What you need to know about fee schedules versus write-offs

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This is the hot topic across the U.S. since one of the largest dental insurance company keeps slashing filed fees for hard-working dentists. For example, in my home state, Delta Dental of Washington devastated dental practices in 2011 by taking a 15% cut across the board on every procedure code. Several offices I work with have called asking for advice on how to deal with it now that even the nonpreferred provider organization (PPO) plans are working under a much lower fee schedule

Before I give my two cents, I want you to understand the differences between using a fee schedule and using adjustments.

Let's talk write-offs

Practices using the write-off system bill out the full fee for the procedure and then perform an adjustment, called a write-off, on the ledger to account for the difference between the practice's fee and what the contracted fee is with the insurance company.

Dayna Johnson of Rae Dental Management.Dayna Johnson of Rae Dental Management.

On their billing statements, patients see the full practice fee and then an adjustment showing how much money their dentist is losing by being a member of their PPO dental plan. For example, if the doctor's full fee for a crown is $1,200 and the contracted fee is only $900, then the patient will see a $300 adjustment on their billing statement showing this reduced fee for the procedure.

Also, in the write-off system, the dental insurance companies are automatically billed the practice's higher fee, rather than the PPO fee, which will help when the insurance company looks at how much of an increase to make to the fee schedule (although we all know this hardly ever happens).

I love this method because it is easy to manage and requires little setup. However, practice management software often doesn't work optimally with the write-off method, and this can create some challenges for your team. So, it is important to know what your options are with your practice management software, so you can make the best choice for your office.

“Practice management software often doesn't work optimally with the write-off method.”

Here's the challenge: If you are using your full office fee and doing write-offs, your practice management software has no way of knowing how to account for the difference between the full fee and the write-off.

Your team will be required to make hand-written adjustments to the treatment plan estimate, which can make it look unprofessional and messy. Also, it will be challenging to collect on the day of service, since the ledger cannot accurately calculate the patient's portion if the full fee is being posted to the ledger.

Of course, even with this tricky calculator work, some practices still prefer to use this method. But you should know that there is another option -- fee schedules -- that can work really well for you in the long run.

Fee schedules

The fee schedules system is the preferred method for practices that are contracted with multiple PPO plans. With this system, the office team must keep the fee schedules current, update the coverage table accurately, and attach the fee schedule to the insurance plan properly.

The most frequent comment I hear from team members when I discuss this method with them is "I want to bill my full fee to the insurance company and that is why I have never switched over to using fee schedules."

Great! You can bill full fees and still use fee schedules.

So what are the advantages of using fee schedules? Collecting at the time of service is accurate on the ledger, the estimates for treatment plans are accurate (so you don't have to do any manual calculating), and the production for the day will show a net production number instead of an inflated production number. All of these are huge advantages for your team and your bottom line.

So, now you have the scoop: Both systems work, and there is no right or wrong way to deal with PPO plans. However, there are pros and cons to each, so you should choose thoughtfully.

This is the perfect time of the year for you to examine your fees and see where they stand in comparison with other practices in your area.

Dayna Johnson is the founder of Rae Dental Management. Her free download, "Effectively Manage PPO Fee Schedules," can help Dentrix users. Email Ms. Johnson with the subject line "Fee schedule" for your copy.

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.

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