For Practice Owners / Office Managers - Insurance Economics

[ByThe Numbers]

Esteemed peers,

I am writing to you for some advice on how to deal with low-paying insurances. I have an economics/business background and I am evaluating a practice that accepts the full spectrum of dental insurances. From what I see, the majority of the practice's patient body is comprised of those with low-paying insurances. Obviously, to cover operating costs, a high patient count is needed when fee schedules are low.

Right now, I'm scratching my head on how this practice can actually make money. By the numbers, rising lab fees and aggressively low contractual fees with certain insurances means that most major work yields very little profit. When you subtract out material, utilities, and staff costs, it seems like the work is not worth the liability of completing major treatments.

I've researched and heard of the following things other practices have implemented to survive this economic squeeze such as the following:

- Use less costly materials (which can sadly affect treatment quality)
- Negotiate lower lab fees
- Charge an additional co-pay or material upgrade fee (some insurances do not like this)
- Invest in marketing and attract more private insurance patients that have more palatable fee schedules
- Negotiate fee schedules directly with insurance companies

I would love to hear of any war stories that you have had with regard to low-paying insurances and how you work with them, if you have utilized any of the tactics above, or if you found success in a different way.

Thanks in advance,
BTN

 

[calcium48]

how much does it cost per hour to run a typical dental practice, just to break even?

And what is the average cost per hour of an average dental practice?

 

[ByThe Numbers]

how much does it cost per hour to run a typical dental practice, just to break even?

And what is the average cost per hour of an average dental practice?

I wish I had a better answer for you, but there are so many variables that can affect a general hourly cost.

Here are a few that can change depending on the day:

-how many associates, dental assistants, receptionists, hygienists a practice has working on a given day and what their wages are
-the types of procedures being completed in a day and the required material costs (i.e. composite material, etch, bonding, lab fees for crowns/bridges/dentures)
-the type of insurance of patients for the schedule if the associate is being paid by commission (if the patient is seeing low-pay insurances, then the cost is lower)

Here are a few variables where the costs tend to stay around the same on a monthly basis:

-Utilities (electricity, water, internet, dental software, phone)
-Insurance (malpractice, office insurance, disability, maintenance fees, .etc)

Unfortunately, this list is not comprehensive, but it should give you an idea of why it is difficult to predict an hourly cost to run an office. All of these costly variables end up making it hard for practices to survive when contractual fee schedules are low.

...Which leads me back to my original reason for posting, which is, how have practices dealt with this when they do not have the luxury of plentiful high-paying insurance patients. In order to break even, or to even see a little bit of the green pastures, it seems that practices have to play the numbers game and see a higher patient count. Practices may have to also make some difficult decisions on which materials to use in order to make ends meet.

 

[calcium48]

I realize that there will be many variables, that's why I said the average cost

what is the average cost per hour of an average dental practice?

 

[ByThe Numbers]

I'm sorry if I gave off the impression that I have data on hundreds of practices to extrapolate a legitimate answer. Let me preface my response with the disclosure that I am not an expert and can only respond based off of what I've observed in my own experiences.

That being said, if I were to estimate, it would be around the following:

~$2000 - Daily cost
~$225 - Hourly cost (9 hour day)

This was compiled based off of the following working assumptions:

- Staff wages (2 assistants, 1 receptionist, 1 lab technician, 1 office manager, 1 associate)
- Lab costs and treatment materials
- Utilities, maintenance/common charges, rent

If the above working assumptions qualify as what you deem an average practice, then you have your answer.

 

[calcium48]

thanks.
I know it's difficult to give an answer to this due to the number of variables involved.

Perhaps other dentists can say what their real-life hourly rates are.

 

[ByThe Numbers]

Sure - Calcium48. I think your questions are worth exploring. I am also curious to know about operating costs for other practices. Perhaps you can open up a new thread to address your other financial questions practices face as it somewhat obscures the crux of the original post. If you do, I'll be sure to follow and contribute where I can.

 

[ScreaminRay]

Esteemed peers,

I am writing to you for some advice on how to deal with low-paying insurances. I have an economics/business background and I am evaluating a practice that accepts the full spectrum of dental insurances. From what I see, the majority of the practice's patient body is comprised of those with low-paying insurances. Obviously, to cover operating costs, a high patient count is needed when fee schedules are low.

Right now, I'm scratching my head on how this practice can actually make money. By the numbers, rising lab fees and aggressively low contractual fees with certain insurances means that most major work yields very little profit. When you subtract out material, utilities, and staff costs, it seems like the work is not worth the liability of completing major treatments.

I've researched and heard of the following things other practices have implemented to survive this economic squeeze such as the following:

- Use less costly materials (which can sadly affect treatment quality)
- Negotiate lower lab fees
- Charge an additional co-pay or material upgrade fee (some insurances do not like this)
- Invest in marketing and attract more private insurance patients that have more palatable fee schedules
- Negotiate fee schedules directly with insurance companies

I would love to hear of any war stories that you have had with regard to low-paying insurances and how you work with them, if you have utilized any of the tactics above, or if you found success in a different way.

Thanks in advance,
BTN

I used to work with one office that offered their patients an additional insurance for $75.00 a year for that they were virtually guaranteed that all would be covered. Patients were happy to pay because the were tired of picking up 60-75% of the bill after paying for inurance already.

 

[ByThe Numbers]

I used to work with one office that offered their patients an additional insurance for $75.00 a year for that they were virtually guaranteed that all would be covered. Patients were happy to pay because the were tired of picking up 60-75% of the bill after paying for inurance already.

ScreaminRay - Thank you for responding with a creative way to supplement low fees. I will definitely bring this up as an idea to other owners that I speak to.