. However, priority is generally given to contracts that are sent through the state dental association.
In this type of program, contracting dentists are paid a fixed amount, usually on a monthly basis, per enrolled patient or family. In return, the dentist agrees to provide a specific level of treatment or scope of benefits to the patients as necessary.
Payment is based on the number of persons eligible for dental benefits during a payment period, regardless of whether the subscribers receive treatment. Under certain circumstances, subscribers may be responsible for a minimal surcharge or co-payment, usually for special services involving dental laboratory procedures, oral surgery and periodontal surgery. Subscribers may receive benefits only if treated by a contracting dentist. Once a provider is chosen, the patient may be treated by only that individual or facility for the length of the contract, often one year, except if a specific treatment in progress must be completed.
Capitation programs protect the plan purchaser from the possibility that the cost of benefits may exceed projections by transferring the financial risk to the dentist, who is paid a set rate for the length of the contract. Contracting dentists are usually responsible for referrals and costs associated with specialty services or emergency care. Financial gain is realized only when actual treatment costs are below the projected levels. For this reason, it is not to the contracting dentists’ benefit if actual service costs exceed the level of capitation payments.
In many cases, substantially more care is required in the early months of the program in order to establish a maintenance level of patient care. The participating dentist’s initial risk is that the capitation payment will not cover the cost of treatment delivered in this first period. A secondary risk is that this initial financial deficit may not be recovered if the patient changes providers or if the plan purchaser does not renew the contract. It is also possible that the rates of the renewed contract will be lower than the rates of the initial contract, thereby creating an incentive to limit treatment, to withhold certain services, or to provide less expensive treatment options to capitation patients. However, this practice could result in failure to provide necessary treatment.
The aspects that seem to appeal to dentists who participate in capitation programs include predictable periodic income, the cost savings realized from not having to devote staff time and energy to completing claims forms (although some companies require encounter forms to track your utilization), and monitoring account collection. There is also the possibility that joining this type of program will increase the number of new patients, thereby creating a new source for patient referrals.
Some capitation programs require periodic reviews of patient records in order to evaluate and monitor services rendered. In some instances, contracting dentists have had to modify their record keeping systems in order to conform to the review requirements. Verification of patient eligibility must be ongoing and may additionally disrupt your normal office routine.
Some practitioners feel that capitation programs deprive patients of freedom of choice and may interrupt already-established provider-patient relationships and treatment plans. In some cases, they may not allow adequate provision for specialist referrals and, under certain circumstances, the capitation dentist may be asked to perform specialty services he or she does not typically perform or he or she may be financially liable for the cost of specialty care.
The Capitation-Surcharge Program model combines the fixed payment concept of a standard capitation program with a limited modified fee-for-service payment structure with surcharges allowed to be charged to the patients for certain procedures, for example, crowns and bridges. Often these surcharges can be quite low, intending to cover all or a portion of laboratory fees. If referrals are allowed, they may be limited to a specialist who also contracts with the capitation program. Joining a capitation program requires serious thought. When signing any contract, there are questions and issues to consider and be aware of, many of which should be answered by the contract. Capitation programs vary from: the amount of paperwork involved; the restrictions placed on the provider; the minimum amount of experience required to be enrolled; and the different number of plans within a program. Although most plans capitate between 30 and 45 percent of the collected premiums, there are plans that capitate around 60 percent. You should keep in mind that payment to the provider varies from plan to plan; some plans pay at the date of enrollment, while others pay after the first office visit. When joining a capitation program, shop around and choose the plan that best suits your needs.
Dental Service Corporations:
Dental service corporations account for a large percentage of the dental prepayment market with plans that usually include contractual agreements with dentists who agree to provide services to subscribers at pre filed fees. Benefits in these programs are usually administered on a usual, customary, and reasonable (UCR) fee.
