FFS vs. PPO: Are You an Apple or an Orange?
FFS and PPO offices can both be highly profitable. However, there is a huge difference in the successful operating model between FFS offices and PPO offices. Trying to be both is where some offices tend to fail. Finding a balance between processes and profitability is key. It is important to understand what type of office you want to eventually be and then focus your efforts on matching that model. FFS and PPO offices tend to be like apples and oranges, they are similar in that they both treat patients, but otherwise have some significant differences.
In general, the successful FFS offices tend to be high customer service and therefore higher in price. While successful PPO offices tend to be lower in cost with high efficiency. Both models work when managed well but can suffer when going outside their lanes.
Apples vs. Oranges
There are several processes that tend to be quite different between the FFS and the PPO office models. Let’s highlight a few so you can determine what type of office you want to be and determine if you’re going in the right direction to meet your ultimate goals.
New Patient Phone Calls
FFS offices tend to spend 10+ minutes per new patient phone call in order to establish the added value, create a more “concierge-level” environment, and subtly address the “we are more expensive” question. This can work well when done correctly. However, when you are a PPO office, people are generally coming to you because of their insurance plan. They do not need convincing so much as just the basics of prompt scheduling and clear insurance details. Spending 10+ minutes per patient on the phone is highly detrimental to a PPO office because they must process more patients to stay profitable. A PPO office should be spending 2-3 minutes per call.
In the FFS model, when asking for more money from patients per procedure, it may take extra time to explain the value and unique benefit that your office provides to help overcome the idea that a patient can go to the next dentist and pay half as much. This means treatment discussions and presentations often take longer in an FFS office.
In a PPO office setting, especially with a higher patient flow, you don’t have the luxury of spending that extra time. The discussion tends to be about insurance benefits rather than the unique value your office provides, which should not take more than a minute or two. When you are seeing significantly more patients, it is important to make each of those interactions quick and simple.
Labs and Supplies
There is a misnomer in the dental profession that more expensive means better quality. In a purely clinical comparison, they have nothing to do with each other. There are labs around the country that have prices from below $100 per crown to over $500 per crown, all of which provide quality restorations that seal the margins and will last for years. The main difference between the prices is often in the cosmetics of the final crown. An FFS office can absorb the higher price by raising their own prices. A PPO office is price fixed, and therefore must find labs that provide quality products and low-end pricing. Trying to provide even an average $200-300 lab crown just is not feasible under most in-network fee schedules.
The same applies for supplies. Many products on the market come with large fluctuations in price based on brand and minor clinical differences. A PPO office’s profitability would suffer greatly by purchasing the higher end priced products.
I have seen multiple offices go bankrupt in the last couple of years by trying to be FFS when the doctor, team, and/or systems were not consistent with a successful FFS model. FFS tends to require a higher level of customer service, a focus on quality that the patient can see, and an emphasis on patient relationship building. The most common FFS failure happens on the human side, with a dentist and team who are not engaged in creating those strong interpersonal relationships with their patients. Self admittedly, this is one reason I avoid an FFS model, it just doesn’t fit my personality.
Now, some aspects can counterbalance the need for this relationship building component, such as being in a rural setting with minimal supply of other providers. In a highly competitive market however, FFS offices need to set themselves apart from other dentists who charge less than they do.
This does not mean a PPO office cannot have a high level of customer service or patient relationship building as well, just that the true PPO vs FFS offices do look different if you walked into each. FFS offices can spend extra time and energy for premier level services that the PPO office cannot.
At the end of the day, the key to profitability is making sure how you run the office is consistent with the type of office you want to create. If you want an office with a discounted fee structure, then it would be prudent to also find and use more budget friendly options for material costs and to focus heavily on team and process efficiency. If you prefer a non-insurance-based office, then you need to find other ways to set your office apart from competing offices in your area and provide the patients a reason to come see you and pay a premium.
Offices can be highly successful in both FFS and PPO settings, if they stay true to themselves. Be the apple or be the orange, just don’t try to be both.
Read part two of this series: Are you Ready to Drop Networks?
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