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Mike Alder on Managing Third Party Payors – Episode 30

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Mike Alder, CEO of Unitas Dental, joins Reese for this episode of Dentist Money™ recorded on location at WRDC in Phoenix. Mike’s firm specializes in helping dentists sustain viable topline growth through managing third party payor relationships. In this interview, he explains how to keep your rates in check, benefit from insurance company partnerships, and set your prices.

Podcast Transcript:

Speaker: These on this program are opinions of dental industry experts and not necessarily those of dentist advisers. Opinions shared in the following interview do not constitute personal financial advice. This program is furnished by Dentist Advisors, a registered investment advisor. You’re tuned into Dentist Money Industry Experts series. Now here’s your host, Reese Harper.

Reese Harper: Welcome to the Dentist Money Show. I’m your host, Reese Harper, here on the industry experts series at the Western Regional Dental Convention with friend of mine who I met last year, actually. Mr. Mike Alder. Mike, how you doing today?

Mike Alder: Doing well, Reese.

Reese Harper: Thanks for coming in, man. Mike’s from Unitas, which is a a PPO management company for dentists. And Mike, I guess the easy way to explain that is a PPO management company helps dentists with insurance problems, right?

Mike Alder: Yeah, that’s, that’s right. We help them from making sure they’re on the right insurances, they’re getting paid the most that they possibly can get paid under that particular contract, et Cetera. There’s a lot under that umbrella, but yeah, that’s basically what we do.

Reese Harper: So tell me a little bit about how you got into this. You’re very tall and I remember you telling me you played some basketball. I remember something about farming. Anyway, tell me a little bit about this.

Mike Alder: Yeah, well my background is, I come from a small southern, south eastern Arizona town and raised on a horse and chasing cattle and farming and-

Reese Harper: Nice. My kind of guy.

Mike Alder: And I ended up getting a scholarship actually in football to play University of Utah and ended up going up there as a quarterback years ago. And I was privileged to actually go to work part time for this little medical company there. And about the same time I was applying to dental school, I really didn’t know what I was gonna do, but I figured I might as well apply to dental school. My uncle was a dentist, I did that. I got accepted and I last minute decided not to go. I decided to buy this little company that I was working for and they were in the process of going bankrupt and I was able to get it for a pretty good price. One of the reasons I did that was their headquarters was in Phoenix, that would get me back to my home state and that way-

Reese Harper: That’s interesting man. That’s a roundabout way of a going… Instead of going to the NFL or dental school, you got back to Phoenix, be an entrepreneur.

Mike Alder: That’s it. That’s it.

Reese Harper: That’s cool.

Mike Alder: I don’t know that I could’ve made it to the NFL or maybe couldn’t have made it out of dental school either. I don’t know.

Reese Harper: Hard to know. You’re a humble guy.

Mike Alder: Did it he safe way.

Reese Harper: So from there, you moved back to Phoenix. How did it get from that point to Unitas?

Mike Alder: I took that company over the next 25 years to grow it to a pretty good size and sold the business and was basically looking for my next opportunity. And my youngest son got accepted to dental school, actually the same when I was accepted to out in southern California. And I was thinking, “Well, at least I can, if I don’t do anything, don’t have anything right in front of me, I can at least maybe help him when and if he buys a practice.” And he did. Graduated and he ended up buying a practice in Newport Beach, actually. He practices Newport beach, which is kind of hard to go there and visit him occasionally. But I do break down and go there once in a while. But when he bought this practice, it was a 30 year practice and the owner had taken over from his father.
So that practice had been around for some time and as we were looking at what… This is really before I got involved with him, I was looking to what I could maybe help him with. And so I looked at a number of things, I mean from supplies to operations to you name it. I had an enough background, I felt, to help him in a number of ways. And I saw this PPO insurance issue that was facing dentists. I just thought, “This is going to be an issue in the future.” And so that’s where I focus my effort. And it turned out we helped him a great deal. He’s doing very, very well right now. And we just took it from there and started helping others. And lo and behold, we’re scattered across the country just about every state right now.

Reese Harper: That’s cool. So the question I think most people want to know is what kind of mistakes do you see with insurance and PPOs? What types of mistakes do you see dentists make from young dentists to mid career to accumulators and beyond?

