There is a conversation most dental practice owners have been meaning to have for years. It involves a stack of PPO contracts, a production report sorted by payer, and an uncomfortable realization. 

 

The realization: the payer sending the most patients to your practice is almost certainly not the payer paying you the most per procedure.  And the gap between those two numbers, the delta between what you’re contracted to accept and what you’d charge a fee-for-service patient, is costing you more than you think.

 

Fee schedule optimization is consistently one of the highest-ROI activities a practice owner can undertake. It requires no new patients, no new equipment, no new staff. It requires a few hours of focused analysis and, in some cases, a conversation with a payer you’ve been too busy to challenge.

 

This issue gives you the framework to have that conversation and to decide, with clear criteria, whether the right move is to push for better rates, exit the relationship, or build something outside the PPO system entirely.

Most practices know, roughly, which insurance companies their patients use. Very few know the actual economics of those relationships.

 

The payer audit changes that. Here’s the process:

 

Pull a production report from your practice management software, grouped by payer, for the last 12 months. Rank by total dollars produced. This is probably a list you’ve glanced at before.

 

For each payer, pull your contracted fee for your top 10 most-performed procedure codes. Compare that contracted fee to your UCR (Usual, Customary & Reasonable) fee, the rate you’d charge a patient with no insurance. Calculate the reimbursement percentage for each payer.

 

This is where it gets instructive. In most practices, the highest-volume payer sits in the middle or bottom third of the reimbursement ranking. Which means you are doing the most work, for the most patients, at some of your worst rates.

 

 

The audit also reveals something else: payers that look small by volume but pay well per procedure. These are relationships worth protecting and, in some cases, worth marketing toward. A patient whose insurance reimburses at 85–90% of UCR is worth more to your practice than a patient whose payer reimburses at 55–60%, even if both walk through the door the same number of times.

The most common reason practices don’t renegotiate PPO rates is the belief that rates are fixed, that the contract is the contract and the payer won’t move. This is often not true.

 

Payers do renegotiate. The practices that successfully move their rates tend to share a few characteristics:

A practical note on timing: most PPO contracts have an anniversary window during which rate requests are reviewed. Check your contract for that window. Requests made outside of it are often deferred to the next cycle, which can mean a 12-month wait.

 

There are payers worth keeping at almost any rate because they represent a significant portion of your active patient base and dropping them would create a disruption you can’t absorb. And there are payers where the math simply doesn’t work, and the right decision is an orderly exit.

 

The question to answer before dropping any payer:

 

 

This calculation is not simple, but it’s doable. Start with the number of active patients on that plan (seen in the last 18 months). Estimate a retention rate, typically 40–60% of patients will follow a trusted provider out-of-network, though this varies significantly by market, specialty, and patient relationship tenure. Then model the revenue impact of losing the remainder.

 

If the math works, if the production loss is offset by the rate improvement on retained patients plus new fee-for-service growth, dropping becomes a viable strategy. If it doesn’t, the better path is renegotiation or selective participation rather than full exit.

 

 

Patients who feel blindsided by a network change are far more likely to leave than patients who receive a clear, proactive explanation. The letter matters. It should go out 60–90 days before the effective date, explain what’s changing and why in plain language, and give patients a clear path forward whether that’s transitioning to a fee-for-service relationship, using out-of-network benefits, or understanding their new out-of-pocket cost structure.

 

Practices that handle the communication well retain significantly more patients through a payer exit than those that send a form letter and hope for the best.

For practices with a meaningful uninsured or underinsured patient population, an in-house membership plan offers an alternative revenue model that bypasses the PPO system entirely.

 

The structure is straightforward: patients pay an annual or monthly fee directly to the practice in exchange for a defined set of included services (typically two cleanings, exams, and x-rays) plus a discount on additional treatment. No insurance company in the middle. No claim submissions. No denials. No timely filing deadlines.

 

The economics, when the plan is designed correctly, work well for both parties:

Membership plans are not a fit for every practice. They require a front desk team capable of explaining and selling the plan, a software system or third-party platform to manage membership tracking and billing, and a patient population with enough uninsured or underinsured patients to make the program viable.

 

A reasonable threshold for evaluating fit: if more than 15–20% of your active patient base is uninsured or on plans you’d consider dropping, a membership plan is worth serious evaluation.

 

 

That delta, the gap between what you’re contracted to accept and what you’d otherwise charge, is your starting point for any renegotiation conversation. Most practice owners, when they run this exercise for the first time, find the aggregate number is larger than they expected.

 

You don’t need to act on it immediately. But you need to know what it is. The practices that improve their payer economics over time are the ones that start by looking at the numbers honestly.

 

Next Week in The Drill Down….

Profit Margin Targets for Solo vs. Multi-Doc Practices. What profit margin should your practice actually be hitting?

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