The Big Swerve

Alternatives to traditional dental benefits provide a new route to success

For years, practicing dentists have identified "finding new patients" as one of their top concerns. Although this push to increase production has been supported by practice management consultants, patient credit providers, manufacturers, and other industry stakeholders who offer products and services to dental practices to gain new patients, retain current ones, and keep the office flowing efficiently, "getting more patients in the chair" is only advantageous if the patients are empowered with a way to pay for the dentistry that is both affordable for them and profitable for the practice. Similar to other healthcare providers, dental practice models have come under increasing pressure from the payment side of the equation.

As the argument for the importance of oral healthcare in overall health gains traction, so does the question of how best to provide these needed services. Stakeholders, insurance companies, providers, and patients all have their own ideas about how a more successful payment model should operate. Identifying and developing "win-win" strategies is the next major milestone on the path to achieving the goals of all of those involved.

Identifying the Problem

Fees are on the rise, dental insurance coverage has expanded, and utilization is nearly maxed out; so why are dentists' incomes decreasing?^1,2,3 Patient membership plans, a payment concept that is quickly gaining in popularity, may hold the key to reversing this income decline. A growing number of companies claim that they can help to both decrease costs for patients and boost profits for dentists.

Membership plans can enable dentists to collect 100% of what they charge, rather than the 37.2% reimbursed by Medicaid fee-for-service plans and the average of 78.6% reimbursed by private dental insurance coverage for adults.⁴ For children, Medicaid reimburses 49.4% and the average reimbursement by private dental insurance is 80.5%. But before we can ask if these insurance alternatives have the potential to revolutionize the dental payment market, we need to understand the full story behind the stagnation in dentists' incomes.

A Widening Gap

An analysis conducted in 2016 found that for most adults with private dental benefits (69%), total financial outlays for premiums, copays, and coinsurance exceed the market value of the dental care consumed.⁵ Therefore, it is no wonder that "cost" is the most commonly given reason that adults with private dental benefits avoid going to the dentist.⁶

However, while the average cost of dental care is increasing, dentists are not seeing a commensurate increase in income. "Average dentist earnings have not changed for over 20 years," says Dave Monahan, CEO of Kleer. In fact, the reimbursement rates offered to dentists by private dental plans have declined over a 10-year period.⁷ And the gap between the fees charged and the reimbursement rate observed appears to have increased during this same period. For example, the fees for the three most often performed prosthodontic and periodontal procedures increased from 2005 to 2014; however, the reimbursement rates for these procedures decreased over the same timeframe.⁸

The American Dental Association (ADA) Health Policy Institute's State of the US Dental Market - Outlook 2018 found that, although dentist's fees increased in most states during the past 5 years (after adjusting for inflation), dentist reimbursements declined in the vast majority of states.⁹ Overall, the data indicates that dentists' incomes are stagnant.¹⁰ Some studies have even reported a decline in dentists' average net income, beginning in the early 2000s.^3,11

Coverage and Utilization

Dental insurance coverage and utilization are two other key variables in determining dentists' income. Dental benefits are an important driver of the use of dental care. An individual with private dental benefits is twice as likely to visit a dentist when compared with a person without any benefits.¹² "Finances are often an obstruction to getting healthy," says Mona Patel, DMD.

Dental care utilization is steady among children and working-age adults, but is increasing among the elderly.¹³ A 2015 survey found that dentists were more likely to report that patient volume was increasing than decreasing.¹⁴ Recent studies have also concluded that approximately 75% of the population visits a dentist annually.¹⁵ Given these facts, there is only modest room for the further expansion of dental care utilization. So, if more people are covered by insurance, and more people are visiting the dentist, then shouldn't dentists' profits also be increasing?

Unfortunately, the increase in demand has not translated into an overall increase in profit.

The Effects of Reimbursement on Income

A growing number of individuals familiar with the dental industry believe that the answer to this disparity lies in the mechanics of the traditional insurance reimbursement process. Participating practitioners are contractually bound to accept the established repayment rates set forth by the insurance companies, but private insurance does not reimburse as well as it used to. Nationally, there was a 10.4% reduction in repayment rates by private carriers between 2005 and 2014, and on average, states with a large share of dentists participating in preferred provider organization (PPO) networks had larger payment rate reductions.¹⁶

After being adjusted for inflation, the average net income for general practitioners decreased significantly from 2005 to 2015, and net incomes for specialists were also down from their 2007 peak.¹⁷ In inflation-adjusted terms, the average net income for a general practitioner in 2014 was comparable with that of 1997.⁷ Understanding the way that dentists are reimbursed by traditional insurance models can shed some light on the stagnant income phenomena and reveal alternatives that may offer solutions.

Traditional Insurance

Traditional dental insurance plans can be classified as either commercial or government models. Commercial insurance models include PPOs, dental health maintenance organizations, and indemnity insurance, whereas government models include Medicaid, the Children's Health Insurance Program (CHIP), and TRICARE for members of the US military and their families.