Mike Alder: Great question. Let’s take the young dentist first. I think probably the… One of the major mistakes in the whole entire industry is for a young dentist or a transitioning dentist that maybe is not so young as they’re buying that first practice or even the second practice. Oftentimes what happens is their mindset is that the insurance companies have most of the patients out there and they feel that they need to be accepting insurance. And so what they do is they have their staff or their spouse or someone start filling out applications and sending them into insurances. Well, the insurance companies certainly enjoy that. Imagine signing a mortgage and sending it in and you don’t know what the rate is and what the terms are and they just send it back to you and it’s a surprise when you get it.
That’s basically how it is. And whatever they get, most of feel that that’s what everybody else is paying. So that’s just what they’re going to accept. And that’s a major mistake. They can actually negotiate a little bit if they know what they’re doing. They can perhaps negotiate a lot. That’s the, for the new dentist, the people that are in mid career, most of them today are accepting some form of insurances. And some of the problems is they’re on too many insurances. A lot of these insurance companies, they have relationships with one another through leasing of dentists, panel leasing of dentists. And by virtue of that relationship, a particular patient from a particular insurance company could theoretically find that dentist through three or four or five different plans. Well that’s great for the dentist. But on the flip side is that insurance company perhaps could also have four or five ways of paying. They could pay off of one or more of those schedules and they’re gonna pay you off the lowest fee schedule. And so that’s, a problem.

Reese Harper: So how does this work generally? If I’m a new practice that just moves into the North Valley in Phoenix or I’m a guy that’s in Downtown and I fill out my application for a carrier, don’t they legally have to give me the same rate? I mean it seems kind of unfair.

Mike Alder: No. They don’t. They don’t. These insurance companies, most of them have multiple fee schedules. It depends on really what they want to do. They might give you a good schedule, maybe, if the stars are aligned. In other words, if they don’t have enough providers in that area. Let’s say they just recently picked up a large employer and now all of a sudden their provider to patient ratio is out of whack. And the Department of Insurance, the State Department of Insurance in every state have guidelines

Reese Harper: Guidelines to show the rate insurance carriers how many dentists to consumer or people to dentist ratio.

Mike Alder: Exactly, exactly. And so you and I, for example, if we wanted to start an insurance company, we’re not going to be able to get a license. And in any state, we’re here in Arizona right now, but let’s say in Arizona we go to approach Arizona, they’re going to ask for our provider list before they will allow us to start selling and we’ve got to have a pretty good provider list. Well how do we do that? Well, we’ve got to come up with a fee schedule and hit the streets and go out and start talking to dentists or we go to somebody that already has a bunch of dentists and lease them. And so back to the dentist that’s just opening up a practice in North Valley or whatever. When he sends his application in, it’s just whatever the insurance companies need at that time.
As I said, if they’re short of providers in that area, they might give him or her a pretty good fee schedule.

Reese Harper: But it’s kind of luck of the draw on the supply and demand of applications?

Mike Alder: Luck of the draw. Particularly when you’re kind of shooting in the dark. That’s hard to do. You don’t have access as a individual provider. You don’t have access to what they’ve done for other providers. It’s actually against the antitrust laws to share fee schedules between providers. So you don’t really have access to what’s going on in the area, what’s the averages in the area. And that’s kind of a tough, tough position to be in.

Reese Harper: Well and if you go ask one of your colleagues, he probably doesn’t really know what his schedule is either. So it’s hard for you to-

Mike Alder: Exactly. Exactly. Exactly. That’s exactly right.

Reese Harper: So how can I change that? I’m a young dentist, is there much I can do about that? I mean, how can I control that?

Mike Alder: I think the first thing is just being aware. I don’t know that you’re ever going to be able to control anything that’s like, you’re filing your taxes, how do you control the IRS?

Reese Harper: You have to have to deal with them.

Mike Alder: You have to deal with them. You have to abide by their guidelines. So there’s not going to be any control per se, but just to be aware, if you understand how the process works, then look at… The first thing you need to do is look at, and I tell this to all of the dentists I speak to is, look at your own fees, your UCRs, what your office fees are. They have got to be, we try to have our clients be in the 60th, 70th, even 80th percentile. But at least the 60th percentile, which means that 60% of the dentists in that area are at that level.
That’s kind of what that means. And that’s the first thing, is you need to have your fees set properly. It’s amazing how many dentists don’t really understand that it’s no different than any… Unfortunately today, even though we’re in health care, it’s no different than any other retail business. You need to set your fees to where you can get a good return knowing that you’re going to get asked to discount from the insurance company’s 15, 20, 25%.

