Boost Profits By Managing Your PPO Participation
By Bill Rossi October 2017Practice Management Managed Care
More practices are participating in managed care plans these days, and a greater percentage of their production is coming from these plans. Moreover, PPO discounts are growing deeper and deeper. Despite these negative trends, you can dramatically improve profitability by properly managing PPO participation. Developing a managed care plan strategy can help you overcome fear and ignorance to limit patient loss, improve profits, and reduce stress.
Our recent reader survey (May 2017) revealed that 66% of practices are now participating in managed care plans (including Delta Dental), up substantially from 56% just 8 years earlier. Even more troubling, a greater percentage of production is coming from these discounted fee managed care plans (for doctors participating) than in the past. In fact, 35% of doctors reported that 40% or more of their production now comes from these discounted fee managed care plans.
Fortunately, you have more power than you think to reverse these disturbing trends, says Bill Rossi*, a leading practice management expert on PPO issues with over 35 years of experience. However, to make positive changes, you must overcome your ignorance and fear to develop a strategy for dealing with PPOs.
Tracking PPO Costs
Rossi says that doctors often contact him thinking they have an overhead problem when, in reality, they have a write-off (PPO) problem instead. That’s because most doctors are not aware of the true impact that managed care write-offs have on their practice profitability, since they’re not tracking the amount of these managed care adjustments (write-offs).
Rossi recommends curing this by charging out all production at full fee for each procedure, with the related production adjustment for the write-off amount required to get to the discounted fee allowed under the plan. As much as possible, the adjustment codes should track each major PPO plan in the office.
You can easily track total production and write-offs by each managed care plan using your practice management software. This allows you to clearly see how much PPO participation “costs” your practice in the form of write-offs.
After this analysis has been completed, you can then rank all of their managed care plans by their write-off percentage (total write-offs divided by production). This allows you to develop a plan to reduce, or eliminate, PPO plans until you have the right “balance” of PPO participation. When selecting the order of PPOs to eliminate, Rossi says you should consider the PPO’s fee level, number of patients in the plan, difficulties with insurance processing, as well as the out-of-network benefits available.
This production adjustment (write-off) information should be reviewed monthly, since in many cases, these write-offs represent the largest “expense” to your practice.
Overcoming Fear of Making Changes
Rossi says that, contrary to public opinion, some PPO fees can be negotiated. If you haven’t tried, there’s a good chance you’ve left money on the table, he says. It costs very little to do this, and the extra dollars are “free” money, so don’t overlook this step.
Rossi says that too often doctors sign up for a PPO plan too quickly, and then drop it too rashly. He urges you to make your decisions logically, since there are many thousands of dollars and many patients at stake.
Doctors with otherwise healthy practices can peel back their PPO participation, but they need a well-thought-out coordinated game plan for doing so. In other words, you must take measures to fortify your practice and build it up in the face of the inevitable patient attrition that may occur. Done correctly, you can keep the vast majority of these patients and lose all, or most, of the discounts.
If you drop PPO participation, don’t send a letter announcing it to the affected patients, unless the PPO is sending one. Rather, discuss this with each patient at their next visit. If your staff is properly trained, you can retain the vast majority of PPO patients, unless they have little, if any, out-of-network benefits, and delay the impact from those that do leave. Employers provide dental insurance to make their employees happy, says Rossi. Of course they want to save money, but their employees aren’t happy if they can’t see the doctor they want. Accordingly, most insurance companies do not have punitive out-of-network benefits. In fact, often the out-of-network benefits are surprisingly good.
He further reminds doctors that most likely they are already seeing some patients out of network. For every PPO plan, there are providers both in and out of the network in your area. No insurance network, not even Delta, has 100% of providers in a given area.
Rossi has helped hundreds of dental practices reduce, or eliminate, PPO participation while increasing profits. He cautions that the practice needs to have a healthy patient base to successfully go through these transitions. He says doctors tend to be compulsive about being busy. Ironically, the doctors in the best position to decrease PPO participation are the ones who are least temperamentally inclined to do so. His best results have come with doctors producing over $100,000 a month who are collecting less than 80% of their practice production.
He flew into 3 practices recently to perform a PPO “exorcism,” with astounding results. In each case, practice production actually went up, not down, after dropping PPO participation. More importantly, collections rose even more significantly, as managed care discounts were eliminated. In fact, these practices saw collections increase an average of over $157,000 annually, virtually all of which went to the bottom line as increased profit. Rossi says that properly managing PPO participation can often add 4–10 percentage points to your collections percentage and profit margin, making it one of the fastest, and most effective ways to fatten your bottom line!
* For more information on his firm’s managed care consulting and other practice management services, contact Rossi at 952.921.3360, online at www.advancedpracticemanagement.com.
The McGill Advisory content is provided for informational purposes only and does not constitute legal, accounting, or other professional advice.
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