Howie and Mark discuss dental insurance and what it really means to a dental practice. There are times when insurance participation makes sense. And there are times when it makes much more sense to transition away from insurance dependence.
Over the course of a career it’s possible for a dentist to move back and forth between the two, depending on their overall business goals.
Dental Insurance. What is it Really?
It’s a Highly Charged Subject
It’s Just a Marketing Medium
You Get to Capacity. Then What?
Using Insurance to Fill Volume
Boiling it Down
Hello, and welcome once again to the Dental Marketing Mastery Series. This podcast is brought to you by New Patients Incorporated, and NPIclick.com. I’m Howie Horrocks, the founder of New Patients Incorporated, along with me once again is my friend and partner and the President of New Patients Incorporated, Mark Dilatush.
Dental Insurance. What is it Really?
Howie: Hello, everybody. Welcome once again to our podcast. And we’re glad to have you out there in the audience. I’m Howie Horrocks here in Las Vegas, Nevada. And my good buddy Mark Dilatush out there somewhere in the east. How you doing, Mark?
Mark: Hey, Howie I’m doing great. Thanks. We have leaves. They’re changing colors now.
Howie: Oh yeah. I saw that picture you posted. My first thought was “Where the heck are all the palm trees?” and you know,
Mark: Yeah, and pools? Yeah, we don’t have palm trees here, but that’s okay. So what are we talking about today?
Howie: Well, we’re going to talk about dental insurance. This is a topic that probably creates more emotion in the minds of dentists across the country than anything else. I mean, you go on, go on any Facebook page, or dental forum and wow, you know, it’s just highly charged.
Howie: What we’re going to attempt to do is, you know, figure out what exactly is dental insurance and how you might sort of navigate it.
It’s a Highly Charged Subject
Mark: Okay, yeah, that’s, I think you were probably user number two on dental town.
Howie: Actually, I was user number one, but…
Mark: User number one, all right, Howie was number one. That’s right. You were on the phone with Howard Farran, weren’t you? When all that was all going down?
Howie: Yeah, yeah.
Mark: So, since the inception of the world’s largest group of dentists, all communicating with each other in one central place, the quest for the truth when it comes to dental insurance is still unmet. This next 20 minutes is our attempt to help you see through the emotion and really see it for what it is. You know, 20 years, 30 years. How long ago was that? 20 years ago – they just they had an anniversary, I think it was a 20-year anniversary.
Howie: Oh, Dental Town. Yeah.
Mark: I guarantee you if you log on to Dental Town right now, you’re going to get dentists talking to each other about how they can’t possibly do quality dentistry if they take insurance. You’re going to see the same arguments with the same tire.
Howie: Yeah exactly.
Mark: Right. So, so we – Howie and I aren’t dentists, right? So, we don’t really get it and we’re businessmen. So, we look at insurance for really what it is. And we’re not trying to minimize the emotional pull because we recognize it. If somebody was trying to pull, like if there was such a thing called “Dental Marketing Insurance” and they were sending us clients, but we had to give them 30% of what the marketing plan value was… and then they refuse to pay us when we did our work, we’d be screaming too.
Mark: So, we’re not minimizing the emotional part of it from a dentist perspective. But what we’re saying is, in the reality is, we’re not dentists, right? So we don’t have that. And, it’s to our advantage. And we’re also businessmen, we’re data geeks, we’re analytics geeks, we’re just result geeks. So, this next 20 minutes is really geared to you know, “What is dental insurance participation? Should I use it? If so, when should I use it? If I do, how should I use it?” That kind of thing.
It’s Just a Marketing Medium
Mark: Just get the hogwash out of it. We think all of you do quality work, because there’s a human being in your chair, whether they’re paying you 30 cents or $30,000. We, you know, we think you all do quality work. So, I say here’s the pure definition of insurance participation. Insurance participation is a marketing medium.
Howie: Yeah. That’s all it is.
Mark: That’s all it is. It is an agreement between you and another business where the other business will put you on a list. They will publish the list once a year, usually in October or November. And send that list of their preferred providers out to the people, many of whom may be in your area who are part of an employee plan. They also agree to put you on a website. In no particular order, just put you on a website. And for that, you agree that you’re pretty much going to write off 19 to 35% of your, your fees.
And basically, that’s a business relationship. That’s, it’s not emotional. It’s a choice. Now, the good news, is that the insurance companies are not asking you for any money. Doesn’t cost anything, initially, to sign up with an insurance plan. About half of America has dental insurance.
So, if you believe that being on a list in a booklet, or on a list on a website is going to gain you exposure to the type of patients that you want in your dental practice, and you’re fine with writing off 19 to 35% of your fees – it’s a viable marketing medium for you. And it’s certainly a marketing medium you could choose as part of a marketing plan.