The dental service approach provides benefits to subscribers in actual dental services, not as reimbursements based on scheduled dollar amounts for each service. Participating dentists must meet certain uniform requirements established by the corporation to ensure its fiscal stability. Contracting providers usually are required to file confidential listings of user fees for each procedure and may be subject to periodic in-office verification of those fees. These requirements allow the corporation to know the dentist’s usual fee in advance and aid the corporation in developing UCR programs. When fee filing is not required, the corporation identifies UCR fees from the actual charges submitted on claims. The participating dentist receives benefit payment directly from the service corporation and cannot charge the patient any more than the difference between the accepted filed fee and the plan-paid benefit.
Of course, certain policies and procedures will differ when treatment is rendered by non-participating dentists, who are allowed to bill patients for any account balance, but patients may be reimbursed at a lesser level. To be successful, a service benefit program must have a significant number of dentists within the state participating in the program. Contracting providers agree to cooperate in quality assurance programs, including routine and selective post-treatment reviews and binding arbitration by state and peer review committees.
Some participating dentist agreements involve non-profit organizations, and require participating dentists to accept limited financial risk—for instance, in the event that the service corporation depletes its financial reserve, the provider may be required to complete treatment for the duration of the contract, even though compensation may be reduced or eliminated.
Direct Reimbursement Programs:
The direct reimbursement dental benefit program is a self-funded, freedom of choice benefits plan that eliminates the possibility that the plan sponsor will influence treatment decisions by reimbursing claims to the patient as a fixed percentage of the amount spent on dental care, regardless of the treatment category.
Subscribers receive dental care pay for their treatment immediately and then submit a receipt and statement of service to their employers for direct reimbursement. Third-party carriers are rarely involved in the process. Since the direct reimbursement benefits model does not involve a middle-man, it benefits all parties involved by having the patient pay the dentist directly for services. This process is streamlined, easy to administer, and theoretically, considerably less expensive, with more dollars available for patient care.
This type of plan is especially easy for plan participants to understand because it is based on actual dental expenses incurred. Another advantage of this model is that there is no need to delineate covered services, which in some cases may negatively influence treatment decisions and interfere in the provider-patient relationship. Patients are given the freedom to choose not only their provider but the type and extent of oral therapy they desire. In providing treatment, dentists are not limited by what services their patients’ plans cover. In addition, purchaser costs are limited by cost sharing levels, modest annual maximums and direct payment by patients. By not involving a third party, both the employer and the provider realize considerably lower administrative costs.
A potential disadvantage exists in that depending on how the program is written, the patient may have to first pay the dentist and then be reimbursed by the employer. However, the employer has great flexibility in designing a direct reimbursement program and the ADA has extensive information available to help in this regard.
Electronic Claims and the NPI Requirement:
Electronic claims submission is a growing trend in the benefits industry. For the participating dentist, submitting claims electronically generally expedites processing and reimbursement by the insurer. Often, electronic claims may be submitted through your office’s practice management system or computer with an internet connection.
If a dentist chooses to implement electronic claims processing, he or she must be aware of the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) associated with it.
HIPAA requires all “covered entities” to use a National Provider Identifier (NPI) for electronic transactions. HIPAA states that, “Providers who transmit health information in electronic form via standard HIPAA electronic transactions are considered covered entities.” All electronic claims submitted (since May 23, 2007) must include the provider’s NPI.
The National Dental Electronic Date Interchange Council (NDEDIC) has posted detailed information on its website (www.ndedic.org) about NPI and HIPAA that is relevant to general dentists.
Fee Schedule Programs:
Under this benefit reimbursement model, participating dentists are required to provide services to subscribers at fees that may be below those most frequently charged in the community. Participants in this type of plan agree to accept the scheduled fees as payment in full and may not collect the balance from patients.
Fee schedule programs are relatively inexpensive for group purchasers, may also be offered to individuals, and may expand the participating dentist’s patient base. They do not allow subscribers freedom of choice and may encourage selection of providers solely on the basis of cost. In addition, by limiting the choices of providers, fee schedule programs may interrupt already established provider-patient relationships and treatment plans. Some have claimed that since participating dentists may reduce fees in order to increase the patient base, this type of program may cause conflict between professional judgment and the need to generate revenue.
