PPO vs FFS: The Math Still Favors FFS

PPO vs FFS: The Math Still Favors FFS

Every dental practice faces the PPO question: should you accept PPO plans or only do fee-for-service (FFS)?

The DSO answer is clear: accept all PPOs, maximize volume, make money on high-turnover patients. The independent practice owner answer is more nuanced: the math might not support it.

Let me show you the numbers.

OPERATOR MATH

Let's model your practice under three scenarios: Pure PPO, Selective PPO, and Pure FFS over 5 years.

Scenario A (Pure PPO): Year 1 revenue: $600K (1,500 visits × $400 avg). Net profit: 12% = $72K. By Year 5, assuming 3% annual growth: $695K revenue, $83K profit. Staff costs rise with volume (burnout → turnover → hiring/training). Your cumulative 5-year profit: $390K.

Scenario B (Selective PPO): Year 1 revenue: $450K (900 visits × $500 avg). Net profit: 25% = $112.5K. You drop low-reimbursing plans, keep 2-3 good ones. Year 5 revenue: $522K (5% growth from better case mix), profit: $130K. Cumulative 5-year profit: $612K.

Scenario C (Pure FFS): Year 1 revenue: $480K (600 visits × $800 avg). Net profit: 34% = $163K. Year 5 revenue: $590K (4% annual growth from reputation/referrals), profit: $200K. Cumulative 5-year profit: $900K.

The 5-year gap: FFS earns you $510K more than Pure PPO ($900K - $390K). That's enough to: pay off a practice loan early, fund retirement, buy a second location, or take 3 months off per year.

Now layer in your time: Pure PPO = 50-55 hours/week (high patient volume). FFS = 35-40 hours/week (same revenue, fewer patients). Over 5 years, Pure PPO costs you 3,000-4,000 extra work hours. You're working 75-100 extra weeks (1.5-2 years of full-time work) for $510K LESS profit. FFS wins on profit AND lifestyle.

THE TAKEAWAY

If you're currently Pure PPO, here's your 12-month transition plan:

1. Month 1-2: Audit your PPO contracts. Rank them by: fee schedule generosity, patient volume, claims hassle. Identify the bottom 30% (low reimbursement, high admin burden). These are your drop targets.

2. Month 3: Notify the bottom 30% that you're not renewing when contracts expire. Legal requirement: 90-180 days notice depending on contract terms. Read your agreements. Don't ghost them or you risk breach.

3. Month 4-6: Build your out-of-network billing system. Train your front desk to explain: "We're out of network with [Plan], but we'll provide a detailed superbill you can submit for reimbursement. Most patients get 50-70% back." Create template letters for patients.

4. Month 7-9: Start the patient conversation. When a patient with a dropped plan schedules, call them: "Your insurance changed - we're now out of network, but here's how it works." 70% stay. 30% leave. That's fine. You're trading volume for margin.

5. Month 10-12: Measure the results. Track: revenue per visit, profit margin, your weekly hours, staff stress levels. If margin improved 8-12% and hours dropped, you're winning. Double down. Drop another 20% of PPOs in Year 2.

If you're opening a new practice: Start FFS or Selective PPO (2-3 plans max). Fight through the slow Year 1-2. By Year 3, you'll have a sustainable, profitable practice instead of a volume treadmill.