The COO of Four Quadrants Advisory, Brogan Baxter, joins Casey and Jarrod to discuss fee-for-service practices and breaking the insurance cycle. Are you ready to start maximizing the profits of your dental practice?
Announcer:
Hello, everyone. Welcome to the Millionaire Dentist podcast brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry, finances, and business practices. To help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.
Casey Hiers:
Hello and welcome. This is Casey Hiers, back at it again at the Millionaire Dentist podcast. In-studio, we have co-host, Jarrod Bridgeman.
Jarrod Bridgeman:
Hey!
Casey Hiers:
And we also have a very special guest, Chief Operations Officer, Head Analyst, part owner, Brogan Baxter is going to join us. How are you, sir?
Brogan Baxter:
I'm good. Howdy.
Casey Hiers:
I'm just enjoying some cold brew over here. Getting the juices flowing. How are you feeling this morning, Brogan?
Brogan Baxter:
Well, I'm grumpy now because you threw out the cold brew thing. I've been told that I shouldn't drink any caffeine today because I have a doctor's appointment.
Casey Hiers:
Because of HIPAA, we won't get too far into that, but you look very healthy. So I imagine it's more routine if anything. We wanted to bring you in today to talk about the limitations of insurances. I travel around the country and thankfully get to speak in-person crowds, insurance. I hear it so much; the frustrations and then the folks that say, "I'm fee for service," and they have this badge of honor on them. And I wanted to talk to you about the limitations of insurance. Why people get in it, potentially the frustrations of getting out of it. It's a big old topic, but I wanted to get your expertise.
Brogan Baxter:
Yeah. So gosh, there's lots of ways that we could go, lots of directions we could take a conversation about insurance.
Jarrod Bridgeman:
Let me ask you, do you think a lot of people end up getting trapped in the insurance cycle because either A, they took over a practice, or B, when they started, they just didn't know what to do?
Brogan Baxter:
Yeah. So if someone starts a practice, if they've started a practice, generally anytime in the previous 15 years, the blueprint to do that is to add insurance plans if you're starting from scratch.
Jarrod Bridgeman:
Okay.
Brogan Baxter:
So, they have a name, a door, and some dental equipment, that's it. No patients. If somebody has acquired a practice, they have a mix of fee for service, generally, a mix of fee for service and insurance. What that mix is could fluctuate dramatically from 10% fee for service patients, someone that's going to pay you your full fee schedule, to 10% insurance, and you, really, the ideal is that you go down to 0% insurance.
Casey Hiers:
One of the things I bring up in the presentation is when insurance can get out of hand. When all of a sudden you look up and your massive insurance adjustments every year. If you want to do free dentistry, do it on your terms. But some of these folks get trapped in that insurance game. I've seen a lot of times, they get out of school, they got a lot of debt, they get the practice, they get more debt, they want a nice practice, so they go on some more debt for that, and they look up and say, "Well, I've got to pay for this so I'm going to accept every insurance under the sun." And I know Brogan has seen this and then they start producing a ton of dentistry and then what? Burnout.
Brogan Baxter:
Right. It is a vicious cycle. So everybody has been told by anybody that has anything to do with dental, you really need to do more because that's kind of the idea. That's not necessarily what we believe, the three of us because we look at it a little bit differently, but generally speaking, that's what they've been told. You need to do more and more and more. Well to do more, you need more new patients. Well, how are you going to get more new patients? Well, I could do a marketing plan. That's a lot of work and it's going to be costly and I don't know how to do some of those things. So I have few insurance plans and the majority of my patients are coming from there, so let's sign up for another one and, boom, more production, more patients, everybody's happy until you realize that you're taking a bigger haircut now.
Casey Hiers:
The insurance companies get paid, the patients get treated, your staff or team, they're certainly making the money that they were told they were going to make. Who suffers in that scenario, Jarrod?
Jarrod Bridgeman:
That'd be the owner.
Casey Hiers:
There you go!