Flexible Benefit Programs and Cafeteria Programs:
Within the past several years, a number of corporations adopted flexible benefit packages, which give employees the ability to choose between cafeteria plans and flexible spending accounts. In the cafeteria-style plan, employees are given a specific dollar amount of benefits to “spend” on any combination of benefits. This option allows employers to maintain a certain level of benefits costs, while still meeting the specific health care needs of each employee. Frequently, when employees select benefits from a cafeteria-style plan, dental insurance is selected only if funds remain after selecting other options such as medical care, retirement plans, sick leave, disability, and vacation benefits.
Another option in flexible benefit programs is the flexible spending account, in which employees may reduce their salaries providing their employers use those funds for selected service expenses approved in the Internal Revenue Service Code. General categories of allowed expenses include medical, child care and legal costs. Participants may apply deductions towards such items as medical expenses and co-payments. In the case of dental care, funds may be set aside to cover the year’s co-payment; or, if the employee does not have dental coverage, funds may be used to cover the year’s expected dental costs.
Health Maintenance Organizations (HMOs):
Health Maintenance Organizations (HMOs) deliver comprehensive health services, stressing preventive care, to a group of subscribers at a single premium. Since the HMO serves as both provider and insurer, it assumes the risk that the cost of treatment rendered may exceed the premium paid by subscribers. This delivery system is often less costly to plan purchasers than traditional insurance packages. Purchasers pay a set premium to the HMO to cover their subscribers, who in turn select a primary care provider from the list of individual providers contracted by the HMO.
The single premium per individual or family is designed to cover the cost of care to all subscribers, regardless of how often they use the plan. Providers are paid either a flat rate for each patient regardless of the amount of care provided, or are paid according to the number of patients seen in a given time period. Referral to specialists or hospitalization can be ordered only by the primary care provider. The principle economies perceived through this delivery system relate to reduced hospital days per annum for insured populations. Some critics express concern that HMOs may undertreat patients since they make the most profit by delivering less treatment. Some HMO managers claim patients often overuse services because they pay little or nothing for the care they receive. Some physicians formerly associated with HMOs report they felt pressured to give too few tests and too little treatment and were required to deal with administrators who tried to influence medical decisions. Some HMO subscribers claim that there is a long wait for appointments and that they can receive treatment from specialists only if they are referred by their HMO provider or if they personally pay the specialist’s bill. While the HMO concept is geared more toward medical care than dental care, some HMOs are including dental plans as a means to build their business.
Because hospitalization is rarely a factor in the delivery of dental care, the HMO model is not believed to offer greater savings in the provision of dental care. Generally, under HMO dental plans, diagnostic, preventive and basic restorative services are provided at no charge to the patient. Depending on the plan’s design, patient surcharges, expressed as a dollar amount, may be imposed for more extensive services such as crowns, bridges, surgery, dentures and orthodontics. Under certain circumstances, dentistry can be delivered under an HMO-type model and often this is referred to as “managed care” (however, managed care can be found under a variety of other models as well). This type of managed care calls for a “personal” dentist to develop patient treatment plans, including any “specialty” services that may be needed, but can be delivered only if approved by the third-party carrier, and may be performed by a “specialty” dentist. Depending upon the plan, “specialty” services may include a variety of procedures: endodontics, oral surgery, periodontics, and IV sedation and general anesthesia. Frequently, orthodontic appliances and services are considered a completely separate category and are administered under a separate insurance rider with an individual lifetime maximum.
Another category can be HMOs that employ salaried dentists. These closed panel systems are established when patients, eligible for services in a public or private program, receive services only at specific facilities by a limited number of providers. Often, the closed panel directly assumes the financial risk of providing care within the premium income of the plan, and receives compensation based on a fixed amount for each beneficiary, similar to a capitation plan. In other instances, closed panel participants are reimbursed through a salary, percentage of gross, fixed fee, or combination basis.
