Business Insights

Fee-for-service vs insurance-based: dental practice business model showdown

business model
Originally published on the Dental Claim Support Blog

The two most common dental practice models are fee-for-service and insurance-based. Fee-for-service allows you to collect your full fee upfront from patients, while insurance-based requires claim submission and the collection of an out-of-pocket estimate from patients. 

Is your current dental practice business model the right fit for your goals?

Depending on your administrative team or your financial goals, you might want to switch to the other model for your dental business. But before you switch, consider that both have their benefits, both have their challenges — and both require revenue cycle management expertise. 

Whether you’re leaning towards fee-for-service or insurance-based, revenue cycle management (RCM) is a game-changing solution that will drive your dental practice toward success.

You might be surprised by the benefits and challenges of the fee-for-service and insurance-based business models, so let’s dig in.

The fee-for-service dental practice business model: Is it as profitable as they say?

The fee-for-service model is many dentists’ ideal state because you can collect your full fee up front from your patient without depending on reimbursement from insurance companies. You’d think this would be the most popular choice for a dental practice business model. 

But according to Dentistry Today—“Only about 5% to 10% of all dental offices in dentistry are fee-for-service.” 

With so few offices using this model, we couldn’t help but wonder how the challenges of a fee-for-service dental practice model might outweigh its benefits. Here’s what we’ve found—

Benefits of a fee-for-service dental practice business model

There are several reasons why the fee-for-service dental practice business model seems so appealing to dentists, such as:

  • Improved cash flow due to the full fee collection upfront
  • No fee limitations imposed by insurance fee schedules
  • Greater control over treatment plans and clinical decision-making
  • Enhanced patient-provider relationship and personalized care
  • Potential for higher profitability in the long run

Challenges of a fee-for-service dental practice business model 

With those benefits come a few notable challenges, like: 

  • Reduced patient pool due to higher out-of-pocket costs
  • Risk of slower patient acquisition and practice growth
  • Increased responsibility for patient billing and collections
  • Higher administrative burden in managing financial aspects

If you have or switch to a fee-for-service business model, you still need expert revenue cycle management (RCM), especially when it comes to your insurance verification and patient billing. 

For example, you will need to present treatment to patients and also explain to them their out-of-network benefits (i.e, how much they can expect to be reimbursed by insurance).

The insurance-based dental practice business model: Does it deserve a negative rep?

Being an in-network dental provider means abiding by insurance plans and their predetermined fee schedules.

Walnut Pond Dental explains an insurance-based dental practice business model clearly. 

“In most cases, insurance providers supply practices with a list of predetermined fees. Therefore, they dictate how much a doctor can charge per procedure. They will then agree to pay a set percentage of that fee.” 

The insurance-based dental practice business model is a more common approach to a dental business, but let’s look at its challenges, as well as its benefits.

Benefits of the insurance-based dental practice model

Some would be surprised to learn these many benefits of the insurance-based model: 

  • Access to a larger patient base through insurance network affiliations
  • Streamlined payment process as insurance companies handle claims
  • Reduced patient financial burden, potentially leading to higher case acceptance
  • Steady patient flow due to insurance provider-driven demand

Access to more patients can be the key for practices trying to grow and open multiple locations. But, you guessed it: there are a few challenges. 

Challenges of the insurance-based dental practice business model 

  • Lower fee schedules imposed by insurance companies
  • Limited control over treatment plans and potential compromises in care
  • Increased administrative workload for claims submission and follow-up 
  • Risk of reimbursement delays and denials

An insurance-based dental practice business model can combat most of these challenges by partnering with an RCM provider.

While you’ll still have less control over fee schedules and treatment plans, you will have experts managing your claim submission and follow-up, as well as appeals for denials and quicker cash flow through automatic billing and online payments.

RCM is a game-changing solution, no matter your dental practice business model

Let’s recap the pros and cons of each dental practice business model. 

Fee-for-service model:

  • Benefits: Improved cash flow, no fee limitations, treatment control, personalized care
  • Challenges: Reduced patient pool, slow practice growth, increased administrative burden

Insurance-based model:

  • Benefits: Access to a larger patient base, steady practice growth, streamlined payments
  • Challenges: Limited treatment control, lower fee schedules, payment delays or denials

You can achieve success no matter which dental practice business model you choose. The key lies in leveraging revenue cycle management (RCM) solutions to optimize your financial operations, increase efficiency, and enhance profitability. 

At DCS, we offer expert end-to-end revenue cycle management services tailored to the unique needs of all dental practices. 

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