Are your monthly administration fees eroding your profit?

If you are unsure what your monthly admin and insurance fee is, it’s a good idea to find out as high admin costs will erode your income and profit.Some providers charge on a sliding scale so if you don’t have a very high number of patients on plan, you will be paying pro-rata and very high cost for administration; as much as £4 per patient per month in some cases.

Look out for hidden costs too. For example, some providers insist upon a minimum number of patients on plan and if you fall below that figure, they will apply a minimum monthly fee. And check to see if there are any annual licence fees to pay, or charges for failed Direct Debit payments. Why should you pay for a failed collection? Check to confirm your provider will write to patients annually to increase your fees and that this service is included in the monthly admin fee. What admin fee is charged for children’s plans? It may not be relevant to every practice, but a child plan is likely to be £5.00 per month so you don’t want to be paying over the majority of this as an admin fee.

Lots of plan providers claim to provide lots of additional services, but many of them are accessible only when you pay additional fees so be careful to establish exactly what you are getting for your money.

What to do:

2. Work out how much the business might save by moving to a new provider – it can add to thousands of pounds a year

1. Look around and compare costs and what is included before taking any decision about your preferred plan provider

Dental Accident and Emergency Insurance – is it a necessity or a Red Herring?

Whilst we do provide plans with insurance, 77% of our clients elect not to include an accident and emergency insurance product with their plan.

In a recent survey we discovered that very few patients ever process and claim. Why then do most plan providers include it as a mandatory benefit? The premium on insurance products is typically price tagged from £0.50p to £1.00, but in fact costs the providers just a few pence, so the premium is a great source of income and profit for them.

We undertook a survey, where 45,000 plan patients were reviewed and over a three-year period only 15 claims were made.

What to do:

  1. If you are considering the introduction of a plan, or a looking to re-position your existing plan, consider the appeal an insurance benefit will have before you decide which plan provider to work with.
  2. You may want the added flexibility of being able to have a plan with no insurance if you feel this suits your needs better.

Buyer Beware – the danger of supervised neglect

If you are looking to acquire a practice with a Full Care Plan, the monthly income can look very attractive. However, it is critical that you carry out due diligence on the plan, not only to establish the facts around all the areas discussed in previous Blogs, but also to identify any possible supervised neglect of patients.

Once you have completed the sale and purchase agreement it is too late to mitigate losses and risks associated with supervised neglect.

Scenario 

Practice is purchased which has 1,000 patients on Full Care currently generating £350k of revenue to the business. Previous owner is retiring from dentistry and leaves the practice upon completion of the sale. New owner commences seeing patients and realises very quickly that most of the patients require dental treatment. There is active dental disease, poorly carried out restorations, fillings placed on top of decay. 

Patients are not willing to accept that the previous owner neglected their dental health, their loyalty lies with the retiring dentist and not the new practice owner with whom they have not established a relationship yet. Who is going to pay for the remedial treatment required? Not the patient. 

The new owner has to decide when and how they are going to broach the delicate subject with the patient, that they require a great deal of treatment to bring them back to dental health. Hours of treatment are required, and it will possibly mean the patient will need to be moved to a higher band. Should they wait until they have established a relationship with the patient? No – because they are then falling into the same trap of supervised neglect. 

This situation is awful for the new owner. A due diligence audit prior to completion would have identified the issues and money could have been placed in escrow to allow for treatment costs, or the sale price of the practice could have been reduced to reflect the significant risk to the buyer.

What to do: 

If you are looking to buy a practice with a Full Care Plan, do undertake an audit as part of the due diligence. Use the results to strengthen your negotiating position or withdraw from the purchase.

Privilege Plan provide comprehensive Full Care Audits either as part of a due diligence for practice acquisition or as part of your internal audit requirements. Email info@privilegeplan.co.uk for further information.

Review your fees

Review the fees for each band

Many Full Care Plans were originally designed as a vehicle to move patients from the NHS into an affordable private scheme. If the bands which were set as part of that original exercise were too low, a cost of living rise each year will not compensate the business and income generated by this cohort of patients may fall well below your target hourly rate.

We typically see patients on Full Care Plans as being relatively demanding on clinic time. This is understandable as they only pay for laboratory work, and the majority of appointments are cost neutral to them.

Do you know your hourly rate for Care Plan patients?

When we complete Full Care Plan audits we typically find hourly rates being generated is much lower than the principal dentist assumed. A practice looking to generate £220.00 per hour only produced £138.00 per hour from its Full Care patients.

Full Care income runs on the win on the swings and lose on the roundabouts principle, with some patients not attending the practice regularly but still content to pay into the scheme for peace of mind; whilst other patients are demanding and receive many hours of care.

It is important to establish the actual hourly rate being generated by your plan patients. Some practice management systems will report a summary of hours spent with plan patients.

Some plan providers provide generous family discounts; 5% for two members of the same family, 10% for three and 15% for four or more. In a recent audit we noted this was costing one practice £13,000.00 per year in lost profit. If you are going to use a plan provider that offers family discounts, this need to be factored into the fees for each band.

What to do:

1. Take a summary for a month in hours spent with plan patients and the net income earned. Divide net income by hours to establish hourly rate. This should include FTAs and white space let by late cancellations if possible, to factor in.

2.  Work out cost of family discounts to your practice and factor this in to future fee reviews.

How Many Hygiene Appointments in a Full Care Plan?

How providing access to multiple hygiene appointments will destroy your profit margins

Unfortunately, some plan providers are not helpful when they advise patients they can have as many hygiene appointments as they want when they are a member of a Full Care Plan. Treatments provided under Full Care are subject to clinical necessity and multiple hygiene appointments should only be available for those patients who require periodontal treatment. This requirement would be factored in when completing the patient’s oral health assessment and place them in the most appropriate band to receive access to this type of treatment.

The issue of permitting patients in low bands to have multiple hygiene appointments can undermine your revenue and profit. Many practices elect to pay dental hygienists an hourly rate. This can be in excess of £30 per hour. If this is the case in your practice you can see how patient on plan will impact your profitability:

Example:

Hygiene pay per hour £32.00

Patient on Band A pays £17.00 per month on Full Care. This provides the practice with £204.00 of gross income before the plan provider takes their admin fee. In this example the admin fee is £2.50 per month, reducing practice income to £174.00 per year. The patient receives 2 examinations (£80.00) and 4 hygiene (£200). The patient has received £280.00 worth of treatment but only paid the practice £174.00. Plus, the dental hygienist has been paid for 2 hours of work costing £64.00.

In this example the practice has “lost” £170.00.

What to do:
1. Establish a policy of how many hygiene appointments should be available to patients in each band and ensure cosmetic hygiene appointments are excluded from plan entitlements
2. Review patients who are in low bands to establish if multiple hygiene appointments are clinically required, and if so, this suggests they may require reassessing into a higher band.
3. Ensure dental hygienists are aware of what should be excluded ie additional scale and polish for cosmetic reasons.