Episode 111: Is Delta Planning to Lower Your Contracted Fees?

Naren: This is the Less insurance dependence show with my good friend Garry Takacs and myself Naren Arulrajah.

Gary: We appreciate your listenership, your time, and most of all we appreciate your intention to reduce insurance dependence in your practice. Our goal is to provide you information that will successfully reduce insurance dependence and convert your practice into a thriving and profitable dental practice that provides you with personal professional and financial satisfaction.

Naren: Hello everyone welcome to another episode of the less insurance dependence podcast show. We have an amazing episode for you and the topic of today’s episode is: Is Delta Planning to Lower Your Contracted Fees?

The reason we picked this topic is a few years back I remember Garry sharing the story of how Delta first tried this in the state of Washington. Since then, this has become a cascade and I want to kind of talk about it, and then we are going to figure out as a practicing dentist how do you respond to this trend.

Gary: Naren you have introduced this topic brilliantly. You know we know that Delta is the gorilla in the dental insurance profession, absolutely because of the fact that they are the largest dental insurance company and for most dentists, Delta has the largest number of patients within a practice – that is almost always the case. Occasionally we will see another big insurance company be number one in a practice, but 95 times out of a hundred when we ask you know what plan do you have the most number of patients, 95 out of a hundred the answer is Dental dental – so it is literally you know the gorilla in the room and if I may Naren I would like to share the story of what happened in the state of Washington a number of years ago and why it is so important for all of our listeners to know this. May I share that story Naren?

Naren: yes, please

Gary: So this goes back to 2012. And on June 1st, 2012 the Delta provider in the state of Washington then known as WDS Washington dental service sent out a certified letter to all member dentists – so these were all dentists that accepted delta in the state of Washington and they said basically what the letter said was effective June 15th fifteen days later we are cutting your fees 15 percent. 15 percent – and then you know introduced it by saying in an increasingly competitive world our clients are asking for more competitive plans and as a result of that we are forced to cut your fees by 15 percent – reluctantly we are forced to cut your fee. So the language on it was very important because who is the client? Who is the client of Delta in the state of Washington – it is not the dentist

Naren: Yeah it is not the patient it is the employer

Gary: Then it is not the patient, it is the employer! So it is the employer that is forcing us to cut your fees – and heads up on June 15th we will be cutting your fees by 15 percent. Now you might look at that Naren and on the surface now you will not be a good person to use as an example as you know your math so well. But you know someone that was not so savvy about math might look at this and say – 15 percent that is not good but I can probably live with that right? You know dentists might ask that – I can try to live with that.

Naren: But think about it – imagine you saying this to your employee or you say this to your associate – ah you know what? I have a lot of expenses starting Monday instead of making 5 grand you will make four thousand two hundred and fifty bucks – I am just making this up.

Gary: Well let me amplify this on your first example – imagine a team member, how is this going to go?

Naren: Right

Gary: Hey Susie you are making 20 dollars an hour now –

Naren: Right

Gary: However with the increase, you know my costs going up I cannot pay 20 dollars an hour so imagine we are having this conversation on Friday

Naren: Yeah

Gary: On Monday you are going to be making 17 dollars an hour

Naren: Yeah

Gary: By the way how do you think that conversation is going to go?

Naren: She would not stick around! I mean forget about the conversation she will be out of there like she will not just because she has not found the next job yet but

Gary: Say what?

Naren: Ha-ha

Gary: When Delta did this in the state of Washington I truly believe that they did their research because you know multi-, multi-million Dollar Company

Naren: Yeah

Gary: They did their research and I believe they thought that it would go well for them. Or they would not have done it. I believe they thought we kind of got these guys over a barrel we kind of got the dentists over a barrel, they don’t really have a choice we are going to lose some as members but the ones that we retain will be paying them so much less we are going to be way better off – but in their mind, they had to do some cost-benefit analysis and say ok – imagine that board, imagine that board meeting. I would have loved to have been at that board meeting in that house in that board meeting listening to their rationale – hey guys we are going to lose people, we are going to lose some members – but we will retain many more than we will lose. Let’s roll the dice and let’s do it. Ok so now this goes out on June 15th and oh let me back up and say what the effect of a 15 percent fee reduction is? Watch this Naren – if your overhead is 70 percent and I am deliberately choosing numbers to make my math – to demonstrate a point here

Naren: Yeah so let’s say I make a hundred grand I take 30 grand – a million bucks I take 300, three hundred thousand out after my overhead

Gary: Right

Naren: So now I am going to lose and let’s say all of that money is coming from Delta must for argument sake

Gary: We have to make an assumption for the purpose of the analysis that all of your patients come from Delta which will never be true

Naren: Right

Gary: But if that is the case if your overhead is 70 percent

Naren: Yeah

Gary: Which by the way is a good number to use because even the ADAs says the average dentist overhead is 74 percent

Naren: Right

Gary: And doctor let me just state it right here – if your overhead is 74 percent you are working too hard too little and the number one reason why your overhead is that high is because you are writing off too much money doing insurance adjustments. But if your overhead is 70 percent and they cut your fees 15 percent

Naren: Yeah

Gary: It has the effect of cutting your income 50 percent. Five zero

Naren: Yes

Gary: So now imagine that conversation with the team member. You know hey Susie I know your income now is 20 dollars an hour but on Monday it is going to be 10 dollars an hour – it is just how this I sorry

Naren: Because I only get to keep half so I am going to give you half so

Gary: Right, but did everyone follow the math on that?