And I’ll give you an example because this just happened this morning. We had a call from a dentist in Canada, and he’s going to do a startup. He’s associating right now. And he’s planning, he’s going to open up a practice next June. We told him, great, you’re starting off great. You’re, you know, you have 10 months of preparation here. That’s awesome. So, he already did that, right.
Well, one of the first questions we ask with a startup is, “When do you want a full-time practice?” And it’s amazing. They all say tomorrow, okay? But, you know, reality smacks them in the head.
Howie: From day one.
Mark: Exactly. And this is a scratch startup and the guy’s coming in with zero patients, right?
So, the reason we asked the question is because we know what it’s going to take to support a 30-hour work week for a GP. That’s about 750 active patients of record. Noticeably active. Not people you saw 18 months ago. People who are actually going to be in the schedule for the next 12 months. So, you need about 750 active charts in order to support a 30-hour work week for a startup and the average acquisition cost in this market is probably going be about 140 – 150 bucks.
If you do the multiplication… If he intends to attract every patient through his marketing his marketing budget has to be close to 100 grand, which why in 30 years of our business being in existence, I think maybe we’ve had five dentists that had a reasonable startup budget, Howie?
Howie: Yeah. Maybe.
Mark: Yeah, it’s very very infrequent that someone comes, you know, completely armed and ready to go with a proper budget. So, we told him that it almost never happens. It especially doesn’t happen now because of how expensive dental school is, right? Everybody’s a half a million dollars in debt by the time they even start their practice.
So, we said to him, “Look, you know, marketing isn’t, you know, outbound marketing, digital, offline combination isn’t the only thing you can do to acquire patients.” You can, for instance, be the most obnoxious human being on the planet and just go around shaking people’s hand and say, “Hi, I’m a dentist, you know, guess where my practice is?” And just, you know, make sure everybody in town knows who the hell you are and where you are. You will get patients by doing that.
You can also participate with insurance. You can say, “Yeah, put me in the book, sign me up and put me on the website.” And, you know, maybe some of these employees who are working immediately around my practice, will choose me when they look at the book or look at the website this coming year.” You might get 200 of the 750 patients just by doing that. And that is zero cost up front, zero cost out of your pocket. So, you can see how that might look really sexy.
Okay, to someone who’s doing a start-up or someone who is doing, expanding their capacity, actually, this might be a good place to take a break. Howie, what do you think?
Howie: Yeah, let’s do that. We’ll be right back Don’t go away.
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Howie: Okay, we are back. We are talking about dental insurance and navigating it and handling it and exactly what it is, is a marketing medium. And how are you going to deal with that?
Mark: That’s right. And when do you deal with it?
So, we went through the startup guy. Let’s just say he does a start-up next June. And he does do some insurance participation. And he has a partial, you know, doesn’t have to be a robust marketing budget, but he has to have something. Right? So, something’s going out for marketing outside of insurance participation, and let’s say he participates with three plans. And at the end of the year, he’s got his 750 active records.
You Get to Capacity. Then What?
And the second year, he’s got his hygienist. He’s got… he’s using his three operatories. She’s using one or two. And he’s, you know, pretty much at capacity. Well, he may choose at that point in his career… “Hey, man, I just want to be a solo dentist. I just want to max.” He may have other business interests. He may have other hobbies, spouse, family, all kinds of reasons why you might want to you know, just have a solo practice. So, he may just say at that point, “Hey, you know what, now that I’m hitting my capacity, I’m going to start weaning off of insurance.”
The takeaway there is once I hit capacity, that’s my indicator. I now have the option of weaning off of insurance participation as a source, or the main source, of my new patients. Because by the time you get there, or when you get there, you can do it.
Very few or if not, I don’t can’t remember the last time. Actually, I don’t remember the last time I don’t, I literally don’t remember the last time we were helping someone through an insurance transition where it didn’t eventually work. If, they all eventually work. Okay, I guess yeah, I guess that’s my point.
Howie: The key is ‘eventually’. You have to, you know, it takes some persistence.
Mark: Right. Well, we just wrote a guide on fee-for-service. How to transition into a fee-for-service dental practice. If you haven’t gotten it, go get it, it’s on our website.
Anyway. So, there’s an example of where our startup could use insurance participation for patient volume at a very low cost, get the capacity, but then be smart about it and start weaning off of insurance. Because one thing’s for sure, if they’re taking 19 to 30% of your, your fees to be on those lists… If you market your practice properly, you can market your practice properly at 5% of revenues. That extra 15 to 20% is profit.
You’re going to see the same number of patients you’re just going to do a lot more dentistry and have a lot more money in your pocket right at the end of the day. So, let’s go through that. And then he changes his mind. “Okay, I’ve got this really nice solo practice, I’m doing 1.2, my overhead’s 65%, whatever. And but now I changed my mind I, whatever I went to – I went to a seminar and the guy talked me into it. And now I want to have two associates and surf for the rest of my life.” Whatever.
