Jarrod is joined by special guest Jason Smith, Founder, CEO, and President of Four Quadrants Advisory to discuss how PPO plans can hurt your business and how to get out of them without killing your 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.
Jarrod Bridgeman:
Hello and welcome to another episode of The Millionaire Dentist. I am your host, Jarrod Bridgeman. Casey Hiers is out today. I'm not really sure what he's doing. But instead, I have the founder, CEO, and president, and overall grand emperor of Four Quadrants Advisory, Jason Smith. Jason, how are you?
Jason Smith:
I am great today. Thanks for having me on. It's been a while.
Jarrod Bridgeman:
Yes, thank you. So you called me the other day and you told me you had something really important to talk about. And as usual, I play dumb. So I might need your help on this one. So you wanted to talk about something about insurances.
Jason Smith:
I did. I wanted to focus on some things that are really hurting dentistry and putting dentists in tough vulnerable positions. And the PPO insurance plan and having too many of them in a practice is right at the top of the list.
Jarrod Bridgeman:
Yeah. And I can see that. Before I started working here, I was not in dental or finance, and I was just a user of insurances. And I was really surprised to out what insurance actually keeps from what the inpatient is charged. It's kind of insane to me. How much of a percentage they take.
Jason Smith:
Well with PPO plans, especially when somebody buys a practice, even if it was a existing practice, or they're starting a new one, there's so much pressure. And it is so easy, which is the easy way to build your practice and get new patients. It is so easy to sign up for PPO plans, and a lot of them. But it's real, real hard to get out. And then what you end up with, even if it's a $2 million or $3 million practice, is you finally look up and go, "Oh my God. I'm writing off 30, 35% off what I do every year." And on a $3 million practice, that's $900,000. You've got to have a whole nother dental practice within your practice of staff to do free dentistry. And it's pretty sad when we see he's somebody doing 2 to 3 million in a practice, and they're making sub $300,000. And we do see that. And then we have fee-for-service practices where a doctor might do 1.3 million and is cleaning out 700,000 out of there, gets to spend more time with patient.
Jarrod Bridgeman:
They don't have to work as hard on making more.
Jason Smith:
That's right. And they've got a lot better life with less pressure and much better cash flow. But what I want to focus on today is how can I help you get out of a PPO plan and what steps should you take.
Jarrod Bridgeman:
Okay, yeah. So what would be the first step? Is it something that you can just run in and start cutting things out?
Jason Smith:
You can't. And a lot of people have made that mistake because a lot of times the frustration of the PPO plan is emotional. And people have gone in and cut two or three PPO plans, and they've had to shut their doors on their practice. And that PPO plan, to cut it the right way, has to correlate to a lot of other facts and figures in your personal life and in your practice to make sure you're safe to do it.
Jarrod Bridgeman:
So instead of going and cutting, you're saying there's a lot of factors inside that you should probably start taking care of in your business side first.
Jason Smith:
There has to be a ramp-up and there has to be preparation. For example, believe it or not, how's your cash flow in the practice right now? And how is it at home? Are you saving anything for retirement? And those things have to be in order first. And how's your new patient count? And we've got to do things like that first, then we've got to move on to before we start cutting PPO plans, how about, which is contrary to what you might think, let's negotiate fees with all your PPO plan first, because we're probably even sure which ones are the worst ones.
Jarrod Bridgeman:
See, I didn't even realize you could negotiate at all. How would you say? What's the percentage of practicing dentists out there that don't even know they could do that?
Jason Smith:
I would say probably 60% or higher. And what's really interesting about that is it can be so geographic. So in an area in small-town Kentucky, where there's not a lot of exposure by that PPO plan, they might up your fees 25% because they have nothing. And then you go to New York, New York where they are flush with business, that dentist might give them a call and say, "Hey, I want to negotiate my fees." And they might say, "Take a hike." Because they don't have to. So it can be so different all the time.
Jarrod Bridgeman:
Okay. So that makes sense. So going from starting from let's look at our cash flow, let's look at our numbers, to negotiating. Here at Four Quadrants, we do all that research and all that time. How long does that normally take somebody?
