For over 25 years, my main practice was a “fee-for-service practice”. Demographics, insurance, corporate dentistry, and DSO’s challenged that status quo and I found that the dental economy was changing in every state. These changes certainly morphed at different rates in different states, but as we look at the new reality in healthcare and dentistry specifically, most locations in the US have a 74% plus insurance coverage for dentistry. Many areas are much higher. So, today I want to take a moment and talk about “fee-for-service practices”. I get a large volume of calls from doctors buying practices, busy offices wanting to drop being in-network for insurance companies, and just regular practices that have struggled in this managed care jungle and want to take on some niche area of dentistry and go “fee-for-service”. In each case the doctors want to know if I think this is a good idea. The answer is always based on their particular circumstances as well as the doctor’s competence, personality, and engagement in the process. A couple of overriding facts exist and have become a driving force in medicine and dentistry. Patients who have insurance want to use it and maximize their benefits. Patient’s choices in whom they buy services and products from has and will continue to be influenced by price. Before you stop reading and begin inundating me with nasty texts and emails, consider that you should realize that there is a double standard here. You don’t, like the rest of us, want to have adjustments of your fees in an in-network relationship with insurance companies. Yet, when we buy insurance (like medical insurance for ourselves and family), we always buy a PPO plan. Stop thinking like a dentist just this once and step back and consider dentistry from the patient’s perspective. Dentistry is expensive, there are dental problems that do not hurt and therefore difficult for the patient to accept this “phantom problem” that needs immediate attention, and very few patients see any difference between one dentist and another. Very few dentists in the market place are “remarkable”. We dentists run a small consumer driven business, and if we don’t consider how our patients see us, we will be doomed to even thrive as a successful business.
According to an article in Dental Economics: “The key factor to the success of a fee-for-service practice is patient education. Patients can be taught the value of services not covered by dental insurance. Dental practices can do an excellent job of educating patients about the realities of dental insurance and its relationship to quality care.”
(Planting the Fee for Service Practice by Roger P. Levin, DDS, MBA)
While I used this quote, I am not sure I agree that education alone will turn the tide in dentistry. It failed in Vision, Medicine, Pharmacy, and Chiropractic. So, why is it not likely to struggle in dentistry? The “commoditization” of health care, driven by educational ads and marketing, has created an educated consumer with the mindset that a crown is a crown, glasses are glasses, Amoxicillin is still just Amoxicillin and a cleaning is a cleaning. I don’t agree with this, but I strongly believe that educating our patients alone will not make the difference. There are too many other entities with much more money educating our clients in print, TV, radio, social media and Internet. Not that we should stop trying, but the bottom line is that while we take that strategy, we must still survive long enough to increase the number of “fee-for-service patients” available for our office. At best, in most locations, only about 25% of the potential clients will be without insurance. Even those often times need to be enticed to stay in our practice by offering in-office discount plans. This is a complicated topic so stick with me a little longer.
While I admit believing that managed care is not a good thing, I also believe that accepting a reduced fee for our service from some of our patients may be the only reason they can afford or want the dental services we can provide. Dentistry, and especially elective services, place us squarely into being a small consumer driven business where our potential clients decide what services and products they want to purchase and from whom they will purchase them. Overwhelmingly, most people have chosen to do just that and as the dust has settled over the last three decades, the vote has fallen strongly on the side of using their insurance and choosing to use it in a way that they get a maximum benefit with its use. Is this smart or good? No, but the public speaks loudly and I want you to consider what they are saying.
The ADA Science and Research Institute claims that only about 6% of all the dentists licensed to practice in the US are “fee-for-service” and do not participate in any in-network dental plans. Don’t stop there. Of the 6%, the ADA did not consider that a percentage of those doctors are retired but still maintain a license, some are older and don’t practice full time and don’t care to participate in insurance, some work in public health or turn coated and work for insurance companies, and then there are the few that actually wear the red badge of courage and are “FEE-FOR-SERVICE” providers. Yet there is another level the ADA failed to consider in their research. What about those fee-for-service doctors that struggle to pay their bills, fail to thrive, and are contemplating getting out of dentistry. Or, they have faced the ugly fact that, in their locale, they cannot compete as a stand-alone, fee-for-service practice and are considering desperate measures. No, I won’t even consider such a dastardly deed of going from fee-for-service to a hybrid or blended practice with both in-network and fee-for-service patients. I can see it now: They shy away from their friends at state and national meetings because the shame is too much to bear. They have failed. How can they look their peers in the eye when they have struggled to maintain a viable business model as a fee-for-service practice?
Now look at the patient’s side of the equation. Let’s assume your demographics are a high-income area of the US ($80,000-$150,000 a year for a family). Sounds great till you stop thinking like a dentist and realize that these folks came from middle class families that have always gone to the dentist, floss, and brush so that comprehensive dentistry is a cleaning and bleaching try. Believe me, these folks have very little to work on and they are looking for an in-network dentist to go to. Higher income people either don’t need much dentistry or they have already had it done. How about the low income demographic ($35,000 and below for a family each year)? They certainly don’t have the money for a lot of work even if they comprehend the need for it. Dentistry to them is needs based, not wants based. Sure, there are exceptions. But we are talking big picture here. With this in mind, help me understand where 20-25 new fee-for-service patients a month are coming from.
One other important factor to consider is competition. This is not a two-choice formula: Fee-for-service vs. managed care practice. Doesn’t it make sense that there are Super General Dental Practices out there that are in-network for some insurance plans based on where the practice is located, but, and this is a huge but, great practices chase fee-for-service clients too. I would have to say in practices that I have owned, we were the practice in the area with the most fee-for-service patients and we did more crown and bridge while still having children, endo, oral surgery, ortho, etc., in our practice. We had the best of both worlds. The strictly fee-for-service practice wouldn’t have a chance at competing with us. We had better consumer hours, stable long-term well-trained staff, highly competent, more confident, with better protocols and systems with and a consistent 20% per year growth with a 50%-55% overhead.
Hopefully, you are beginning to realize that a fee-for-service practice is awesome, but you should also realize that some of us might not make the cut. Demographics, location, competition, skill set, personality, and engagement in the business of dentistry will always be a consideration when we move towards having more fee-for-service patients in our practice. The bottom line is that the best path is to perfect your business model so that you can compete in any dental economy while improving your skills, leadership abilities, and assembling a team that attracts the best patients whether they are fee-for-service or in-network. The idea of a safety net with 40 to 70 new patients a month per doctor along with a wider range of ages, services, and consumer wants is going to win every time.
It’s hard to talk to doctors that have decided that the only way to practice is a fee-for-service office until they have struggled and failed to meet or exceed moving towards the practice they always thought they would have: Adequate income, sustained growth, long term staff, great systems, wide range of services, continued clinical excellence, etc.
So, what is the answer? I said this a few weeks ago, but it bears repeating. You will never find any doctor that feels they are not working hard. Most feel too busy as all of their time is being consumed now. How could you possibly do more? That’s just it. It is not doing more; it is doing less of the things that you shouldn’t and doing more of the high value things you should. Step back, take a hard look at your own performance history, make a decision, and act. Don’t keep doing the same thing over and over again and expecting a different outcome. Believe it or not, there are articles being written, speech’s given, and classes taught by doctors that have well below average practices and struggle every month to pay the bills. Be careful whom you listen to. Accept what they say, but verify everything. This is how you Summit.
Michael Abernathy, DDS