Reese Harper: So how do I know what… I mean it seems like there’s average fee schedules that I can buy online. I can pay for it to participate in fee surveys. How do I know what the average fee is in a given area for certain-

Mike Alder: Good question. And of course we-

Reese Harper: You guys have more data, maybe.

Mike Alder: We do that. Sure we have more data, we have that data.

Reese Harper: So you have to find someone who’s got a fairly large sample size.

Mike Alder: That’s right. That’s exactly right. And we don’t even have that large of sample size compared to all the dentists in the United States. So we go to a third party that’s just a data collector and we pay for that service and then we use that service to generate these reports for our clients. And they can go directly to them. You don’t have to go through us. You can find these companies out there that will-

Reese Harper: Can help with that. Do you find that the national surveys, though, are sometimes different than your local data set?

Mike Alder: They are a little different, but you know, this isn’t a science, an exact science I should say.

Reese Harper: Yeah, it’s a little bit of an art.

Mike Alder: It’s an art. It is an art.

Reese Harper: Like that jump hook that used to do from the foul line.

Mike Alder: Yeah. Jump hook foul line or pass from the end zone or whatever. But we… If you went to five different companies that do this in the country, and there’s a number of them, if you went to five different ones, they’re not going to be the same. They’re gonna be in the same area. But if your crown was… Let’s say you had a crown of $1,000, one insurance company might say, “Well that puts you in the 40th percentile.” Another might say, “Well that puts you in the 70th percentile based on our data.” So each of them have a different set of data. So just getting something started is the the number one goal. Have something instead of just setting them. Or instead of taking what you… Maybe someone has worked as an associate previously and just took those fees from that prior office.

Reese Harper: Just went with them, right?

Mike Alder: Just went with them. That’s typically what happens because they’re not going to start from scratch, many of them. And so they’ll just take that and maybe adjust them or just use those. And that’s okay if they, again, if they are in a good percentile that’s great. There’s nothing wrong with that. But it’s always important to have that first step is to know where your fees are going to be.

Reese Harper: Well and it’s interesting because this is the, for most businesses, the first place that they look when they’re trying to improve is their top line sales. And I think in dentistry sometimes, for most dentists, that top line sales number is a foregone conclusion because it’s like, “Well, it’ll be what it’ll be. I mean there’s nothing I can do about that.”

Mike Alder: Right, and that’s the old mindset. And my uncle is a retired dentist. I didn’t share that earlier, but he retired about 15 years ago and he never did participate in any insurances. He was in a small town. He set his fees where he felt were reasonable that were going to be profitable for him, would be reasonable for the patient, and had a wonderful career, and did a great job. But again, you just set that price and it just takes care of itself. Today is a different story. Imagine today… This is something that I think is really interesting. Think of any other industry or business out there, outside of health care, that they take their top line revenue and before it comes into their coffers, they run it through a third party to let them have at it.

Reese Harper: Filter it. And they don’t ask how much that filter is-

Mike Alder: Right, right. And then sometimes it’s so complex, they don’t even… They go glazed in their eyes and they don’t understand what they’re talking about. What the insurance company is talking about. But it’s so important to manage that. I see time and time and time again that a young dentist or a first owner dentist will be very concerned, which they should be, very concerned about their equipment and their lease and certainly their employees and getting everything ready and they don’t even give consideration to what’s gonna happen on their sales. Many of them. And again, considering that a large portion, in some cases, I said 80% 90% maybe more of your revenue is going to come through a third party. You’ve got to manage that. You must manage that. You can’t allow that to just be managed by some other-

