This is our comprehensive guide to dental membership plans.
In this guide you’ll learn what they are and why they might be a good fit for your practice.
Done right, a dental membership plan can:
- Reduce your dependency on insurance companies
- Generate recurring revenue
- Improve patient loyalty
- Increase the value of your practice
- And lots more
We did our best to cover everything you might want to know.
So let’s jump right in.
Contents
- What is a dental membership plan?
- In-house dental plan example
- Benefits for your practice
- Benefits for your patients
- Why don’t more dental practices offer membership plans?
- Dental membership plans software
- Accounting and practice management considerations
What is a dental membership plan?
A dental membership plan is a program where patients pay a monthly or annual subscription directly to the practice for preventative care and discounts off other treatments.
In many ways, it’s similar to how a Costco membership works. You pay a subscription fee to get access to member deals and perks.
In-house dental plan example
Here’s one way to structure a dental membership plan.
A patient pays $36/month for their membership. This membership includes two comprehensive exams, two cleanings and one set of x-rays each year. And any additional dental work can be purchased with an exclusive 15% discount available only to plan members.
Of course, this is just one example. You can mix and match services however you’d like.
Dentists who offer their own in-house dental membership plan have the flexibility to customize the membership fees, services, and discounts to accommodate their unique patient base.
Benefits for your practice
There are many potential upsides to offering an in-house dental membership plan.
Reduce your dependency on insurance companies
A large percentage of a dental practice’s revenue today comes from insurance reimbursements.
According to a report from the ADA, 58% of all dental expenditures in the US came from private insurance companies and CMS programs in 2016.
Over time, we’ve seen private insurance companies use their leverage to pressure dentists into contracts with lower reimbursements.
This leave the dental practice with the burden of shouldering most of the rising costs of healthcare. Ultimately, it ends up negatively impacting the provider’s compensation.
Just look at this figure of dentist earnings from the ADA. Dentist net income has declined on average since 2005 relative to the mean US household income.
Dentists today are waking up to this reality.
According to a 2018 Bankers Healthcare Group survey of over 400 licensed dentists, 72% said declining reimbursement rates is their top concern.
But what are they supposed to do?
Well, dental membership plans are one way to fight this reimbursement crisis because they cut out the insurance companies altogether.
Dentists can decrease the percentage of revenue that they depend on from insurance companies while simultaneously reducing the administrative overhead spent filing and tracking claims.
Generate predictable recurring revenue
How many times have you heard someone say that cash flow is the lifeblood of the business?
By now, it’s an overused cliché. But that’s because it’s true!
Cash flow is the single most important metric for managing your business. Cash is what pays the bills and keeps the entire operation running.
And predictable cash flow is best of all.
When you know how much money is guaranteed to come in, you can build more accurate budgets and make smarter business decisions.
In-house dental membership plans are typically billed automatically on an annual or monthly basis.
So instead of sporadic one-off payments, a subscription-based membership plan guarantees a steady and predictable recurring revenue stream into the practice.
Attract new fee-for-service patients
At year-end 2016, there were approximately 249.1 million Americans, or 77% of the population, with dental benefits.
That may sound like a big number, but it’s not everybody.
There are an additional 70+ million Americans who don’t have dental insurance coverage.
Most of these people are unemployed, small business owners, entrepreneurs, and retirees.
They all need access to good dental care just like anyone else, but are often discouraged from visiting the dentist when faced with the prospect of paying full price.
By offering a dental membership plan, you effectively lower the cost barrier for people without insurance.
Marketing a plan like this can give you an advantage over competing dental practices and attract new fee-for-service patients.
Reduce no-shows and increase patient loyalty
No-shows are often cited as one of the biggest issues that dental practices face on a regular basis.
Open chairs are costly, as is the extra administrative time spent rescheduling appointments.
There’s a lot of debate on how to reduce no-shows. Some offices find success in discouraging no-shows by charging a last-minute cancelation fee. Others take a more proactive approach by increasing the frequency of their appointment reminders.
But really, fixing the no-show problem boils down to answering this question: Why do patients skip their appointments in the first place?
I think the honest answer is that patients don’t look forward to visiting their dentist.
Having your teeth scraped, or a cavity filled isn’t what most people consider an enjoyable experience. At the end of the day, I believe that appointments are skipped because patients don’t place a high enough value on their dental treatment.
Unless the treatment promises to fix a tangible problem—such as relieving pain or repairing a chipped incisor—most patients don’t really care. If they get busy with something else, it’s easy to blow off their appointment.
This low-value mentality for routine dental care is perpetuated by the insurance model for a couple of reasons.
Low price transparency
First, there’s a direct correlation between price transparency and recognized value.
When you know exactly how much something costs, you’re better able to assign value to that product or service.
Insurance premiums, deductibles, and write-offs make the actual price of dental work difficult to understand for the patient. This in turn makes it difficult to recognize the value accurately.
Low switching cost
Second, if the patient has insurance with a company that has contracted with many dentists in the area, there’s not much to stop them from leaving your practice for the competitor down the street.
Low switching costs almost always lowers the perceived value of the product or service.
Dental membership plans increase perceived value of services
On the other hand, dental membership plans have the complete opposite effect.
Price transparency with a membership plan is much higher than dealing with insurance benefits.
In addition, membership plans give you another way to differentiate yourself from the competition by offering unique packages and discounts that patients can’t get anywhere else.
This type of direct payment arrangement increases the accuracy and perceived value of your dental services.
All of this contributes to a high-value mindset for your dental services, which improves patient loyalty to your practice, and decreases the chance that they no-show for their appointment.
Increase the value of your practice
A fair market value of any business is typically based on its cash flow, the risk of investment, and the return on that investment for the buyer.
