Should Your Practice Join or Drop a Dental Insurance Network?

Every decision to join or drop a dental insurance network depends on a number no report contains: how many patients would come if you joined, or how many would leave if you dropped out. Nobody can look that up. What a practice can estimate is the break-even point: how many new patients it would take for joining to pay off, or how many patients it could lose after dropping before the profit on that work falls. That turns an open-ended guess into a specific question the owner can judge.

Why a Write-Off Costs More Than It Looks

When a network pays less for a procedure, the cost of performing it largely stays the same. Supplies, lab fees, and staff time do not change with the fee, and neither does the dentist’s compensation if it is based on full-fee production. Those are variable costs: they come with the work — staff time to the extent hours are matched to the schedule — unlike rent, which the practice pays regardless. What is left after them is variable profit, and the write-off comes straight out of it.

An illustration, with every figure invented. Suppose a patient’s care at your full fees comes to $1,000 a year, and a network allows $750 for the same care. Suppose variable costs come to $500: $200 in supplies, lab fees, and staff time, and $300 for an associate dentist paid 30% of full-fee production.

• Out of network, estimated variable profit on that patient is $500 a year.
• In network, it is $250.

In this example, a 25% write-off cuts estimated variable profit in half. The direction holds whenever costs stay the same while the fee falls: variable profit drops by a larger share than the write-off.

Turning the Unknown Into a Threshold

With those two figures, the open question of how many patients would come or leave becomes a specific threshold. Continuing the same example:

• Dropping the network. If 400 of your patients come through the network at $250 variable profit each, their estimated variable profit is $100,000 a year. At $500 each out of network, the same $100,000 requires only 200 patients. Under these assumptions, the practice could lose up to 200 of the 400 before estimated variable profit falls.
• Joining the network. If 60 of your current patients carry that plan and see you out of network, joining moves them to the network’s fees. Their estimated variable profit falls by $250 each, or $15,000 a year. At $250 each, it takes 60 new patients from the network to make that back.

Whether 200 patients would leave, or 60 would arrive, is still a judgment. But it is a far more answerable question than whether the network is “worth it.”

What the Threshold Does Not Settle

The illustration treats every patient as average, and assumes the patients who stay after a practice drops a network pay its full fee for the same care. Your patients are not average, and some questions sit alongside the arithmetic:

• Does the schedule have room for new patients, or would they displace work at full fee? That is the difference between a demand bottleneck and a capacity bottleneck.
• If patients leave, is there demand to fill the time they free up?
• Would patients who stay accept less treatment once more of the bill is theirs?
• Would the practice need to adjust its capacity — adding hygiene hours, staff, or operatories to take on more patients, or scaling back for fewer? Those changes carry costs, or savings, of their own — and the dropping threshold assumes staff costs actually fall with the lost work, which happens only if the practice adjusts.
• How would a change affect referrals and the flow of new patients?
• Which long-standing patients and families would be affected, and how would they hear about it?

Those are judgment calls, and they belong to the owner. In our view, the job of the analysis is to make sure that judgment is exercised against real numbers and a concrete threshold rather than an impression.

How Proveer Can Help

Proveer’s network participation analysis reviews your network fees, write-offs, procedure frequencies, and patient counts, estimates variable costs from your income statements, and allows for collection reductions. We present the financial implications and risks of dropping, adding, or staying in a network. We do the arithmetic; the decision stays with you. The analysis stands on its own and does not require outsourcing anything else.