Dental Insurance and Fee-Setting

Setting Dental Fees (and Dealing with Insurance Companies)

An auto mechanic changing a muffler has more control over the fees he charges than many doctors.

Last week I discussed how to handle dental patients and dental fees. Now it’s time to discuss insurance companies.

I remember asking doctors to explain exactly what procedures they followed when they increased their fees. Each explained that he took his old fee schedule and guesstimated a general 3%-6% increase in fees on those services he performed most. The next step, in about 80% of the cases, was to send the new fee schedule to the insurance company for approval.

At this point I would jump in and ask a series of questions:

  1. Why are you sending your fee schedule to an insurance company for approval?
  2. Is the insurance company a partner in your practice?
  3. How much money did the insurance company invest in your practice? Do they chip in extra cash at the end of the month if collections are short of what it costs you to run the practice?

I would then ask, “Was your new fee schedule rejected by an insurance company within the last year?” Over half the doctors I asked said yes.

One doctor explained that his fee increases had been rejected three times by an insurance company and each time the process took two months. After six months, he still hadn’t gotten approval. Each time he was rejected, the insurance company explained that his fees were 1.5% to 4% over what is considered the usual and customary fee for practitioners in his zip code area.

When the doctor called the insurance company to ask what he could charge on specific treatments, relative to other practitioners in his zip code, he was informed that that information was confidential and that he would have to just keep guessing until he got it right.

At this point, most doctors come to the conclusion that the deck is stacked against them. What does your zip code have to do with what you need to charge your patients to economically perform treatment? Does everyone else in your zip code have the same overhead expenses, use the same quality of materials, invest in the same level of continuing education for their staff, and have the same amount of experience that you have in providing a given treatment?

Before we take this discussion any further, I want to be clear that not all insurance companies treat the participating doctors in this manner. Additionally, dental prepayment plans have dramatically increased the affordability of and thus the availability of dental treatment to the public.

In exchange for the patient referral and the automatic assignment of benefits, many doctors have signed agreements stating that “they may not charge a patient from DLT Dental Insurance Company a rate higher than their usual and customary fee for a specific treatment.” However, an increasing number of doctors are finding themselves being squeezed by increasing operational costs on one side, and the amount they are allowed to charge as specified by their PPO and HMO agreements on the other side.

Dental care treatment costs increase annually at a rate of 4% to 4.5% as compared to the general inflation rate of 2.5%. Many insurance companies are holding fee increases to the 2.5% level, which leaves the remaining 2% increase in operating costs to come from the doctor’s pocket. In a practice producing $360,000 a year, with 50% of the patients on prepaid-fee controlled programs, the loss to the doctor will be approximately $3,600.

What are your choices?

Your first choice is to resign as a preferred provider from the offending prepaid plans. Resigning does not necessarily mean you will lose the patients who carry this plan. What it does mean is that the patient will have to pay you first and seek reimbursement from the insurance carrier directly. It is interesting to see how much faster the patient is reimbursed for treatment than when the doctor takes assignment and files through the practice.

We want to be clear that we are not recommending that every doctor drop his insurance company affiliations. However, if only 10% to 20% of your patients are on fee-controlled prepayment plans, you might find it to your advantage to ask these people to file for reimbursement directly with the carrier. For the most part, the verbal skills of your staff in explaining your new policy to patients is the key to successfully implementing this change.

If 40% or more of your patient base is on a controlled-fee insurance plan, the thought of dropping the plans may be a little frightening. There may be a less scary alternative: two fee structures.

Now before we go much further, we want to qualify these comments with the admonition to check your insurance plan agreements very carefully. Also, check any state or local regulations which may govern your fees. Your dental society is one of the best sources of advice in this area.

Many of your insurance company agreements stipulate that “you may not charge a patient with DLT Dental Insurance Company a rate higher than your usual and customary fee for a specific treatment.” The reverse of this is also true – you may charge a DLT patient less than your usual and customary fee.

The logical result is two fee structures: one fee structure for DLT insurance company patients, and a higher fee structure for “usual and customary” patients. In implementing this strategy, there are two aspects to consider, one practical and one ethical.

On the practical side, you need a method to identify different fee structures with different patients. This is one place where a computer system is invaluable. Most systems allow multiple fee structures, with the appropriate structure being assigned to the patient at the time of initial data entry for insurance and billing. Many doctors have found that the multiple fee handling features can pay for the entire computer system.

For non-computerized practices, a simple color-coded sticker on the inside of the patient’s chart can act as a reminder to the doctor and staff of which fee structure to use.

The question that usually comes up at this point is what to tell the patient when you have just quoted her a crown fee of $632 and she asks, “Why doctor, my cousin Mary was here just last week, and you did her crown for only $580. Why am I paying more?” First you must recognize that the chance of this happening, even in a small town, is rare. But if it should happen, deal with the question with honesty and integrity.

Pull cousin Mary’s chart and tell your patient the truth. “You’re right; we did do Mary’s crown for $580. Mary works for ABC Electric Company, which provides her dental insurance through the DLT company. By contract, we have registered a special set of fees with DLT. If you had your insurance through DLT, we could offer you the same rate.”

People are used to special discounts for different classes of patients. Most doctors give 5%-10% off for the elderly. Many give up to 8% off to patients who pay cash. In our example, Mary received a reduced rate because she is insured through the DLT company.

The ethical question is not as easily answered. With two fee structures, your “usual and customary” fee patients are actually subsidizing your DLT insurance patients. This a question which each doctor must wrestle with individually.

Remember that quality treatment must be supported by fees that allow you to maintain your staff, facilities and continuing education at the highest levels of which you are capable. If fees are restricted by one class of insurance patient, do you cut back on the quality you provide, or raise fees for your usual and customary patients?

There is no easy answer. We welcome your comments.

About Jim Du Molin

+Jim Du Molin is a leading Internet marketing expert for dentists in North America. He has helped hundreds of doctors make more money in their practices using his proven Internet marketing techniques.

  • Goncharova

    We’re dammed if we do and we’re dammed if we don’t.

    As the clowns in Washington continue to ruin our economy, patients live from paycheck to paycheck. Insurance is a major factor in getting work done or not.

    Insurance forces price fixing on dentistry, which is illegal by the way, and then force us to have a second “Customary Fees”, which is what they base their “Zip Code Fees on” which is different, which is also illegal as it can be considered “discrimination”.

    One customer paying one price and another paying a different price.

    We play the game because “they own the game and the lawmakers who are the referees” !

    Thank you Hilary ! It’s another fine mess you got us into ! (During Bill Clinton’s term)

    The ADA seems to be part of the conspiracy as they allow Mexican dentists free entry to the USA via the CDA (California Dental Association), which is what the insurance companies asked for. Poor emigrant dentists who will work for peanuts in order to push out Real American dentists.

    This is now growing from State to State by Dental Associations who have been bought and paid for by Insurance Companies. It’s called “License by Cridentials”. (Even from unaccredited foreign schools)

    As this happens from State to State, expect fees to get lower, not higher with “cost of living” !

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