The Practicon Viewpoint by Ann Page Griffin

ARE MANAGED CARE CONTRACTS WORKING FOR OR AGAINST YOUR PRACTICE?

No doubt PPOs and other forms of managed care have made huge inroads into private practice. In the last eight to ten years, managed care has become so widespread that many practitioners feel compelled to participate in provider networks, often signing contracts with little analysis or consideration about the impact on practice profit.

A recent survey focusing on managed care penetration reported that approximately 15% of respondents deliver more than 60% of their total production to patients enrolled in some form of managed care. In those offices, the dentist must adjust production to match the fee allowed by the third party rather than calculating production according to his/her own fee schedule. And, of course, reduced production = reduced collections = reduced profit.

If you are a provider in one or more managed care plans, there are several questions you should ask to determine the effect managed care has on your practice:

1. What percent of your production is delivered to managed care/PPO patients?
2. What percent of your full-fee production is adjusted off for each managed care plan in which you participate?
3. On a monthly and a yearly basis, how much money is adjusted off your full-fee production, and, therefore, your collections? This figure should include adjustments made to all care delivered to patients who are not charged full fee, including managed care/PPO patients, patients on government assistance, pro bono/charity treatment, and professional courtesy, totaled separately.
4. How many patients are enrolled in each managed care plan in which you participate? You may find that a plan with the fewest number of enrolled patients requires the most significant write-off.

If you cannot answer any one of the four questions posed above, it is past time to make the calculations. Once the data is collected, create a list of managed care plans in which you participate, using these criteria:

• Rank the list from first (the one that comes closest to paying your full fee) to last (the one that pays the lowest percentage of your full fee).
• Note the number of patients enrolled in each plan.
• Calculate the percentage of full-fee production adjusted off for each plan. You may find that a plan in which 5% of your patients are enrolled is actually costing you 15% or more of the write-off from your production/collections.
• Finally, calculate the overall collection percentage rate for all full-fee production. (Divide collection on full-fee procedures by production. The recommended collection rate for full-fee production is 97% or better.) Compare this collection rate to the collection rate for each managed care plan in which you participate. Surprise! Instead of collecting 97% to 98%, you may find a collection rate of 65% to 70% or less on managed care plans, plummeting your overall collection rate for all treatment delivered (full fee plus managed care) to around 80%.

You now have the data to make an informed decision about which, if any, PPOs and other managed care plans you will continue to accept. If you decide to drop out of one or more provider networks, it will become even more critical to boost your full-fee new patient numbers, strengthen the recare system, increase the acceptance rate of recommended treatment, and control overhead. Analysis of managed care/PPO write-offs, astute management of systems such as recare, marketing, scheduling, etc., and ongoing control of overhead are equally important factors in maintaining maximum practice profit.