There are many factors contributing to the revenue and cash flow issues many dental offices need to overcome this year. Materials and supplies are more expensive, payroll is higher than ever, and inflation is affecting the entire economy. But the problem at the front of many practice owner’s minds is likely the low reimbursement rates they’re receiving from insurance carriers.
Is raising your office fee schedule the answer? Simply raising prices seems like an obvious and straightforward solution. However, there are two major problems with this tactic.
1: If you’re contracted with benefits payers, and most of your patients see you as an in-network provider, raising your fees will change essentially nothing.
2: If you are fee-for-service, or if you decide to go out-of-network, raising your fees without knowing exactly how much your patient’s plans are willing to pay for out-of-network care can result in patients leaving your practice, which can be disastrous for your business.
Common misconceptions providers have about how to optimize their UCR office fees
A commonly recommended dental practice management strategy is to raise your UCR office fee schedule by at least 3-5% across the board each year just to keep up with inflation, and stay on par with other dental offices in your area.
Instead of just going along with what’s typical for the industry, you need to base your office fees strategy on objective market data. It’s not about how much you think you should be getting paid, it’s about how much the insurance companies are actually willing to pay.
Raising your office fees when you’re a provider for multiple PPOs and other dental benefits plans
The question isn’t really how much should you be charging, it’s how much are your patient’s plans willing to pay?
When you sign a contract to be an in-network provider, you agree to be paid a discounted contract fee schedule in exchange for access to more patients. The specific discount rate can be found in your contract, but typically averages between 20-40%. This discounted rate is equal to your “write off.” It’s simply the difference between your office’s UCRs and the actual fee schedule you agree to be paid in your contract.
So, raising your office fees won’t increase your contracted fee schedule as an in-network provider, it will just increase the amount you’re “writing off” of the charge you billed for that procedure. This write off affects the overall value of your business.
On the other hand, many of our clients find that they’ve actually set their fees too low for certain treatments and procedures. It’s entirely possible that while some of your contracts are paying you well below your office fees, others may be willing to reimburse far more than your current UCRs and you aren’t even aware of it!
There is another fairly common misconception that a dentist office may be able to receive larger reimbursements from their insurance carriers by raising their office fees and submitting larger charges. This misconception is often perpetuated by some consultants who advise their clients that raising their fees will put them in a better position to negotiate.
Unfortunately, this is simply not true. At the end of the day, you can bill whatever you want for your services. But if you have contracted fee schedules with your patient’s plans, that’s what you’re going to be paid regardless of what your office fees are.
Fee For Service
What if your office doesn’t have contracts with any major carriers, and your patients primarily see you as an out-of-network provider?
Some insurance companies will actually pay your full office fees for OON care. However, the vast majority have a Maximum Allowable Charge (MAC). This means that they have a cap on how much they’re willing to reimburse you for every procedure. This figure is usually a good deal higher than what they may be willing to pay you In Network.
But, if you raise your fees too high without knowing what the carrier’s MAC limit is, you’ll end up passing on the difference to your patients.
If your patients suddenly owe you for procedures they expect to be free, even if it’s not a significant amount of money, they’ll naturally feel disappointment and frustration. Unmet expectations are a painful, distressing situation for anyone. Raising your fees without any guidance could ultimately cause patients to leave your practice over a relatively small amount of money.
How do you increase revenue without burdening your patients?
Your fees need to be based on what insurance is willing to pay, both in and out-of-network. If you don’t charge enough, you’re leaving money on the table. If you charge too much you’re penalizing your patients.
Solutions 101 has the market data and industry expertise to help you totally optimize your fee schedule for maximum profit. This gives us the freedom to safely make bold changes to your contract situation, without the fear of damaging your patient base.
Whenever we begin working with a practice, we start by modifying their office fees and helping them get out of the lowest paying networks that are causing them to lose money when treating certain patient bases. Our clients will regularly see their monthly revenue increase by tens of thousands of dollars with these changes alone.
Leaving network contracts and optimizing your office fees isn’t the only way we can increase your revenue. Some carriers offer very lucrative fee schedules, and depending on the patient mix in your area, it may be very beneficial to stay In Network with certain carriers.
However, you still need to carefully review every contract to ensure they benefit you just as much as the insurance companies offering them to you. Even if you have a lucrative direct fee schedule with a carrier, you could be opted into a network with dozens of other carriers across the country via leased networks. This can allow your direct contracted networks to reimburse you using much lower fee schedules from different companies.
To see how our process works in practice, see this in-depth review of a previous client’s case.