Jarrod Bridgeman:
The dentist is there working all those long hours and day in and day out and not really seeing much self-improvement, I'd say.
Casey Hiers:
Yeah. So from a business model perspective, Brogan, once somebody gets in deep with insurance and then identified that they're a little bit frustrated with that, what can they do? What are some options that they can go to?
Brogan Baxter:
You brought up employee costs and whatnot, and everybody's getting paid and everything, that's something that is one of the limitations that's out there. In dental, everybody wants to pay their staff well. Nobody wants to pay their staff poorly, but the dentist has a certain lifestyle that they want to enjoy as well. And so if you're taking a 20% haircut, that's 20% off of today's dollars. That's what your fees should be. Okay? But if you're taking a 20% haircut on that, you're only collecting 80%. Your staff wants to be paid in today's dollars, not in 20% reduction dollars. That doesn't compute for them. That's your problem. And that can be a problem.
Brogan Baxter:
You get in too deep and it's like, "Oh shit, what do I do now?" So if you have a situation like that, you have to slowly unwind from it. You can do it aggressively, it's not ideal, but the caveat there you really want to look at it is your scheduling and how far you're booked out, and how many patients you have, and how overwhelmed people are, and all that. Because to continue to make more and more dollars, you got to produce more and more, but you're producing more and more of a less on the dollar because of the insurance.
Jarrod Bridgeman:
And as you said, sometimes being aggressive can work or maybe not. Going cold turkey oftentimes is not the way to do a lot of things. And I was actually speaking with one of our clients who recently decided to drop an insurance company, but they let their patients know like, "Hey, August is when we'll stop accepting that, just to give you time to adjust to yourself what we're going to do, but here's the options. We're still going to be here to help you and all those other things." You need to let your patients know ahead of time that you're going to be doing something major like that.
Brogan Baxter:
Yeah, definitely. And most of the insurance companies out there require a notice. It can be longer, but usually 30 to 90 days, somewhere in that timeframe, you want to be out in front of that, even with your patients of the practice too, to let them know. That's also your opportunity to be able to stand on a soapbox a little bit and to let your patients know what insurance does to you as the owner. You can write in a letter or however it goes out to let them know that you're tired of having treatment planning dictated by somebody that's not even a dentist.
Casey Hiers:
I like that idea of explaining how it affects you personally, as someone who has never been in the insurance game. I've had health insurance, and dental insurance, and vision insurance, I never realized until much later in life, how much they, I don't know if I want to say screwed over, but not pay the actual practicing doctors.
Brogan Baxter:
Right. Well, and then you have some of the bigger insurance companies out there starting to throw around their weight. Some insurance companies will renegotiate their rates. It's not something generally that an office can really make any major headway with. They might be able to get them to increase a little bit. You really need to go to like a professional to be able to do that. But there are companies out there that just flat out say, "I don't care who the hell you are. We're just not renegotiating our rates. So, tough."
Casey Hiers:
Do a lot of practice owners forget that step of potentially writing a letter or note to their patients to give a little deeper explanation? Because I hear all the time, "Oh, they're getting rid of my insurance" and this frustration. I never hear, "Oh, this is the reason why."
Brogan Baxter:
No. They can forget or they just discount how important that is. We always try to make it a point to have a client do something like that and to explain a little bit of the rationale. It doesn't have to be this big weepy letter or anything, but you do just need to let the patients know, "Hey, they keep cutting the amount of money that they're paying to me to do your quality of care. It's impacting the costs that I put into it. And I'm not going to suffer, or I'm not going to put off those costs on you, with lesser quality work or equipment or supplies."
Casey Hiers:
Most insurance companies give you the double bird if you want to renegotiate, as you mentioned. If you walk away, are there instances where they'll come back and maybe give you a better deal or rate?
Brogan Baxter:
Yeah, generally that's one of the angles that you take with the insurance company is, "Look, we really need to have our fees to at least this level." And if they say, "No, we're not going to do that." Then you can say, "Well, then, we're just going to walk." And they can choose whether or not they call your bluff. Sometimes they do, a lot of it really depends on the amount of providers in the area. But in a situation like that, if you ultimately do come back and decide not to ultimately leave, well, they know you're not going anywhere anytime soon. And so if you're going to say it, you should do it.