"Insurance is geared toward groups and their families," explains Quinn Dufurrena, DDS, JD, CEO of United Concordia Dental, "but there are four categories of individuals who typically aren't covered by traditional insurance who might benefit from an alternative." These categories include: (1) self-employed individuals who are looking for single coverage for cost savings; (2) retirees who need coverage or are looking to supplement Medicare; (3) early retirees who might not yet qualify for Medicare; and (4) individuals working for companies that don't offer dental insurance.

This seems to suggest that the alternative payment models on the market may not be directly competing with traditional insurance. It is possible that there are enough patients for everyone, and the insurance alternatives are simply connecting with a previously untapped client base. "Dentists are trying to get patients in their chairs," says Dufurrena. In an ADA survey of dentists, more than a third of the respondents, including 42% of solo practitioners, said they were "not busy enough."¹⁸ However, is the secret to financial success about working harder or working smarter? A growing number of insurance alternatives claim the answer lies in the latter, working smarter, and letting them help. By opening a dental practice up to both patients with traditional insurance coverage and those with insurance alternatives, the overall demand for services should logically increase.

Insurance Alternatives

Alternative payment models include fee-for-service, dental discount plans, membership plans, and self-funded dental plans. All of these models are intended to decrease the cost for patients, but only membership plans and self-funded dental plans are aimed at simultaneously increasing profits for dentists.

Fee-for-Service Plans

In fee-for-service dentistry, dentists determine their own fees for dental procedures. After the patient is given an estimate for the dental work, he or she usually pays the entire fee, or the portion of the fee not covered by insurance, up front. Some dental practices offer financing to help patients manage out-of-pocket expenses. Although fee-for-service systems are not based on a fixed delivery system like a PPO, they can sometimes be used in conjunction with a traditional dental insurance plan.

Dental Discount Plans

Dental discount plans are a type of plan that can be used by patients at participating dental offices that typically offer a 10% to 60% discount on services.¹⁹ "Obviously, in these models, dentists are not receiving anywhere near the full fees for their work, which can result in lower quality results, increased waiting times, compromises in the materials used, and less-experienced dentists performing treatments. You can't get a five-star chef to cook for a fast-food wage," explains Qadeer Ahmed, the CEO of ProCare Dental Services.

Membership Plans

Membership plans are dental care plans offered by dentists to their patients. "Dentists know that they need to make a change and membership plans are a great way to establish a new care plan model that, when compared with insurance, is easier to manage, much more profitable, and less expensive for patients," says Monahan.

"The traditional model for these in-house plans was more of a discount plan," explains Brett Wells, DDS, CEO of DentalHQ. "However, no services were included in that model, the member was simply buying a discount." Now, membership plans are fully customizable. Patients typically pay a flat fee on a monthly or annual basis that covers their basic preventive and diagnostic needs, and then an affordable rate is set by the dentist for restorative and specialty treatments. This flexibility enables membership plans to help practices improve treatment acceptance among existing patients as well as attract new patients who are interested in finding a dental care plan that is simple and affordable.

There are a number of companies offering software that makes it easy to design and implement customized dental membership plans. These companies vary in their services offered and the ways in which they make their profit, but they all aim to minimize the hassle and expenses associated with traditional insurance models.

Kleer

Patients make Kleer subscription and treatment payments directly to their dentists, not to an insurer or a third-party administrator, like in a discount plan. "This way, dentists keep 90% or more of all patient payments, compared with the 50% to 60% reimbursed by traditional insurance," says Monahan.

Kleer offers a "Kleer Success Manager" to work one-on-one with dental practices to design, implement, and manage their membership plans. "Kleer is free and easy to implement, and it only takes about 15 minutes to design and launch a plan," says Monahan. Importantly, the platform, which also includes marketing tools for promotion, is compliant with the Health Insurance Portability and Accountability Act's (HIPAA) privacy and security rules.

BoomCloud

"Dental practices are getting bullied by dental insurance companies; they control participating practices' profit margins and complicate the industry for dentists and patients," says Jordon Comstock, CEO of BoomCloud.

BoomCloud was designed to help dental practices create, organize, automate, and manage in-house membership programs. "Dental practices are in love with the idea that they can create their own plans to help their patients, build a loyal patient base, generate recurring revenue, and reduce dependence on dental insurance," says Comstock.

Beyond merchant fees for software usage, BoomCloud only charges one flat fee, which means that as a practice grows, it won't pay more for BoomCloud's services. "If a practice markets and advertises their plan correctly, they can see hundreds, if not a few thousand patients sign up for their membership program, which gives them a better financial model with regard to predictable recurring revenue and patient loyalty," claims Comstock.

Dental HQ

DentalHQ is a "software as a service" company that enables dentists to easily set up their plans and automate the payments and tracking of their members. The cloud-based software allows dentists to create customized marketing materials and other assets to help them market their chosen plans.