Reese Harper: Yeah. I’ll see sometimes a dentist paying more attention to his credit card processing fees. Which are going vary anywhere from like one to maybe two to three percent. But they don’t pay any attention to the top line disparity. And I know you’re not saying in every case there’s a dramatic amount of swing that you can control, but I mean even the fact that you’re not aware or benchmarking it or even understanding what those those filters are that you’re passing your revenue through, right? You’ve got to start there. Just getting some general awareness and that way you can make some decisions.
Because a lot of people talk, which is kind of, let’s go to our next subject here or our next thought, and then we’ll come back to another mistake, which is a lot of dentists will say, “Well, I don’t know about whether I should take insurance anymore. I’m just going to go a fee for service.” You hear that a lot. And in my experience, I see a mixed result from going down that road. And from someone like you who I know deals in the insurance world so deeply, I’d be curious to know where you feel like the… Add a little bit to this debate or this question. The dentist that says, “I think I just want to get out of this insurance world. They’re stealing all my money.” And then the guy that doesn’t even analyze it at all. And he’s just taking it in the shorts and it filters 35% of his revenue.

Mike Alder: Yeah. Good point. Good point. You know, I would say generally that some of the successful dentists I’ve seen that have done this over time, what they do is they will use PPO insurances to attract their patient base, the new dentist I’m talking about, to try their patient base and perhaps down the road to five, 10 years, start pairing those back, dropping them. And we’ve seen many, many, and most times those patients will, the bulk of them will, stay with the dentist. They’ll convert, they like the dentist, they’ll pay the out of network fees many times. Sometimes they won’t. There’s going to be some attrition.

Reese Harper: That’s where the relationship building comes in.

Mike Alder: Exactly.

Reese Harper: If you care about your patient. And eventually some of those can can be-

Mike Alder: But I tell you, it is a tough, tough row today to come out of the shoot with a fee for service practice. You transition. Even transitions, I find that the older dentist that has been in this business for 25, 30, 35 years and transitioned to a young person. The older dentist has a number of his patients or her patients that are out of network, but they want to come to them. Just as I said earlier, he may have gotten off and terminated some of these contracts and he’s won these patients over. Now, there’s no relationship there. The new dentist has got… It’s imperative that they form that relationship and one of the first things that patient is going to do is realize that because they’re getting a notice every time they go to an out of network dentist from the insurance company, “Hey, do you realize that you spent more money than you could have if you’ve gone to one of our in network dentists?”
So they’re getting that notice and now here it is. They just now started seeing Dr. Smith. They’d been seeing Dr. Jones. They get that notice that they just saw Dr. Smith again and they go, “You know what? This is a brand new dentist for me. I might as well go to somebody under my plan. If I’m going to develop a new relationship with someone, why don’t I just go to somebody who’s gonna accept my insurance?”

Reese Harper: Yeah. So at some level, when you’re starting out, it’s tough to be that selective. In some degree it might be a little more expensive, but it’s a form of marketing. It’s a way to get exposure.

Mike Alder: It is. It absolutely is. Today, there’s different numbers out there, but today that it’s about 65 to 70% of all patients in the United States have dental insurance. Some form of dental insurance. So it’s a tough road.

Reese Harper: Yeah. To really go against the grain. You establish a reputation and build up a network of a few thousand really loyal people that you can service, then you’ve got some options. That’s when they’ll start paring back maybe in some cases because some insurances are actually a really excellent form of marketing. At some level you’re buying yourself access to a group of people that you wouldn’t otherwise have access to. A lot of times, dentists don’t realize, a lot of entrepreneurs, as they build companies, they have to pay for access to certain markets. You could start out maybe marketing through one channel, but once you’ve saturated that channel, if you want to keep growing, you’ve got to use another channel of marketing. It’s why you see companies putting up billboards that maybe haven’t before, because they’ve penetrated a channel of marketing, now they’ve got to go down another road and a particular insurance provider can really give them some-

Mike Alder: That’s exactly right. That’s exactly right.

Reese Harper: It’s not all negative.

Mike Alder: That’s right. It’s something that can be a very positive. There’s there a lot of, I mean thousands and thousands of practices out there doing extremely well in the PPO world. Everyone is always going to have cash paying patients or fee for service patients. But if you manage your contracts correctly, you can… This can be a very lucrative thing for you. You know, one thing I will clarify and just to mention, this is not the same environment we saw 20 years ago. 20 years ago, you could sign up with an insurance company and it almost took… It could replace your marketing budget. It was almost that dramatic. A little tougher today because there’s so many people in the game. Now it will impact you. Absolutely. No question. It will impact that practice. No question. Not Quite as much as it did 20 years ago.