Casey Hiers:
I had a really good question and then I got wrapped into what you were saying.
Brogan Baxter:
That's okay. I have that impact on people. So I can tell you from what I have seen, when we do have clients that do go and cut insurance plans, generally speaking, like the worst someone will lose is 50%. So hypothetically, you have a plan that's a 30% haircut for you. So if you lose the absolute worst-case scenario, but you get your full fees for your out-of-network benefits, that's 50% of your money. Well, hell you were already giving up 70% of your money because you're only collecting 30%. So in a situation like that, that's a pretty small gap to make up with fee-for-service patients or even a better insurance plan. A lot of people forget about that. You can replace really crappy plans with plans that are just less crappy. But that's still a move in the right direction. And a lot of people kind of discount even potentially doing something like that.
Jarrod Bridgeman:
Well, and as you said, you may lose 50% of those patients, but you're making more with less people, less people in the chair, which gives you the opportunity to have more people in there.
Brogan Baxter:
Right. That's less wear and tear on your hands, that's a longer career you could have, that is a more sustainable work environment for your employees so then they don't feel overworked and underpaid. Now they just feel maybe underpaid, but they're also not working on a crazy volume.
Casey Hiers:
And you can actually spend time with your patients and there can be a quality there that's increased and improved.
Brogan Baxter:
And with your family, vacation, they hold the cards that way. They're not being pushed around by the insurance plan, running on roller skates, trying to see these patients they work their butt off to take a 30% haircut.
Jarrod Bridgeman:
It can really help with your work-life balance, as you said, with vacations and family time.
Brogan Baxter:
Yes. Something that's really important with this too, is a lot of people discount this when I say it, but if you think about it at like inflation. I'm an economist among other things, I guess is one of the things that I do. So inflation has been a real hot topic; they're talking about it on CNBC. So, of course, we get emails about this. Like, "What's this inflation stuff?" So think of it as inflation; if you back off 30% worth of inflation, you're going back to 2098, somewhere, '95, somewhere in that timeframe, you're paying your staff in those dollars is essentially what you're paying those folks.
Brogan Baxter:
They want to be paid in today's dollars. You want to be paid in today's dollars. That can squeeze your overhead. And it goes for everything; your supplies, your rent, your staff, and something that a lot of people discount is when you get so busy because this is what happens ultimately, is they get so busy, they keep adding more and more plans, running on roller skates, more and more, working more days, doing whatever. Then they go, "Well, I got to bring in an associate because I can't handle this myself." You're going to bring in an associate, just listen, you're going to bring in an associate to write off 30% when you could just cut half of your plans and make the same money.
Casey Hiers:
That way mindset right there, young dentists don't think about, middle-aged dentists don't think about. And again, to your point, it's drilled in more and more and more; more associates, more chairs, more buildings, more practices, more insurances, and ultimately you're being so ineffective. You're magnifying a broken business model and all it does, it brings you more grief ultimately.
Brogan Baxter:
So to perpetuate that idea a little bit further, I just had a situation with a client looking to bring on an associate. Well, this associate's getting paid 35% of their adjusted production. And she goes, "Well, why we don't pay anybody 35%." And I said, "Well, let's look at some numbers here." So we take into consideration my client had one plan in her practice. This other practice had many more because their adjustment rate was over double. My client could pay them 7% less and she can make the same money because she has better plans. That's something that young dentists out there, young associates, and the older host doc never consider that. Don't get hung up on the percentage of how much you're getting paid. If it's on adjusted production or if it's on collections, they've already adjusted out the insurance. So it doesn't really matter what the percentage is. If you're in a bunch of crap plans, you're going to get crap pay regardless of percentage.