Using Insurance to Fill Volume
So, now he needs a whole bunch of patients in a short period of time because he’s going to, you know, he’s going to, he’s going to expand the practice. Put in four more chairs, getting an associate or two to handle the days he doesn’t want to work. He wants to build a big practice maybe multi-specialty practice with some specialists that come in, right?
So, now instead of the 19 or 22 good, solid new patients a month just for him… now he needs like 50, 60 on a consistent basis to feed everybody because he wants to build this machine. Okay, this might be a good time for him to go back into insurance participation. Just use it for when… here’s the bottom line. You use insurance participation only for the times in your dental career when you need a big boost in patient volume at very little upfront cost. Keeping in mind that the back end cost is always going to be greater than the cost of actual marketing. So, the longer you do it, the more it costs you.
I hope that makes sense to everybody. I believe it makes perfect sense to every dentist listening to this that complains about their right-offs, right? Okay. If you actually, if you want to see where you stand in your own particular practice, just go run a write off report. Many of your practices it’s a $100 to $300,000 in a solo GPS practice and just stare at that number. That was the cost at the beginning. That’s the cost now, but that was the actual decision you made when you chose to participate.
Now, again, Howie and I are the least judgmental human beings on earth. If you want to participate in 27 insurance plans, you have our full support. Hope you have the capacity for dentist to treat them all. But know that you have our full support. We’re not you know; we’re not judging you. We’re simply breaking it down and we’re taking 20 years of us listening to dentists argue with each other about the pros and cons of insurance participation. When there really isn’t an argument. It’s like “less filling – tastes great.” Right?
And we propose that insurance participation is great when you need an influx of new patients with almost zero upfront costs, we would agree to that. Oh, we would 100% agree to that, especially in a startup situation.
Mark: You know, we run into situations all the time where one of our solo GPs, let’s say we’ll get from 1 to 1.5, somewhere in there. And they have enough space or they’re expanding.
And they call and they say, “Hey, man, I just got an associate.” “Really? How many days a week?” And they say “four.” Wait a second, “How many days a week are you going to work?”
“Well, I’m going to still work four days a week.” And we go, “that’s 100% increase in capacity and you’re calling me now? You need, you need double new patient flow like, I’m not going to say instantly because every practice has a little bit of a cushion right for about 90 days. But in 100 and 100 days, you’re going to start feeling the impact – the negative impact – of you waiting on this decision.
So, anyway, so there’s always, there’s always points in your career when you can use insurance participation for really what it’s good for. And there’s always points in your career when you get to capacity. When you can wean yourself off of insurance participation. And we will tell you that it’s always worth it. Financially, it’s always worth it.
Boiling it Down
And if you just want to boil it down to two basics, you hold your hand out and say, “Do I want to give up 20% of my money or 5%?” And everyone listening to this will choose 5%. And that’s what it costs to market your practice and 20% or 30% was what it costs to participate with insurance.
So, that’s, that is literally all it is. Take all the insurance examiners who have pissed you off. The X rays they’ve lost, the fact that you have to sit on hold and find eligibility and the 67 million hoops you have to jump through just to be a part of this. You know, this process of insurance participation, get rid of all that stuff. None of that really matters.
When you look at this from a pure business perspective, it’s a business proposal. You do insurance plan. The analogy might be a bad analogy, but the analogy I used and I forget where I was, but I, I look at insurance participation the same way as a, as a druggie would look at it, As a druggie would look at, what do they call it a dealer?
Howie: A drug dealer.
Howie: Hey, come over here I’ve got some patients for you.
Mark: I’ve got 40 new patients a month. Come on, come on, or a loan shark. There’s another great example, right? “Hey, man, I got 1500 bucks, it’s just 10% a week. No big deal. Right?”
And pretty soon, six weeks go by and you owe him three times as much money. It’s kind of the same thing. Okay? You can tell I’m from New Jersey with my analogy. So, don’t get sucked into it too far. But you can use insurance participation for really what it’s good for and then start to wean yourself off of it. So, get in when it’s good, get out when it’s better, get in when it’s good, get out when it’s better.
And your dental career, well, I mean the impact, the financial impact, over a dental career just it’s astounding, it’s literally millions of dollars. Okay? And I’m not talking about top line dollars, these are profit dollars. So, the financial impact is inarguable. I’ll let the dentist choose whether or not there’s a, like a professional satisfaction out of working with insured patients or fee-for-service patients, I’m not even going to go there. Okay? We look at the financial and we look at that arrangement and we say, “Okay, it’s time to help dentists see it for what it is, and use it when it’s good for them. And get out of it when it’s not.”
Howie: Yep. There you have it. Thanks for listening out there. We’re going to wrap things up for today. We look forward to talking with you next time. Bye now.