Individual Practice Associations (IPAs):
Individual Practice Associations (IPAs) consist of groups of practitioners, usually practicing individually, often with an administrator, which contract with a purchaser of dental benefits in a manner that is designed to be more economical than conventional delivery systems for both the purchaser and group members. Involved dentists usually agree to provide treatment to eligible subscribers at fees below those most frequently charged in the community.
IPAs are legal entities organized and operated on behalf of participating dentists for the primary purpose of collectively entering into contracts to provide prepaid dental services to enrolled groups. They are organized and operated on behalf of dentists or dental societies as a way to leverage their ability to compete in the dental benefits market.
IPAs are similar to the capitation-risk pool model except that they pay providers solely from a risk pool. An IPA may contract directly with a group purchaser or with an insurance carrier for delivery of dental benefits. Generally, IPA dentists assume financial risk for the program and are reimbursed directly via the agreement with the purchaser. Participating dentists practice in their own offices and can also provide care to patients not covered by the IPA contract. Instead of assigning relative value systems to the procedures performed, each dentist in the association files claims, noting the usual fees charged for services provided to IPA subscribers. If program costs exceed premium income, participating dentists may receive less income than the actual value of the services performed.
A growing number of dentists are distancing themselves and their practices from dental insurance companies and proudly claiming to be “insurance-free.” This is an interesting and significant trend inasmuch as most surveys regarding the practice of dentistry point to the fact that most respondents report their number one problem is dealing with the dental insurance companies. The concept is being encouraged by consultants who are on the circuit giving reasons such as bureaucratic problems, excessive paperwork, payment delays, interference with treatment, fee restrictions, interference with the dentist-patient relationship, being kept “on hold” for excessive periods of time, inappropriate and unfair insurance company policies, lost forms, lost x-rays, comments such as “we never received your claim form”, etc. Additionally, patients also experience frustration in light of greater limitations, restrictions, and exclusions as well as stagnant annual maximums in the presence of significantly higher dental costs. Most dentists who take this step refuse to submit claims directly to the insurance company although they will fill out a standard claim form and give it to the patient. Most will not accept assignment, but rather make their financial arrangement directly with the patient who is solely responsible for the finances. This type of practice modality is not for everyone and all aspects of your practice should be examined before cutting ties with the carriers. Consultations with dentists who have moved in this direction or with consultants who are experts in this arena are appropriate.
Managed care is a term for a concept that is continually evolving. Because of the differences between medicine and dentistry, medical managed care concepts do not always transfer well to the practice of dentistry. Managed care is a general term designed to affect cost containment. It often refers to capitation-type payment modalities, but may include modified capitation, HMOs, PPOs, or other provider discount systems. It may include the concepts of utilization review, utilization management, record audits, and/or fee limitations.
Management Service Organizations (MSOs):
Management Service Organizations (MSOs) are a more recent entry into the dental health care delivery system. Under this structure, a third-party corporate entity purchases a dental practice and hires dentists as employees. The ADA is researching the implications of MSO dental models and will contact members employed through this system in order to learn more about it, how it works, and its impact on the doctor/patient relationship, as well as whether it interferes with the dentist’s use of professional judgment. While the answers are still unknown, many have expressed concern that these arrangements may focus primarily on financial elements and place too little emphasis on the practitioner’s professional judgment. Additional issues include the grievance process and the ability of the state dental board to revoke the license of a dentist who claimed to have been performing under the direction of an employer.
The MSO model opens the door for non-dental ownership of the practice, which both the ADA and the AGD oppose.
