We’re trying to do things differently
Last Friday, Jamie and I went to a continuing education (CE) course. The focus of the course was increasing practice profitability and lowering overhead. GREAT! Jamie and I would love more profit and lower overhead. Win win win…
I took a lot of notes.
The main themes of the presentation were:
Dentistry is facing unprecedented uncertainty and rate of change.
The industry is up against a paradigm shift through: (1) increased patient utilization of PPOs; and (2) consolidation in the form of DSOs.
Network adjustments eat into your margin.
Most dentists aren’t intentional about their pricing strategy.
Your hygienists aren’t pushing enough periodontal services.
You may be able to tell by my tone, but I was not impressed by this presentation. Let’s take the arguments listed above in order to see why.
First, every industry CE course I’ve ever attended has started off by saying how crazy things are. How fast things are changing. How much harder things are now than they were 1 year ago, 5 years ago, or 10 years ago. I find this line of thinking tiresome and unproductive. The world is always changing. Dentistry is complex. We learn new things about it all the time. The US economy is complex. It’s evolving constantly as new innovations, consumer preferences, and market dynamics emerge. To wallow in this complexity and evolution is asinine. Suck it up and do the hard work of running a business and trying to compete.
Second, I hate the phrase “paradigm shift”. It’s cliché. Stop using it.
Third, complaining about insurance companies as a provider is fruitless. It’s a trade-off. If you don’t like it, you should run for congress and try to enact a single payer system that sets prices and includes everyone. It turns out that’s a dreadfully unpopular idea amongst Americans, but you’re more than welcome to try. So just for this paragraph, let’s assume that we can’t change the underlying infrastructure of the American healthcare landscape. About 9 out of 10 people in the US have some type of insurance (e.g., through their employer, through the federal government, through their state government, through the military, or by buying it on their own). The vast majority of those people (in some form/fashion) pay for that insurance in the form of a monthly premium. In return, consumers receive discounted medical/dental/vision/etc. services with in-network providers and they receive protection (to a point) from potentially catastrophically large bills resulting from complex medical scenarios. As a provider, when you sign up to be in-network with an insurer, you’re making a trade-off. You’re trading a discount on your prices in order to bring in more patients who have that insurance. The insurer is funneling patients into the provider’s practice the provider pays the in-network adjustments in return. Consumers/patients like this arrangement. The vast majority of our patients enjoy not having to pay for their cleanings, exams, and x-rays. This is because they already pay a monthly premium to gain access to dental insurance. For a number of our patients, paying for dental insurance AND paying for exams/cleanings/x-rays would feel like a double whammy. Do we have some patients for whom this is the case? Yes. But it’s a small minority. If we were to exit from all of the networks in which we currently participate (e.g., BCBSIL, United Healthcare, Humana, Principal, Federal Employee Program, Mutual of Omaha), we would definitely lose patients. There is zero doubt in my mind. And because we don’t want to lose those patients, we stay in the insurance network and we accept the in-network adjustments. That’s the trade-off. We accept it gladly. Could we attain higher margins if we stopped participating in all the insurance networks? Yes. But that would come at the cost of our patients' and their pocketbooks and that’s not a trade-off we’re willing to make. It doesn’t line up with our values as business owners (EDITORS NOTE: dental insurance fee schedules have largely degraded over time and have not kept pace with the rate of inflation leading to a very real pressure that can only be solved through innovation - which is certainly hard).
Fourth, we’re very intentional about our pricing strategy. We analyzed dental procedure pricing in the area and set our rates at the 65th percentile. We did that because we feel like it accurately reflects our place in the market and the type of business we want to run.
Lastly, our hygienists are doing the types of procedures needed to keep our patients healthy. We don’t present production targets to our hygienists. We keep their schedule full and they keep our patients healthy. It’s this final point that really stood out to me. There’s a billion ways to make a buck in this world. Jamie and I chose to buy a service business in a complex industry that requires our customers to do something that is vulnerable, uncomfortable, and sometimes expensive. We accept the realities of the situation and we attempt to make the very best out of it. Jamie and I don’t wake up every day asking ourselves how we’re going to squeeze additional percentage points out of our patients and our suppliers. We wake up and ask ourselves how to run a kind business and how to make sure our patients get the care they need to feel good about themselves. Our order of operations is:
Focus on the clinical.
Build trust.
Run an efficient operation.
Make money.
Jamie and I strongly believe in those tenets (and how they’re prioritized). They’re central to who we are and the way in which we run this place. Upon reflection, Jamie and I decided that the CE course was beneficial in that it made us realize that maybe we’re doing things differently in a good way. If the dental consulting world is selling a message with which we disagree, we can compete in a way that’s consistent with our values. Thank goodness.