Study: Insurers' market power lowers dentists' income

By Rabia Mughal, DrBicuspid.com contributing editor

April 1, 2009 -- Did you know that your practice's income may be directly affected by the number of insurance carriers in your area?

Reimbursement rates are lower in areas where few insurance carriers are servicing a large population resulting in lower net incomes for participating dentists, according to a recent study.

"Competition among carriers for dentists’ participation in their networks protects dentists from highly discounted fees," the authors noted (Journal of the American Dental Association, January 2009, Vol. 140:1, pp, 90-97).

“Carriers with greater market shares ... effectively depress reimbursement fees paid to practicing dentists.”

But at least one dental carrier is taking exception to the study's findings, arguing that discounts do not necessarily translate into income reductions and that network participation increases dental visits.

The study examined the effect of an insurers' market power on fee discounts.

"While the theory of imposed price discounts has been applied to healthcare markets, empirical examinations of a potential relationship between fee discounts and carrier concentration are rare," the authors wrote. "Therefore, we undertook a study to determine the extent to which greater percentage discounts reflect the exercise of carrier market power acquired through the attainment of greater market shares."

This is the first study to examine this relationship in dental care markets.

The authors identified 219 metropolitan areas and sent questionnaires to 11,542 general practitioners within those areas between the fall of 2000 and spring of 2001. They received responses from 8,017 dentists.

Some key questions in the survey included information about fees they received from uninsured patients for selected procedures, reimbursement fees received from carriers for the same procedures, information about participating agreements, and estimates of carrier concentration in their local area.

The responses showed that carrier market power has a definite impact on the size of fee discounts.

"Relatively large carrier market shares were related directly to discounts and related inversely to reimbursement fees," the authors wrote. "These results support our argument that carriers with greater market shares in a metropolitan area effectively depress reimbursement fees paid to practicing dentists."

Dentists who are dealing with larger discounts cannot reduce overhead to compensate, which means a reduction in their net incomes and eventually reduced average claims expenses for the carriers, they added.

This can create problems in recruiting and retaining dentists in those areas, the authors contend.

"As dentists find it less attractive to practice in a state because of, among other things, the negative impact of carrier market power on dentists' net incomes, they may either leave practice in that area in search of more favorable market conditions or not locate there initially," they wrote.

The authors also noted that even though large discounts will initially result in lower dental care costs for the insured population, in the long run the reduction in the number of dentists serving an area will increase costs.

"The reduced supply of dentists ... is likely to result in more expensive care for all patients and reduced access to care among area residents," they wrote. "The long-term impact of fewer dentists will be especially pronounced for patients who do not have dental insurance, because they have to absorb the total fee increases caused by a reduction in the number of practicing dentists."

Both patients and dentists suffer from the imposition of reduced reimbursement fees, the authors argue.

"Poorer access to dental care as a response to imposed fee discounts is not a result that improves public welfare, something to which dentistry is committed," they wrote.

But Janis Oshensky, vice president of dental relations and public policy for Delta Dental Plans Association, says the study has several flaws, such as the small sample size and low response rates. Also, the use of dentists' subjective perceptions to draw conclusions about the relationship between carrier market power and fees paid to dentists makes the study unreliable, she added.

"The study speculates that dentists will leave markets dominated by a few large carriers, which would lead to higher fees for uninsured patients and reduced access to care," Oshensky stated in an e-mail to DrBicuspid.com. "In fact, the miniscule effect of concentration on the fees paid to dentists -- as they are reported in the study -- is unlikely to trigger a mass exodus of dentists from concentrated areas."

Dentists realize that discounts do not necessarily translate into income reductions and that network participation increases dental visits, she added.

"We are committed to promoting access to dental services while ensuring fair reimbursement for participating dentists," she concluded.

Copyright © 2009 DrBicuspid.com

 

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