Reese Harper: Yeah. What are some, maybe what’s another mistake that comes to mind besides this lack of awareness that this lack of even understanding your numbers? Maybe something else that you thought you wanted to mention?

Mike Alder: Yeah. Probably one of the bigger ones are not keeping up with your office fees. In other words, many dentists will set their fees and they just forget about it. They’re done. Which business are you aware of in the world that does that? Nobody does that. Nobody sets their price and just says, “Well, I think I’m finished.”

Reese Harper: The people that do tend to be neglecting something really important. A lot of small businesses will do that for 10 years.

Mike Alder: And so what happens is, at the very least, I believe Reese, everyone should… Once they get to that percentile that I spoke about earlier, once they feel that they’re in a comfortable, where they feel comfortable within their particular market, then in order to maintain that, you’ve got to have a little bump every year two, three percent, cost of living, whatever it is. And then the second most important thing is to inform the insurance companies.
Your fees went up. Don’t expect that just because you wrote it on the claim form that they’re somehow going to a note that and understand that your fees went up. So you need to continue to continually raise your fees continually notifying the insurance companies and something will happen. Something good will happen from that.

Reese Harper: Yeah. It starts a dialogue.

Mike Alder: Yeah, exactly.

Reese Harper: First step, if I’m having some takeaways here, my first step is, realize that I need to pay more attention to the difference between my UCR and what I’m actually getting paid from each carrier. How do you recommend keeping track of that? What’s the best way to keep track of that?

Mike Alder: I think most dentists are probably, although it’s probably not classified under the keeping track of it, they’re aware of it because they look at their write offs, they call it write offs.
So they’ll say, I’ve written off $400,000 this year from insurance.

Reese Harper: How familiar do you think, out of 10 dentists, how familiar are they though with how to do that within their practice management software?

Mike Alder: Not, not too many.

Reese Harper: Okay it’s pretty rare.

Mike Alder: Not too many are.

Reese Harper: Do office managers… Out of 10 office managers that deal with this, how many do you think are very aware of this?

Mike Alder: Oh, I would say 20%, 15%.

Reese Harper: Okay. So it’s a very low competency for most office managers. Okay.

Mike Alder: Right. And really that’s not what they are hired to do. They’re hired to manage patients and to help them. They’re not hired to do this. And it’s hard to develop the expertise-

Reese Harper: Well it’s a pretty deep skill.

Mike Alder: It is.

Reese Harper: This is an area where I think it’s particularly useful to have a large body of data points to work with. If I’m a practice and my whole paradigm is based on my own data and what the insurance company tells me when I give them my new UCR schedule, how do I know how to give them any pushback if I can or how you know that’s impossible.

Mike Alder: The rule of thumb is always. I mean always pushing back here. Always. I mean you’re never happy, right? You’re never happy with, and you shouldn’t be most of the time, you’re never happy with what they’re paying you. Now it sounds crazy, but it’s not uncommon to find an insurance that has a particular code that they’re paying on is higher than the UCR of the office. What does that tell you about the fees of that office? The insurance company themselves, with expecting a 20 plus percent discount, is paying more than the office fee.
That should be a really an eye opener. Of course they’re not getting paid that. All the contracts say that they will pay the lower of the two, UCR or the contracted price.

Reese Harper: Interesting. Well Mike, this has been super insightful. I think at the end of the day, I think the big takeaways for most people are that this is an area that is really crucial and we can increase their profitability by a meaningful amount. It can help them pay down debt faster. It can help them retire sooner. It can build wealth a lot quicker this way. It’s just an area I feel like under appreciated in terms of financial management within the practice and something that’s not that expensive to get support on either. So if people want to reach out and get ahold of you or your team at Unitas, how would they go about doing that in the best way?

Mike Alder: Well, the best way to do it is to go to our website, They can go to our website, set up a consultation, and we have a little 20 minute free consultation that we’re… It’s kind of a cross interview almost. They’re interviewing me and I’m interviewing them and we’re talking about the industry. And at the end of the discussion, I can tell them if we’re going to be able to help them.

Reese Harper: That’s great man. Well, Mike, it’s been a pleasure. I hope we get to do this again soon. Anyway, thanks again for your time. Really appreciate it.

Mike Alder: You bet. Thanks. Thank you.

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