Casey Hiers:
So Brogan, here's a question for you, generally speaking, let's pretend you're a 32-year-old dentist. You've been an associate for a couple years. You're unsure what to do. What would you do? Knowing what you know now if you were 32, you were a dentist and you had been an associate for a couple of years, we're talking business model... What kind of practice would you start or buy or fill in the blank?
Brogan Baxter:
I would be, knowing what I know now, I would ultimately go to look to start my own practice by acquiring something, ideally as close to fee-for-service as I could get. If it's not fee-for-service, I would acquire one that was pretty darn close, that was also small enough that I could gobble up another nearby dentist down the road and go completely fee-for-service then.
Casey Hiers:
Fee for service. That's the common denominator right there.
Brogan Baxter:
When you get your fee-for-service, you can get really, really low overhead. When you get really, really low overhead, you don't have to work real hard to make a lot of money. And that's very attractive because your practice values are based on the amount of money generated by your practice.
Jarrod Bridgeman:
So when you're ready to retire, that just makes your practice seem much more attractive.
Brogan Baxter:
Definitely.
Casey Hiers:
And what you said, it's a novel thought, but those are common conversations I'll have. There'll be a dentist working three days a week making a lot, saving a lot, and just almost bored looking for the next challenge. And in my mind, it's simply because they chose that fee-for-service route. They have the options. I'll talk to somebody else working four or five days a week, insurances everywhere, and they're just drowning. It feels like they're drowning. It's a complete different conversation; tone, numbers, everything is different. And the one big common issue is the insurance. It is exactly what you've been talking about, such an important topic. Anything else on insurance, fee-for-service business model that we haven't touched on that you want to mention to our listeners?
Brogan Baxter:
So quickly, because I could just gloss over this if you're in a bunch of plans and you feel like your on roller skates and you're looking at your schedule and you're booked out really far; I've got a lot of COVID dentists right now that are dealing with this because they're short-staffed because the labor market stinks, they're short-staffed, so-
Casey Hiers:
What's booked out really far mean to you?
Brogan Baxter:
Booked out really far me is, from an operative standpoint, at least 90% booked for six-plus weeks, hygiene booked very, very full, call it 95% capacity through at least six months, and they're starting to run into issues with getting someone back for their six-month recall in month seven and/or not being able to get anybody in for perio and having your new patients booked out at least four weeks.
Casey Hiers:
Gotcha. Didn't mean to interrupt you, but I like those benchmarks.
Brogan Baxter:
That's what I like to see. If you're a dentist and you're in that boat, you need to really look at the insurance game because if you're booked out eight weeks and your new patients can't come in for three months, you're actually hurting yourself because you've got two additional months of production just sitting there that you can't even get to right now because you're so darn busy. So maybe look at cutting two plans. Maybe those two plans are 20% of your production. If they're 20% of your production and at worst, you're going to end up losing half, that's only 10% that you lose. Your eight-week schedule drops all the way down to what, seven, six? There's a lot worse things and you get a pay raise from that. Nobody else gets a pay raise. You do. That's the way to do it.
Casey Hiers:
Again, years and decades of anguish and grief, not super intense, but enough to affect somebody, and it's because of insurance. It's because of the business model. It's because they don't know what to do and they almost feel like they're drowning.
Jarrod Bridgeman:
We've talked on previous podcasts about how all that can really take a toll on you mentally and physically, too.
Casey Hiers:
On the practice owner, guess what, the culture of the practice, with your other employees, everybody feels it. Then it starts to be felt by who? The patients. It's a bad cycle right there. And if nothing else, understand your insurance situation intimately, the numbers of it, what your options are, and ultimately your external team should be helping you with those decisions. That's not something that a dentist should have to bear the weight of on their own.
Jarrod Bridgeman:
If you don't have one, you should probably get one.
Casey Hiers:
There you go. Brogan, thank you for joining us. Jarrod, insightful. I think we learned a lot of things today. I appreciate it.
Brogan Baxter:
Thanks gents.
Jarrod Bridgeman:
Thank you.
Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year, they retain over 95% of their clients. Thank you again for joining us, and we'll see you next time.