Jason Smith:
To do it the right way, it takes an extraordinary time, because I haven't even gotten to the fact, this sounds a little nerdy, Jarrod, but we've got to do... A lot of times, because it's just easier to do, the staff upfront on procedures will book the fee that the insurance company gives or what I call expect to collect, versus what the true fee on that procedure is. So let's say they book because that's what they're going to collect, $90, but the fee was $120. They don't research and figure out what the real fee was. They just put the expect to collect in because it's faster, they're seeing a ton of patients all day and they don't make the extra effort. But that's the first tell-all of what is your worst PPO plan. And so we've got to change all that as we're doing all this. And we're building cash flow and we're trying to save money and we're trying to do other smart financial things. Get your taxes in order, get your proper salary planned out that you should be taking. And even right-sizing your practices. We're doing all this.
Jason Smith:
Do you have too many doctors in there? Is your staff right? Is your hygiene right? Or do we need to add a hygiene day or do we need to even add a operative day? That all has to take place while we're doing this. And then one of the other things that really comes into this to help get us stronger is could you please add some fee-for-service procedures in that practice to help the cause? Do you know what a couple procedures would be fee-for-service, Jarrod?
Jarrod Bridgeman:
I don't.
Jason Smith:
Well, from looking at you right now, I would highly suggest some Botox.
Jarrod Bridgeman:
I have been told that many times.
Jason Smith:
And dentists are trained on all the facial muscles. It's a no-brainer and it is cash money, and people love it. Other one which, hey, send the tough stuff to all your specialists. We love our specialists. We have a ton of specialty clients here but is doing orthodontia. And as I call it for the general dentist, you're not going to make a ton of money off of orthodontia. We have some clients that have to have a whole different operatory because they do so much orthodontia and that setup. But what happens a lot of times is you do orthodontia on one of the kids, and then you end up with mom and dad and two other kids as new patients.
Jarrod Bridgeman:
True.
Jason Smith:
And it's kind of a loss-leader/can be a cash cow. And those two procedures and you don't have to do everything, but in particular, are great things to add. And then through that, and it's gotten so much easier with technology and cone-beam machines, is let's add implants. And if we work on making that smile more pretty and do things like implants. You don't have to do quadrant dentistry or maybe you put four implants in side by side. But if you'll just start doing the one-off and the two implants and you're open to learning those things. Through that process, if we're adding more fee-for-service business to that practice, we can get a little more chesty about-
Jarrod Bridgeman:
Kind of help offset the potential of cutting insurance out, right?
Jason Smith:
Well, yeah. And then what along the way, here again, everything has to work together. What if your savings for retirement through all that and cash flow went up 300%? What if you started saving 60,000? Or you were, excuse me, saving 60,000 for retirement, now you're saving 120? This is a great question. If that happened to you and if your patient schedule was booked out well, would you feel a little better about cutting a PPO plan?
Jarrod Bridgeman:
Oh, I think so. 100%. I think it'd be a lot easier to swallow that pill.
Jason Smith:
Then you know what happens after that? I'm going to give you a secret.
Jarrod Bridgeman:
Okay.
Jason Smith:
Overhead starts going down. Because when you have a ton of PPO plans in your practice, you're staff heavy, like I'd mentioned before, and you just don't see a practice with a lot of PPO plans that doesn't have crappy overhead. And so all of a sudden now we're driving-
Jarrod Bridgeman:
Is that just because of all the admin work it takes to work with them?
Jason Smith:
It's the admin work, it's more staff. And then it's, would you rather get a dollar or would you rather have 70 cents for the time you put into something? I mean, the person that gets a dollar and you only get 70 cents, if you both had a landscape company, I bet he's going to make more money than you. And it comes down to that. If a dentist can only see about 4,000 to 4,500 patients a year, would you rather have them pay you 65 to 70% of what you're worth or 100 percent?
Jarrod Bridgeman:
Yeah. So then obviously we have a lot of different listeners out there. For somebody that's a new dentist or going to become a practice owner soon, what kind of advice would you give to somebody who's new in the field?
