In today’s inflationary environment, many dental practices are reevaluating their relationships with Preferred Provider Organizations (PPOs). Rising operational costs, coupled with capped patient fees, are squeezing profits and impacting wages for both owners and employees. This trend of dropping PPOs is gaining traction as practices seek to maintain financial stability and quality care. 

The Impact of Inflation on Dental Practices

Inflation affects all sectors, and dentistry is no exception. The costs of dental supplies, lab fees, rent, and employee wages are all on the rise. However, reimbursement rates from PPOs often remain stagnant, effectively capping the income dental practices can earn from PPO patients. This disparity between rising costs and stagnant revenues is putting significant financial pressure on dental practices.

According to the American Dental Association (ADA), dental practices are experiencing increased operational costs without a corresponding increase in PPO reimbursements. This situation forces many dental practice owners to consider whether participating in PPO networks is financially sustainable. In fact, The ADA’s Health Policy Institute recently asked 769 owner dentists about their plans to drop some insurance networks this year. According to their report, 24.8% answered yes, 26.9% said no, but may later this year, and 48.2% said they do not plan to drop any networks this year. With more than half saying they have dropped, or are considering dropping, coverage this is something all dental practices need to understand.

Some Pros of Dropping PPOs

• Financial Viability: PPOs typically negotiate lower fees with dental practices in exchange for a steady flow of patients. However, with costs rising, these lower fees may no longer cover the cost of providing care. By dropping PPOs, you can set your own fees that better reflect the cost of services and ensure a sustainable profit margin.
• Quality of Care: Participating in PPO networks often means adhering to strict guidelines and fee schedules, which can limit the level of care dentists can provide. By moving away from PPOs, you can focus on delivering higher-quality care without the constraints of reduced reimbursements. This can lead to better patient outcomes and higher patient satisfaction.
• Administrative Efficiency: Managing PPO claims and reimbursements can be administratively taxing since the time and resources spent on PPO paperwork can be substantial. Dropping PPOs allows dental practices to streamline their administrative processes, reduce overhead costs and free up staff to focus on patient care.
• Improved Work Environment: Higher revenues can allow for better wages and benefits for employees, as well as professional development opportunities, enhancing staff morale and retention. It will also alleviate some of the pressure of managing high volume PPO patients so you and your team can focus on quality over quantity and lead to a better work-life balance. 

Some Cons of Dropping PPOs

• Loss of PPO Patients: Dropping PPOs may lead to a decrease in the number of patients, as some may prefer to stay within their insurance network. This could also lead to lower overall revenue – at least temporarily – until the PPO patients can be replaced. It is worth noting that patients usually don’t want to change dentists, so if handled well, patient loss is generally very low. 

• Marketing Challenges: Practices may need to invest more in marketing to attract new patients who are willing to pay out-of-pocket or have different insurance plans. This can be a challenge since spending more marketing money while revenues are decreasing can put your practice into a financially scary position.

• Reputation Risk: Some patients may perceive the move negatively, potentially impacting the practice’s reputation if not managed carefully with clear communication and excellent patient care. While it means incurring more costs, some practices may find it valuable to invest in the services of a public relations professional during the transition. 

• Financial Uncertainty: All of the above points signal that during the transition, there may be a period of time where revenues decrease while expenses increase, which can be hard for a dental practice to weather. 

Dropping PPOs is a significant decision for any dental practice. You must carefully weigh the pros and cons and consider your unique circumstances before making this move. At Edwards & Associates, we can help you look at your financial situation and determine if, when and how a shift away from PPOs would make the most sense. 

And for more insights and personalized advice on managing your dental practice’s finance, reach out to us. We’re here to help you achieve your financial goals.