The Elephant in the Operatory

There is an elephant in the operatory, and it’s presenting all kinds of challenges for dentists, says Charles Blair, DDS, of the consulting firm Dr. Charles Blair and Associates, Belmont, N.C. That elephant is the preferred provider organization, or PPO.

PPO plans accounted for 77 percent of commercial dental benefits by plan type in 2011, compared to just 42 percent in 2002. Indemnity plans went the other way: Thirty-five percent of commercial benefits by plan type were indemnity plans in 2002, but just 9 percent were in 2011. The result? “There has been a spiraling downward of contracted fees, and I’m not sure we’ve reached the bottom yet,” says Blair.

Dental practices face another threat from payers – fee-capping, that is, the practice whereby insurers (or self-funded plans) cap the fees dentists charge not only for covered services, but those not covered by the plan as well. (Though more than 30 states have passed laws forbidding fee-capping, the federal government – which regulates the self-funded industry – has not.)

Traditional approach won’t work anymore
Dental professionals might look to their medical counterparts for a glimpse into the future, says Blair. The medical market is dominated by PPOs today. In response to reduced profit margins, physicians have moved from solo practices, to small-group practices, to large group practices. Hospitals have been on a physician-practice acquisition binge, and the hospital industry itself is undergoing rapid consolidation. In fact, it is estimated that hospitals or hospital systems employ half the physicians in the United States, and may employ as many as 70 percent in three years.

More than 80 percent of dentists are contracted with at least one PPO. Dentists and practices who resist the trend and are out of network will continue to lose patients, says Blair. Like physicians before them, dentists are joining forces with others and extending office hours in order to stay competitive. Many are joining group practices or alliances.

Over the next 10 years or so, corporations could comprise 20 percent to 25 percent of the market, says Blair. In addition, multi-doctor practices will dramatically increase while the solo count will plummet.

Throw in an influx of dental schools (non-profit and for-profit), rising levels of student debt, and a glut of dentists in metropolitan areas (though not in more remote locations), and the future looks hazy. “I have been looking at some of the online dentistry message boards, and I see pre-dental students wondering, ‘Is it worthwhile becoming a dentist?’” says Blair. No doubt dental school applicants will decrease with the growing uncertainty.

Sidebars: Successful strategies

Some dental professionals are ignoring the larger trends, or are simply too busy working at the chair to take it all in. But others are rising to the challenge. Some examples of successful strategies:

Some dentists and practices have developed their own in-house discount plans for those without insurance, whereby they offer enrolled individuals and small employers discounts on their services. Half the population has no dental insurance, and dentists offering discount plans will dramatically increase, says Blair.
Many dental professionals are investing in technology in order to become more efficient and productive, and in order to perform procedures that they used to refer out to specialists in the past. “If I’m able to work in a couple more procedures a day in an unbooked operatory, that’s the difference between a $600,000 practice and an $800,000 one,” says Blair.
More dentists are recognizing the need to take full advantage of the skills of properly trained staff to increase productivity and patient throughput. In the long term, the count for mid-level providers will increase, says Blair. Laws and regulations must be changed in order for the dentist to be more productive with the dental team in a PPO environment, with less reimbursement.

Sidebar 2: Group practice presence