Naren: Yeah

Gary: Because the math on that is if your overhead is 70 percent your net is 30 – your fees are cut 15 percent – it is half of your 30 percent

Naren: Profit

Gary: And so literally your – you took a fifty percent hair cut on the fees

Naren: Yeah

Gary: Now here is where the story gets rich, I was not part of that meeting of course I wish I was a mouse on the wall – they had to be thinking we are going to lose some – four thousand members at the time, four thousand a very close number to 4000 almost around three thousand nine hundred and ninety-eight I believe. Naren do you know how many dentists resigned? When they sent that letter out? Do you know how many resigned? The actual answer was 3. That is it. I do not know what their projections were but I guarantee they thought they would lose a lot more than that

Naren: Hmmm

Gary: I guarantee they thought more.

Naren: Hmmm yeah

Gary: I do not know what they thought they would lose

Naren: Let me ask you this

Naren: 3 are as a function of four thousand it is less than one-tenth of one percent. These guys had to be dancing in the aisles. Can you imagine the celebration after everything shut down – yep can you imagine whoever presented that to the board and said remember when I told you, you were going to lose people? Well, guess what? We lose 3! Ha ha ha! These knucklehead dentists – 3! And here is the interesting part this is a fun little sidebar – two of them were clients of mine –two of the three and we were already getting ready to gloat and the network with delta was the last one – and this became the start that broke the camel’s back. I never knew who the third one was – I never knew. Until about a year ago – I was teaching at Pankey and I was telling them this story and one of the instructors at the back who’s eyes got really big – like big as saucers and she could not wait to come up to me – one of the instructors at Pankey came up to me after the class and said Garry meet number 3. I was the third one

Naren: Ha ha

Gary: So I now know who it was. But three out of four thousand now some of you will be thinking I am sure as heck I am not in Washington. I am not in the state of Washington. Those poor fools there – but this has emboldened every other delta organization. There are not 50 delta organizations because some of the states they combine there is actually 37 Delta, but what do you think the executives of the other 36 are doing when they saw the success of Washington, can you would you agree Naren that this is an unmitigated success story if you are Delta dental

Naren: Oh yeah I mean when you lose 3 out of four thousand there is one in a thousand – I mean it is it is a home run, it is like a grand slam!

Gary: Grand slam!

Gary: Yeah and so what has happened now is and we are seeing it all over WDS – Washington dental services considered to be a certified innovator in the world of delta and so the other delta organizations are looking at them and are looking at what happened there and they are being embolden by those results and we are seeing this happen all over the country. So I am going to answer the question that our headline asks – is Delta planning to lower your contracted fees? Absolutely yes, absolutely yes. They will not be raising it and the only way to tell

Naren: You have seen this in state after state after state right and this is not the only one, may many may states

Gary: It happened in December in Arizona

Naren: Right

Gary: The state of Arizona delta set the letter out and the same thing and it is happening all over because of the success if you look at the economics of this you know – they cut your fees that you are paying out – 15 percent look at the profitability inside delta – you know of which the executive team and the board benefits from. It is amazing so I am going to answer that question very directly. Is Delta planning to lower your contracted fees? The answer is yes. So doctors if you think it is bad now their fees you look at that fees schedule you now and it causes you grief to look at it – it is only going to get worse. It is only going to get worse. So you know that is the lesson there – think about it. Naren think 3 dentists resigned!

Naren: Absolutely, Garry talking about the 3 dentists who resigned Garry, I know we share mutual clients and I can think of three dentists – one is a lady doctor A and two men doctor b and doctor d and I mean of course for confidentiality reasons I am not going to mention their names

Gary: Those actually are their first name initials!