Jason Smith:
Well, in regards to PPO plans and taking over a new practice, I would tell them to take a year to get to know that practice and figure some things out. And I know there's stress and pressure, and you can become impatient, but the practice can change so much just with a new dentist. Especially when you're taking over for an elder dentist who, honestly, probably didn't do a lot their last three or four years, which is normal. And typically there is dental work everywhere to do because the last three or four years they've been doing checks on patients, they're just putting a watch on things and they're like, "Oh, we'll get to that later." When there might be, frankly, three or four crowns that need to be done. And I would just take time to get to know your patients and get really good at spending time with them and treatment planning to see what kind of procedure opportunity is there in there. And let's do that and just maybe pump the breaks on adding 10 PPO plans in your first year.
Jarrod Bridgeman:
Yep. Now let's do that on the opposite end of the scale here. Of the age range, let's say you're looking at five to 10 years out from retiring or hopefully retiring in five to 10 years. What advice would you give to someone who's still struggling with insurance issues at that point?
Jason Smith:
That's five to 10 years away from retiring?
Jarrod Bridgeman:
Yeah. Or hoping to.
Jason Smith:
At 10 years, I still think it's worth getting some PPO plans out of that practice. And I think there's still time.
Jarrod Bridgeman:
Okay.
Jason Smith:
At five years, I think you're duck soup.
Jarrod Bridgeman:
Gotcha. Yeah. Love that movie.
Jason Smith:
And I think it's probably too much effort to do that. And I would probably have a couple years where you work hard to get your production up and then hand it over to the next dentist and kindly say, "That's probably going to be on you." Let me tell you one more thing. I would also, because continuing education isn't that expensive. If a new dentist in their first year signs up for a $80,000 marketing plan with some local company, you're going to have to have a website, okay?
Jarrod Bridgeman:
Yep.
Jason Smith:
It's not 1965. But as you well know, since you're our marketing coordinator, the cost of marketing can be extraordinary.
Jarrod Bridgeman:
Yes.
Jason Smith:
And I would love for somebody to go take one of the first starter, for example, Spear Study Clubs, your welcome Spear, and get good at treatment planning and presentation. And I would spend money there because a lot of times the new dentist has so much to learn on procedures. When you get out of dental school, you find out you're amazed what you don't know. It takes 10 years to become a great dentist, but you also don't know what your ability is. I would say we will see dentists that produce $180 a patient. And then we have some clients that just, frankly, kick butt and they do $350 a patient. And the difference is all in ability, talent, and treatment presentation. They're all doing dentistry, but there is that much range between two different dentists. So whatever practice you bought, you don't know what you're going to be able to get out of it until you get good at treatment and treatment planning yourself.
Jarrod Bridgeman:
Right. Because I mean, at the end of the day, even though it is a skill, a learned skill, but it's also there's an art to presenting yourself to the patients and things like that. I mean, if you've got terrible bedside manner, maybe you're not going to have as many people stick around.
Jason Smith:
I don't think you will have as many people stick around. A lot of times the theory, and unfortunately some of that does come from practice management in dentistry, is more and more and more is better. More production, more production, more production. And not if it's bad production. And not if, frankly, you are the bargained dentist on the block because of how terrible your fees are.
Jason Smith:
Even when we take a new client here, regardless of how many PPO plans they have when we do a fee study for them, let's say there isn't even an insurance issue, sometimes people will have their fees 25 to 30% off, based on... The fee study test has been out there for 50 years. It's older than me. Based on the 80th percentile of the... So it doesn't mean they have to be the most expensive in the area. It's not based on their 30% off that. And so even looking at that, I mean that's also going to be an important step through all this. You've got to make sure your other fees are right.
Jarrod Bridgeman:
Right, yeah. Well, any final thoughts on this topic before I let you get out of here?
Jason Smith:
I don't have any final thoughts other than like I said, try to be patient and get fiscally strong before you sign up for two PPO plans, because it's only going to complicate your life.
Jarrod Bridgeman:
Well, thank you, Jason, for stopping in today. For our listeners out there, don't forget to check us out on fourquadrantsadvisory.com. If you go to our events page, we do have some links to our events coming up in Las Vegas, Salt Lake City, and Omaha. Also, if you don't mind, give us a like and a follow on all our social media. We on Instagram, Twitter, Facebook, and LinkedIn. Just search our name and you'll be able to find us to keep up on what we're doing. Thanks, Jason.
Jason Smith:
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.
