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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.

Are you losing revenue and profit because your patients are not in the right bands?

While every practice is unique, the distribution of patients between bands A to E on your Full Care Plan should fall approximately in line with the following guidelines:

12% in band A
29% in band B
39% in band C
16% in band D
4% in band E

When I conduct Full Care Plan audits I often come across practices where the majority of patients fall into Band A and Band B, and when we look at the amount of clinical time spent with these patients, it’s clear that many should be in higher value bands.

You should be able to quickly establish your practice distribution by referring to the latest monthly summary report your plan provider prepares for you.

If the distribution of your patients differs from the guidelines shown above it may be because:

• You inherited the patient list and have assumed patients had previously correctly banded
• The dentist assessing the patient prior to them joining the plan may have lacked confidence in placing them in the most appropriate banding due to financial concerns – can they afford it?
• Patients have never undergone reassessment which may have required moving to an alternative band as their dentition changes

What to do:

1. Establish the distribution of your patients between your plan levels
2. Carry out an audit on a representative sample of Band A and Band B patients
3. Where required note to reassess patients who appear to be incorrectly banded at their next scheduled visit
4. Put a policy in place to reassess all patients on a regular basis – at least every 24 months is recommended.

 

How to maximise the return from your Full Care or Capitation Plan

If you offer a Full Care or Capitation Plan to your patients or you are acquiring a practice which has a Full Care Plan, then this series of Blogs will provide you with lots of information about how to avoid some of the costly pitfalls associated with Full Care Plans. The series will cover the following areas:

  • Audit the distribution of patients between bands and how this can impact revenue and profit
  • How providing access to multiple hygiene appointments will destroy your profit margins
  • Review the fees for each band
  • How to work out your hourly rate income from Full Care Plan patients and the cost of Family Discounts
  • Buyer beware – inheriting a list of supervised neglect is your worst nightmare
  • Dental Accident and Emergency Insurance – is it a necessity or a Red Herring?
  • How much administration fee are you paying each month?

Well-managed Care Plans can be a major source of income to the practice, but it is vital to ensure you regularly assess your plans to confirm they are contributing the correct hourly rate to your business. If you diary is busy but your profit is less than you think it should be, it could be the income being generated by your Full Care Plan which is undermining the performance of your business.