consults so if you are considering adding a PPO but want to discuss your individual situation before proceeding, give Sandi a call at 303-204-9515. Remember that the first PPO fee schedule the insurance company gives you may not be their best offer. Your best shot of making PPOs profitable is to make sure you are first getting a fee schedule that works for your office. We can look at your practice numbers, see which codes you are utilizing the most and create the custom fee schedule you should ask for when negotiating.
