Guest Author: Nick Partridge, Five Lakes Professional Services

Practice transitions are exciting. Once the right opportunity is identified, buyers anxiously work through a significant checklist of items. From finding financing and negotiating a purchase price to chart reviews and beyond, buyers and sellers delicately dance toward closing. Along the way, it is important not to overlook insurance participation.

Many times, new owners want to mirror insurance participation so that the newly acquired patients will continue to have the same experience from an insurance perspective. However, there are important things to consider such as are you actually able to mirror the doctor’s participation? Should you? Can it be done better?

Let’s address these questions as they all have a significant impact on the cash flow of the business (the cash flow you are presumably using to begin paying your loan).

Can you mirror the selling doctor’s insurance participation?

In many cases, yes … but not always. For example, in many states, new owners can no longer participate with Delta Premier only. If you are buying a practice where the owner is in Delta Premier only, be prepared to address this in the buying process as new owners will likely have to accept Delta PPO in addition to Delta Premier. This can significantly impact reimbursements as Delta PPO offers a much lower fee schedule in most scenarios.

Occasionally, buyers come across scenarios where the previous owner was invited into an exclusive network. As a result, the practice may have attracted patients from these plans. Without the same access, a new owner could then be considered out-of-network for the patients just acquired.

Should you mirror the selling doctor’s insurance participation?

The selling doctor’s insurance participation is likely something that evolved over many years based on many factors. As a result, it is important to consider your objectives as the new owner in determining whether you should mirror the selling doctor’s insurance participation. It is also crucial to understand some history regarding previous decisions.

In some cases, maybe the previous owner desired to be in-network for every plan or perhaps the office is participating very selectively or not selectively at all. If the office wanted to be in everything, there is a good chance the practice is likely in overlapping or unproductive networks.

The dentist could have joined a plan 10 years ago as part of an association membership and never termed after the association changed carriers?

Conversely, if the office is selectively participating, be sure to understand the market (employers and competing dentists) to validate that approach. In-network participation has evolved rapidly over the last five years, and your competitors may be more competitive than you think.

Buyers should also consider trends at the office. When you acquire a practice, many times the selling doctor will provide an active patient count, annual collections and other important numbers that serve as a barometer for the health of the practice. Two other crucial statistics to consider are patient acquisition and patient attrition. Patient acquisition and attrition trends can be valuable data points when determining the best insurance participation strategy.

What is the optimal insurance participation strategy?

Over time, insurance companies have created tremendous complexity within their networks. Many insurance companies often partner to extend their network to additional providers. Further, insurance companies segment their groups through multiple networks. It has never been a more complex environment to operate in as a provider.

Practices realize tremendous value by analyzing these key data points to an optimal insurance participation:

  • Your goals as a new business owner
  • An understanding of your market opportunities
  • Analytical review of your existing practice
  • Clear picture of your network options

In a typical practice, nearly 80 percent of patients have insurance. As you make many decisions throughout the buying process, don’t underestimate the importance of developing the optimal insurance participation strategy. Building your practice from a solid foundation is imperative. If you
have questions or want to discuss insurance participation further, please contact us at PMA.