"I have been a private practicing dentist for more than a decade, and I cannot tell you how many tens of thousands of dollars that I've wasted on false promises by dental companies trying to get me to sign over large quantities of money for their services. I built DentalHQ with a payment model in which we don't make anything unless the dentist utilizes the software successfully," says Wells. DentalHQ profits by keeping an 8% residual on each membership processed, "so if the dentist doesn't sign up any members, we don't charge a dime."

Self-Funded Dental Plans

Dental membership plans are not the only new alternatives on the market. Self-funded dental plans, which are sometimes referred to as "administrative services only" plans, provide patients with another alternative to traditional insurance. In these models, an employer uses a federal exemption to provide group dental benefit to its employees. Traditionally, the employer hires a licensed plan administrator to work directly with care providers to control claim costs and utilize prearranged "leased" discounts. When people actually use the plan, costs increase significantly under this model, so adjudication is used by the employer to keep the plan costs in line. Although these plans can offer higher value to employees than discount and membership plans, many dentists argue that the adjudication process prevents them from achieving an appropriate level of profitability. Fortunately, there is a new alternative among self-funded plans as well.

ProCare

ProCare designs group dental plans for employers who self-fund to offer to their employees. However, ProCare's model is unique from traditional self-funded group plans in that it eliminates adjudication, which means that no time is wasted arguing with administrators over what is and is not covered, and pays the dental provider his or her usual fee schedule in full with no caps on utilization. "Nobody else does this-not insurance carriers, not discount plans, and not membership plans either," says Qadeer Ahmed, CEO of ProCare Dental Services. These designs will soon be available to individual consumers as well.

Everyone who uses ProCare's system pays a small licensing fee to conduct their business using ProCare's tools. "It took a little while to get a critical mass of dentists to understand that they no longer need to take the abuse delivered by the old models of coverage. Now, we have thousands of participating dentists and millions of patients signed up to meet them," says Ahmed. "The insurance companies cannot compete with their own customers, so we're empowering employers to work directly with dentists in a way that is better for both consumers and providers."

Robert Margeas, DDS, just joined ProCare in the Des Moines, Iowa, area. "The jury is still out on how successful this system will be for my practice, but it made sense for me to sign up and try it out. By signing up early on, I've secured my spot as the ProCare dentist in my area, and there's no out-of-pocket expense incurred."

Risk vs Reward

So, is the potential reward worth the risk? Insurance alternatives offer the opportunity to secure more patients and more income. However, when incorporated improperly, these alternatives may be risky both legally and in terms of the efficient use of office resources.

Regulations on insurance alternatives vary by state. Direct primary care (DPC) legislation is an area of common law that is growing across the nation that, in the majority of states, facilitates the creation of membership programs.

"The DPC law and medical retainer agreement may allow your practice to create a membership program that is not obligated to abide by insurance regulations. Of course, you still shouldn't call your program ‘insurance,'" warns BoomCloud's website. Although many companies offer assurance that they handle the legal aspects, Bruce Bryen, CPA, says, "I always recommend talking to a lawyer first."

With that in mind, it is possible to set up an in-house membership program without the help of one of these companies. "Whether or not that decision is right for you will depend on the size of your business and other factors," says Bryen, "You also need to evaluate whether you have someone in your office who can handle the administrative aspects with great attention to detail or if you need some help."

Another issue to consider is whether or not a dental practice can handle a sudden, potentially dramatic, inflow of patients. "A smaller practice might not have the staff to serve a lot of new clients while continuing to provide care to existing patients. My plan is to hire extra staff so that everyone can make an appointment when they need one," notes Margeas.

Although insurance alternatives might not be right for every practice, they're certainly growing in popularity. "The trend of using a membership program has definitely increased and we are seeing more and more practices setting them up due to the challenges of working with dental insurance companies and the shrinking margins insurance creates for a dental practice," says Comstock.

Will It Last?

"The idea behind these insurance alternatives and membership plans has been around for decades," says Bryen. "Companies may be calling it something new now, but it's not new."

So, if they aren't new, then why all the attention? "With the increasingly adversarial role of dental insurance and the rise of automated solutions, which make these plans a breeze to implement, their popularity is skyrocketing," says Wells. Monahan agrees. "We expect that more than 50% of all US practices will implement a membership plan in the next three years."

Just how significant an impact these insurance alternatives will have on the dental insurance market is still up for debate. "The traditional models of coverage won't last after membership plans take off. No business with an inferior quality product can sustain a 13:1 cost disadvantage and expect to survive once the alternative is well-known," says Ahmed.

Although some people see these alternatives as disrupting the traditional insurance market, others see it as supplementary. "I believe that traditional insurance will always exist, but with the growing rate of uninsured patients in the dental industry, practices have to be innovative and think of other ways to attract patients, control profit margins, build patient loyalty, and increase recurring revenue," says Comstock.

 "This is the first step in the modernization of the dental practice. We'll have new forms of capital and far higher utilization of care in each community, rewarding great dentists with many new revenue streams," says Ahmed. "And we couldn't be happier for our fantastic dental members. They deserve it."

References

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