Naren: Yes

Gary: We will keep the rest of it confidential for hipo reasons – doctor A doctor B and doctor D

Naren: Right and they are literally I remember being in a kind of being a fly in the wall in a conversation you were having in a group meeting – they are kind of working with you as we speak to actually resign from Delta

Gary: Well to use a dental term Naren – they are literally right on the cusp of

Naren: Cusp ha ha

Gary: Of resigning. And we have done all the- these are coaching clients – and we have done all the necessary prep work, we have checked everything off the checklist you know I am pretty careful about this because none of this is done irrationally or emotionally it is done analytically – there are readiness factors that have to be in place before we- before we send that resignation letter and all 3 of these clients have systematically checked off each one of the readiness factors and they are ready and that strikes me as kind of amusing as I have 3 right now in my client base which would equal the entire state of Washington

Naren: Ha ha

Gary: Provider list in 2012 and they are so excited about breaking free from the shackles of Delta and it is one of in our coaching, it is one of our most prideful you know sources of our work is to help dentists successfully break free so they are, there are so many positive things happening in their practice after they have done that. And so really the message I would like to continue with in this podcast episode is doctors it is – do not stick your head in the sand. Pull your head out of the sand and realize that it is only going to get worse and if your discounts today are 42 to 44 percent which is what they are and it gets worse than that – would it make any sense to remain a participating provider under delta dental and I am going to say absolutely not.

Naren: Garry can I

Gary: Now is the time

Naren: Can I make an observation – two of the three clients in you know back in the day who resigned from Washington was your client’s right? That is 66 percent and just in the last couple of weeks – you know you are literally working with 3 clients who are doing the same – so the thing that kind of was sitting in the back of my head is, on one hand you have almost 60 I mean a hundred percent success rate in resigning with your client, even delta including the other plans, on the other hand you have one in a thousand – that is zero point one percent – what is the difference? I am thinking again I am just sharing my thoughts and I want your fed back on it – perhaps it is fear. And perhaps what you are doing is you are giving people clarity and confidence. Clarity meaning here are the steps one by one this is not rocket science this is what you need to do – and of course not just a list of steps but the details of how to do them precisely and then helping them to do those steps and then confidence – you have done this hundreds and hundreds of times and you have done it personally it is like

Gary: And Naren let me emphasize in every practice physical environment

Naren: Mhmm

Gary: Urban areas, big cities, large towns, medium sized towns, small towns, were all practices and so we have been successful everywhere with this now you know it takes some work. And it takes some effort and you know there are occasions on the coaching side where a doctor wants to go out of network and I have to deliver the bad news to say that you are not ready for it – it is not that you could not do it sometime, but you are not ready for it now

Naren: Well I am going to out you n the spot Garry – have you ever started the process of reducing insurance dependence meaning you said ready and failed?

Gary: Yeah not once. Not once have we gone down made the decision and had – now there is a fall back, there is a fall back and I want every dentist to know this you have a plan B. we had it in place when we went out of network and the plan B was if it was no working you can always sign back up for the plan – I mean

Naren: Ha ha

Gary: Essentially

Naren: But you did not have to do that with your clients but you are saying that option was there?

Gary: No no not any of our clients but you do have that I mean

Naren: It is like you are jumping from the plane but you have a parachute – I mean you have ha ha ha you want to enjoy that feeling of flying and jumping off a lane but you are not going to – you know you have a plan B

Gary: Truly there is no risk.

Naren: Yeah

Gary: You can always sign back up – now you would never want to do that – that would effectively be like flying the surrender flag

Naren: Yeah

Gary: You know you never want to do that – but what I noticed which is the break through which often moves doctors off of the indecision path. You know there is a turn that we hear quite a bit about optics – you hear that term on social media and in the media it is all about the optics – it is all about those things, and I believe that that comes in to play in this discussion because how many times have we heard Naren in our common clients Garry I do not know if we can do this because 80 percent of my patients have insurance, plug in whatever number you want – 80 percent of my patients have insurance, 85 percent to my patients have insurance, 90 percent of my patients have insurance – so their optics and they are real

Naren: Yeah

Gary: Or they can’t see a way forward because of what they currently have and in our own practices it was 80 percent, but what I was sharing with them was that your future does not have to be your past the truth is your past you brought people in because you took their insurance. So reason only one out of thousand resigned was because in your case, you know every one resigned is because they were not afraid they were not afraid of this optic – you give them the confidence and the plan that they could execute from and I notice the break through Naren

Naren: Mhmm

Gary: Now certainly there could be individual reasons why you want to go out of network of any dentist you could have your own set of reasons but what I noticed most commonly is that when I explained to them that those insurance adjustments are a marketing expense and they are spending say four hundred thousand dollars a year – you know on marketing or let me use five hundred thousand dollars which would be more common – they are spending forty one thousand six hundred and sixty six dollars a month on marketing when I show them that, that is when many dentist realize oh my gosh there has got to be a much better way – there is a much better way to do this

Naren: Right

Gary: because you could spend a fraction of that like you know our clients are sending around 2 percent of their revenue on meeting – so what would you rather spend doctor forty four percent which is the average adjustment from delta – or two percent? Take as long as you like – you know while we playfully have those discussions

