October 20th, 2014
Are PPOs are affecting the value of your practice?
Did you know that taking a 20% PPO write-off on a $200 procedure with a 60% overhead cuts practice profits in half?
By participating in PPO plans, you agree to take a certain discount on fees; however, your fixed overhead costs remain the same regardless of the fee you collect.
Let's review the math on a sample procedure:
The example above is one of the better scenarios for a PPO practice. The average general practitioner practice overhead is actually 72%.
Let's take a look at another scenario with a higher overhead and larger fee discount:
Performing this procedure actually results in a loss for the office. This example illustrates how important it is to review the insurance plans you accept on a regular basis to ensure situations such as this are not occurring in your practice.
Whether the majority of your procedures are closer to Example 1 or Example 2, it's impacting the value of your practice. If you are planning to sell your practice within the next five years, a comprehensive insurance review is essential. When you are determining the value of your practice, remember that value is not based on your stated fee schedule but on actual practice collections.
Run a report called production by procedure from your computer and look at what codes you are using and the number of times you billed them for the last year. When you are finished with that, compare the codes to each of your insurance companies that you work with. What are you writing off per each code, should you negotiate a better fee or go off the plan.
Hint: When billing out any claim, always charge full fee. After the claim is paid, write the balance off towards the name of the insurance company so that you can determine if you are making or losing money.