PPO vs FFS: The Math Still Favors FFS

A single PPO contract running at a 35% write-off across 960 doctor hours a year hands the insurance company about $336,000 of production you already performed, in rooms you already paid for, with staff you already employed. That is not a discount. That is a second payroll you fund without a single job description attached to it.

Our view: for the typical single-doctor general practice with a hygiene column booked more than two weeks out, the second and third PPO contracts destroy value, and the only reason owners keep signing them is that write-off percentage hides exactly where the damage lands. An informed owner can disagree with that, and plenty do, usually by pointing at patient counts and new-patient flow. We think they are counting the wrong unit. The unit is the chair hour, not the chart.

Your Fee Schedule Is Frozen and Your Rent Is Not

The structural case for fee-for-service is not a preference. It is arithmetic that compounds against you every year you do nothing.

The ADA Health Policy Institute tracked charged fees against third-party reimbursement for common endodontic, periodontic, prosthodontic and oral surgery procedures from 2005 through 2014 and found the two lines pulling apart: inflation-adjusted fees rose while reimbursement rates rose only slightly or fell outright across periodontics, prosthodontics and oral surgery. Read that as an operator rather than an economist. Your cost of delivering a crown tracks labor, lab and supply inflation. Your reimbursement for that crown tracks whatever a plan decided in a year you may not even remember.

That is the mechanism behind every PPO net-yield complaint, and it explains why a contract that penciled out in 2019 can be underwater in 2026 without anyone at the plan doing anything hostile. A PPO contract is a fee freeze you re-sign every year by doing nothing.

Vendor analysis citing the ADA's 2023 Dental Fees Survey puts average write-offs for participating PPO providers at 30% to 40% of production. We treat that as a supplement to the ADA fee data rather than proof on its own, but it matches what the gap data implies: a third of the work, gone before it reaches the deposit.

Why 89% Market Share Is Not an Argument

The most common rebuttal to the FFS case is market structure. Dental PPO plans held 89% of commercial dental benefit enrollment in 2024, per the National Association of Dental Plans. So the patients are insured, the insurance is PPO, and going out of network means swimming against 89% of the market.

That number is real and it is also being misused. Market share tells you what kind of card patients carry. It does not tell you how many of those patients will follow you out of network, which is a local question about your reputation, your location, your recall discipline and your front desk's ability to explain out-of-network benefits without flinching. A plan with 89% share and a 42% write-off is not a market you must serve. It is a market you must price into.

And note what the same enrollment data implies: enrollment fell in 2024 even as benefits rose. The PPO pool is not an infinitely expanding river you can keep diverting. It is a shared pool that every corporate group in your zip code is drinking from at the same discount.

What Most Owners Get Wrong: Ranking Plans by Write-Off

Here is the specific mistake, and it is made most often by owners of maturing solo practices with three to six active contracts, usually around year eight to fifteen, usually after a consultant handed them a spreadsheet sorted by adjustment percentage.

They rank plans by write-off percentage, drop the worst one, and are shocked when collections fall.

Write-off percentage measures discount. It says nothing about profitability, nothing about throughput and nothing about what a plan's patients actually consent to. The plan with a 38% write-off that sends you four crowns and two molar endos a month can earn more per chair hour than the plan with a 26% write-off that sends prophies, bitewings and endless treatment plans nobody accepts. We have watched owners cut the high-discount plan and keep the one quietly turning their doctor column into a hygiene overflow lane.

The correct instrument is Collections per Provider Hour, computed separately for every payer: net collections divided by the provider chair hours that produced them. Run it for each plan, run it for your out-of-network and self-pay patients, and the ranking will almost certainly reorder. Our call: write-off percentage is the wrong metric, and any plan-exit decision built on it is a coin flip wearing a spreadsheet.

Plan B Costs 960 Hours and Returns $652,800

Take a practice doing $1.6M in production, one doctor, two hygienists, 1,600 doctor chair hours a year, and an average of $1,000 in full-fee doctor production per chair hour. Plan B is the largest contract and occupies 60% of the doctor column, so 960 hours a year.

At full fee, those 960 hours generate $960,000 of production.

At a 32% write-off, net collections on that block come to $652,800, which is $680 per doctor hour.

Now price the out-of-network version. Assume you do not collect full fee from everyone: 5% goes to courtesy adjustments, bad debt and the occasional write-down to keep a good family, so you net $950 per hour.