Preferred Provider Organizations (PPOs):
The preferred provider organization (PPO) benefits model is a contracted plan under which contracting dentists agree to discount their fees as a financial incentive for patients to select their particular practices.* These individual dentists, most of whom have been solicited by carriers, agree to provide treatment to eligible subscribers at fees below those most frequently charged in the community. This serves as an incentive for patients and, in return, the carrier and sometimes the purchaser agree to promote the contracting dental facility to plan subscribers. These arrangements often feature priority claims service for patients being treated by contracting providers and sometimes include coverage for services not covered in many standard contracts. This benefits model offers eligible subscribers freedom of choice, but provides financial incentive—a discounted fee schedule—to encourage subscribers to seek care from a participating provider. Subscribers may elect to receive treatment from non-contracting providers, but will be required to contribute a greater co-payment since the insurer will pay these claims at a lower percentage.
The PPO program allows participating health care providers to remain in traditional fee-for-service practice while still being able to compete for dental benefits dollars. While this benefit program typically does not require the dentist to assume additional financial risks, the contracting provider is subject to, and must abide by, utilization review or else leave the plan.
An Exclusive Provider Organization (EPO) is the same as a PPO except there is no freedom of choice for subscribers. Subscribers must seek care from panel dentists to receive benefits. They are not eligible for financial benefits if they prefer to choose their own dentist.
Table of Allowances/Fixed Benefit Programs:
The table of allowance program specifies a maximum dollar benefit for each covered procedure, regardless of the fee charged. As a result, there is sometimes a difference between allowed coverage and the fee charged. Plans vary according to their provisions to adjust reimbursement rates for inflation and according to the determination of coverage for required procedures not included in the table.
The table of allowance model sets benefits in specific dollar amounts for all covered procedures. Benefits are payable only in amounts equal to or less than the fees specified in the table. Frequently, such plans do not automatically respond to fluctuations in the dentist’s fees and may result in an increase in the cost to subscribers. Also, since schedules are usually set in relation to the administrator’s calculation of community fees, subscribers may measure the fees charged against the benefits in the table and believe that the fees charged are inappropriate. In instances when allowances are set at levels that are high in relation to community fees, fees at the lower end typically rise to the level of the schedule, thereby giving less assurance that a reasonable degree of cost-sharing is maintained and that the determination of allowances for specific procedures may influence the course of treatment. Table of allowance plans are relatively simple and easily understood by subscribers.
Usual, Customary, and Reasonable (UCR) Programs:
Usual, Customary, and Reasonable (UCR) programs are dental benefit plans that determine benefits based on “usual, customary, and reasonable” fee criteria. The reimbursement percentage depends on the treatment category of care provided. UCR fees may vary greatly due to wide fluctuations in the demographic data (which may be based on national, regional, ZIP code or another demographic breakout) used, as well as due to a lack of regulation or consistency of the determination for the “customary” fee levels.*
Before reviewing the specific aspects of a UCR program, it is important to understand the definitions of each term. These are outlined below.
A usual fee is the fee that an individual dentist most frequently charges for a specific dental procedure.
A customary fee is the fee level determined by the administrator of a dental benefits plan to establish the maximum benefit payable under a given plan for that specific procedure.
A reasonable fee is the fee charged by a dentist for a specific dental procedure that has been modified by the nature and severity of the condition being treated and by any medical or dental complications or unusual circumstances and therefore may differ from the dentist's usual fee or the benefit administrator’s customary fee.
In the UCR dental benefits model, benefits are based on fees charged by the dental provider, but only to the extent that each fee is no greater than the maximum allowable fee as determined by the program administrator, based on procedural or composite fee data or other considerations.
Most UCR programs provide a high level of benefits and permit the weighting of benefits to encourage preventive care while imposing a limit on the fees upon which benefits will be calculated. Since benefits are primarily based on fees charged, UCR programs often respond automatically to fluctuations in the cost of dental care. However, compared to other plans, UCRs can be more expensive for group purchasers to offer and administer and the complex definitions of UCR may make it difficult for subscribers to understand the benefit levels. Also, the design of the program may cause some subscribers to have more of a co-payment if their provider’s fees are determined to be above the UCR for that community.