Naren: And I love that exercise you did where this one particular client Garry, they were doing one point five, I mean they were collection 1 million 80 percent insurance dependence average write off of forty forty two percent – they were giving up five hundred and thirsty seven thousand dollars a year and what you did with these particular client was you had them realize in the next 10 years he is going to give the insurance firms 5.37 million

Gary: Yeah

Naren: The next 20 years he is going to give ten point seven million dollar

Gary: Early mid careers – he is in his early 40s

Naren: Mhmm

Gary: So to say he is going to practice another 10 years is pretty obvious

Naren: Yeah

Gary: And that is not much 0

Naren: 5.37

Gary: 5.37 million in 10 years – and he is the one that said it is going to be more like 20 so do the math

Naren: 10. 7 million in 20 years

Gary: 10. 7 million dollars difference over a 20 years career

Naren: It is mind blowing

Gary: and I pointed out he was spending over forty one thousand dollar  month on marketing he was like no man I am absolutely going to choose a different path forward – well Naren I wanted to answer that question so in terms of answering the question – is delta on planning to lower your contracted fees – the answer is yes

Naren: yes

Gary: the question doctors that you need to answer is what are you going to do about it? What are you going to do about it? And I would, I have always like this analogy – we all know the parable of the frog in the boiling water – if we drop a frog in a pot of boiling water it jumps back up

Naren: Mhmm

Gary: It is a life saving measure – it jumps out but if you if you put a frog in a pan of Luke warm water and then turn the you know turn the burner up

Naren: Yeah

Gary: Turn the heat up what will eventually happen is that the frog will boil itself to death – doctors you are the frog in the pot. Because that is what they are going to you know inch by inch they are going to be turning up the heat and they are turning up the heat by dropping your fees. And it is time for you to regain control of your practice it is time for you to discover a new way of marketing instead of just signing up for the plan – lets attract people who are choosing you for reasons other than you are on their insurance – the end result of doing so you will spend 2 percent instead of 44 percent and if you can just take a leap of faith in me – the result if you will truly have a legacy quality practice that provides you with  personal professional and financial satisfaction

Naren: I am going to invite our listeners to take a couple of next steps – the reason I am doing that is because every single one who has listened to the hundred and one episodes here is committed to reducing insurance dependence and by the way we are having a record month in October – so thank you so much for that – this is the best month ever and this is 2 percent better than the last best month ever so thank you for that

Gary: Thank you for sharing the pod and Naren is listening to our listenership on the less insurance dependency podcast – so thank you from the bottom of my heart and thank you for sharing this with your friends and colleagues you are committed to reducing insurance dependence that is why you are listening that is why you are sharing this podcast –

Naren: one of these next steps I would recommend is go to thrivingdentist.com forward slash coaching and check out the coaching program, in a nutshell, it is you know virtual coaching, personalized virtual coaching with practice management support – what that means is you have a Garry supporting you meaning working with your champions making sure they are doing their part – setting goals – achieving those goals, so you have Garry support kind of the same kind of support Life smiles enjoys – and while life smiles are within the one-fourth percent – plus there is an entire array of coaching calendar events – verbal skills, case acceptance you name it there are many many many hours of content that helps you become a better clinician helps your team become better at you to know influencing people and getting people to you know to say yes to the treatment that they deserve. So check it out it is fifteen hundred dollars and Garry wanted to make to affordable because he was thinking of the next phase of his career and he wanted a program that everyone can afford and everyone can say yes to –

Gary: Yeah Naren we have structured that there are no onboarding fees there are no upfront fees there are no travel expenses it is 1500 dollars a month there is a 12-month agreement – we want to be of much value to you that you would never want to practice without us but we simply do that in 12-month increments and we would love to work with you – our primary focus for the majority of our clients is successfully reducing insurance dependence and if that is you and if you want to do something proactively ahead of time before delta delivers that letter to you then I would politely suggest that our coaching would be a good decision.

Naren: Yeah the other thing is there is a coaching strategy meeting and if you are interested just go to thriving dentists. com again the coaching page and you can book it, or just type in the URL thriving dentist. Com slash CSM and you can you know talk to Garry and you know Garry here has turned several people down because for whatever reason he felt that they were not a good fit for

Gary: Yeah you know what I do with that call – it is with me – what I do with that call I get to know a bit about your practice and the purpose of the call is to determine if our coaching would be a good fit for you and if so we would love the opportunity to work with you but I am also not shy about being very candid and direct if it is not a good fit. Well on that note – and Naren we will just put those links, we will put a link about our coaching in the show notes, we will also put a link to schedule that coaching strategy meeting if they like and on that note thanks again to all of our listeners, thank you for sharing this with your friends and colleagues – thank you for helping us enjoy our strongest month ever in terms of downloads we appreciate each and every one of you – thank you for the privilege of your time today.