The gap is $270 per doctor hour, every hour, all year.

If you dropped Plan B and kept 75% of those patients, you would fill 720 of the 960 hours at $950, which is $684,000.

That is $31,200 more than the contract produced, on 240 fewer hours worked.

Read that second number carefully, because it is the one that matters more than the first. You did not just add $31,200 of collections. You freed 240 doctor hours, roughly six weeks of clinical time, with the overhead already paid. Fill half of those hours with new patients or previously deferred treatment at $950 and you add another $114,000.

And this is why the PPO-versus-FFS argument keeps getting mis-run. Owners model it as a revenue question with a volume risk. It is a capacity question with a price gain attached. The capacity is the prize.

The 72% Question

None of the above is a reason to fax a termination letter this afternoon. Before you drop anything, run the Break-Even Retention Test: divide net collections per visit under the plan by net collections per visit out of network. That quotient is the share of those patients you must retain for collections to stay flat.

In the scenario above, $680 divided by $950 gives 71.6%, so call it 72%.

So the real question is not whether the FFS math is better. It plainly is. The question is whether you can keep roughly seven of every ten Plan B patients. If you can keep eight, leaving wins decisively. If you can only keep six, you stay and renegotiate, and you go into that negotiation knowing exactly what the contract is worth to you, which is the only thing that has ever moved a fee schedule.

The threshold moves with the discount. At a 40% write-off, break-even retention drops to about 63%, and leaving gets much easier to justify.

At a 22% write-off, you need 82% retention, and we would not take that deal lightly.

That is the entire decision, reduced to one fraction you can compute from a year-end production report and a payer-mix split.

42% to Under 5%, and What That Case Study Leaves Out

The transition stories are real. One documented Idaho practice was writing off 42% of production before moving toward a fee-for-service and membership model, and fell to under 5% afterward. On a $1.6M production base, swinging 37 points of write-off is the difference between collecting roughly $928,000 and roughly $1,520,000.

Treat that as one practice, not a trend line. It is a single case study, and it does not tell you how many patients left, how long the trough lasted, or how much the owner spent on marketing to refill. Every FFS transition we have seen has a valley in it. The membership plan is what shortens the valley, because it gives a patient without insurance a reason to stay that is not simply loyalty.

Run the Break-Even Retention Test against your own payer mix before you borrow anyone else's 42%.

The Research Does Not Give FFS a Clinical Halo

One honest caution, because we would rather be useful than flattering.

Payment design changes clinical behavior, and not always in the direction that suits the FFS argument. A systematic review of capitation and fee-for-service models for oral health services found that the incidence rate ratio of manifest caries lesions after six years was 1.5 times higher under fee-for-service than under a capped-fee model. That finding does not hand FFS a clinical trophy. What it establishes is the thing most owners skip: the payment structure materially shapes what gets diagnosed and what gets done.

Which is precisely why the two models' economics diverge, and precisely why you should not argue your exit on ethical grounds. Argue it on price, capacity and retention. Then hold your diagnostic standards constant across both sides of the transition, because the research says that is exactly where payment incentives do their quiet work.

Five Business Days, Three Numbers

Pull last year's production and collections split by payer, then divide each payer's net collections by the doctor hours that produced them, so you have Collections per Provider Hour for every contract and for your out-of-network patients. Run the Break-Even Retention Test on your two weakest plans and write the resulting percentage on a sticky note. Then call your top-performing plan's provider relations line and ask for the current fee schedule in writing alongside the date of your last increase, because about a third of owners discover it has been five years or more. Decide nothing this week except which single plan goes first.

If you want to see your own break-even retention threshold against your actual payer mix rather than our example practice, run your own numbers through our PPO-exit calculator. It takes your write-off percentage and doctor hours by plan and returns the retention share you need to hold for collections to stay flat, which is the one figure that decides whether to leave or renegotiate.

What we are watching next: whether the 2026 and 2027 fee schedules finally move after three years of labor and lab inflation, or whether plans keep absorbing the gap by holding rates flat. What would change our mind is simple and so far nonexistent: a contract with an index clause, a fee schedule tied to a published inflation measure with a floor and a three-year term. Show us one and we will revisit the math. Until then, every renewal you sign quietly is a pay cut you agreed to in advance.