By Shelley DeGroff, Founder of PPO Advisors
The dental insurance landscape is constantly evolving. To keep up, practice owners need to be strategic about how they contract with insurers. There’s a tendency for dentists to adopt the “strategy” of simply trying to be in-network for everybody, but that’s neither feasible, nor financially sustainable. Instead, dentists should make the effort to clearly understand what they are getting out of every contract they sign.
What many practice owners don’t realize is that there are multiple ways to contract for the same patients, and depending on what contracted rate you agree to, you can be reimbursed differently on the exact same production with the exact same patient. The complexities behind this reality are high but so is the potential impact on revenue.
MetLife – Direct Contract vs. Umbrella Network
Let’s look at an example that involves MetLife. With about 20 million participants, MetLife is the second largest dental insurance provider in the country. They are also a source of frustration to many providers because of their low fee schedules.
One of our clients bought a practice that had a direct contract with MetLife. The seller had been writing off close to 60% of production, which the buyer, our client, realized was unstainable. We advised the buyer to look at ending the direct contract with MetLife in order to join an umbrella network that would provide higher reimbursements than the direct contract.
Through MetLife, dental patients can sign up for one of two networks – Preferred Dental Provider commonly referred to as PDP, or PDP Plus.
Simply put, by joining PDP Plus our client could grow their practice while getting a higher reimbursement from MetLife. Given the network’s size, they would still have access to plenty of in-network patients, and because the out-of-network benefits are good, those patients could also contribute to the practice’s growth.
In order to be picked up by PDP Plus our client would have to term out of their direct contract agreement. That means going out of network for 12-24 months, which is a frightening prospect for many practices. Before taking that step, we ran the numbers to confirm that it would be a good financial decision for the practice. We looked at:
• Whether the practice could sustain going out of network for the required period and what the financial impact would be.
• The make-up of the current patient base and how many new patients the practice could expect to get through the PDP Plus network.
Successful Strategy Yields 27% Increase
The transition went smoothly and the impact on revenue was significant. As a result of the changes, our client saw a 27% increase in the PPO fee schedule. In a post-transition analysis, our client reported that while some out-of-network patients were frustrated by having to apply their deductible to preventive services that would have been fully covered had they been in-network, MetLife’s generous out-of-network reimbursements minimized those issues. The client also reported that because many of their patients were already PDP Plus, it hadn’t been a struggle to retain old patients while adding new patients.
The results were a real eye-opener for our client. They had always believed it was preferable to contract directly with MetLife, but this experience proved otherwise. They also realized that because the reimbursement on the PDP Plus level was so much higher, even if the practice lost a few patients, they were still money ahead.
Working Smarter – Not Harder
This client is not unique. Many practices who have a direct contract with MetLife will do better by terming out of their agreement and joining an umbrella network. Often, the biggest obstacle to increased reimbursements is the fear of losing patients. As our client discovered, with the right strategy you can increase reimbursements on production enough so that revenue will still go up even if you are treating fewer patients.
The bottom line is that if MetLife or another carrier is forcing you to write off 60% of production costs, you’re working too hard. There’s a better, easier, more profitable way to serve your patients.
If you’re unhappy with your reimbursements from MetLife and would like to see if it’s possible to do better, contact PPO Advisors today. We’re committed to helping dental providers work smarter not harder.