As we’ve already discussed, in-house membership plans increase the practice’s cash flow. This alone increases the value of a practice compared to one that relies solely on insurance payments.
According to John Warrilow, author of The Automatic Customer: Creating a Subscription Business in Any Industry, “The more guaranteed revenue you can offer a potential acquirer, the more valuable your business is going to be. Because a high percentage of the revenue of a subscription-based business is recurring, its value will be up to eight times that of a comparable business with very little recurring revenue.”
I’m not so sure that 8x the value is realistic, but John’s point is well taken nonetheless.
There are many reasons why having subscription-based revenue would make a dental practice more valuable.
- Fewer surprises: You know with a higher degree of certainty what your expected revenue will be each month. This helps you plan for the future and it makes big business decisions less risky.
- Less expenses: Your team will spend far less time and money managing the collection process. Membership fees are collected automatically by credit card. There’s no hassle with submitting insurance claims, waiting for reimbursement, and managing your A/R.
- Increased flexibility: You’re in charge of your in-house membership plan. Instead of working around rigid insurance contracts, you can offer your patients a plan that fits their budget and needs.
Differentiate your practice
Dentistry has become much more competitive in recent years. Older dentists are practicing longer and more young dentists are entering the market. On top of that, the demand for dental services has remained relatively flat.
Those who want to succeed in private practice need to be business-minded and savvy marketers. Top producing dentists partner with advisors who specialize in their industry.
There are relatively few locations where the demand for dental services exceeds supply. So it pays now more than ever to stand out above the local competition.
An in-house dental membership plan can be a great way to do just that.
Word of mouth continues to be the top referral source for new patients. So if you can get the message out about your plan before anyone else, a membership plan can be an excellent opportunity to set your practice apart.
Benefits for your patients
A dental membership plan is a win-win. Along with the benefits we just discussed for your practice, there are plenty of things for patients to get excited about as well.
Access to affordable dental care
According to one ADA study, 28.5% of uninsured survey respondents claimed they did not plan to visit a dentist in the coming year.
And 43.8% of them said cost was the biggest barrier.
Membership plans are a great way to provide affordable dental care to people without insurance.
Use of plans can open the door to a cohort of people who may have previously skipped preventative, restorative and elective procedures due to expense.
Improved price transparency
Dental insurance benefits are complicated.
Some patients mistakenly believe that their insurance should cover all of their dental expenses. Or that if a treatment plan isn’t covered by their plan, then it must not be necessary.
Combine most patients’ lack of understanding and most dental practices’ inability to communicate the value of their treatment plan and it’s not difficult to see why some patients end up frustrated about their out-of-pocket expenses.
But it doesn’t have to be this way.
Membership plans cut through the complexity of insurance coverage. They do away with deductibles, copays, and allowable fees.
What’s left is a simple, discounted fee schedule.
The patient knows exactly what perks they get for their regular subscription (e.g. cleanings and exams) and what they’ll be expected to pay for everything else.
Greater trust in the value provided
Membership plans don’t get in the way of the relationship between dentist and patient.
The dentist can speak plainly about the costs and benefits of a proposed treatment plan. What is or is not covered by a patient’s insurance doesn’t ever enter the conversation.
Since everything is out of pocket, albeit at a discounted rate, the patient knows exactly what they’re getting for their money.
The incentives between a dentist who promotes preventative treatment and the patient who pays for that service out of pocket are more closely aligned than when insurance plays a role in the conversation.
As a result, trust and value in the relationship improves.
Why don’t more dental practices offer membership plans?
Despite the many benefits that can be realized by both the practice and the patients, relatively few dental practices have given membership plans a chance.
Here are a handful of reasons why I believe that’s the case.
Fear of change and the unknown
Like anyone else, I think most dentists are reluctant to try something new.
Dentistry has been entrenched in the insurance scheme for some time now. It’s difficult to imagine that you could go back to a time when more patients paid out of pocket for their dentistry.
Getting started with an in-house membership plan is an investment. And like any investment, there’s a chance that it may not pay off.
It requires vision, due diligence, and planned execution to make membership plans a successful part of your practice.
Compliance and regulation risk
There are legal requirements and restrictions in some states that limit what you can and cannot do when creating your own dental membership program.
If you decide to manage the plan yourself, one of the first things you’ll need to do is contact your healthcare attorney and learn the laws that govern your jurisdiction.
According to a 2017 report from the Consumer Health Alliance 34 states had discount health program laws, while 23 of those states required a license or registration for discount health programs including in-house dental plans.
Some states may also consider them to be a form of prepaid insurance and, if so, require dentists to license or register with the state accordingly.
Complexity of managing the plan
Managing a membership plan successfully can be difficult to do on your own.
A successful plan will require the ability to handle:
- Automated payments
- Automated plan renewals
- Benefits tracking
- Financial reporting
- External marketing campaigns
With the right team behind you, it can be done on your own.
But it can also be very costly to maintain if you don’t have the right expertise.
That’s where third-party software comes in.
Dental membership plans software
Most dental practices don’t have the IT systems or expertise to manage an effective membership program on their own.
So in recent years, a number of software companies have entered the market with the aim to help dentists launch a successful in-house membership plan.
Popular vendors include Kleer, BoomCloud, DentalHQ, and Illumitrac.
Key features
Some of the benefits of partnering with one of these providers include:
Automatic payment processing: They handle all of the credit card payment processing and their system keeps track of subscription dates and anniversaries for automatic renewals.
Compliance: Dental membership plans need to be compliant with various state and federal regulations including HIPAA, federal anti-kickback laws, federal physician self-referral laws, federal consumer protection laws, FTC laws and state healthcare and dentistry laws. These companies have invested considerable time and money into ensuring their systems comply with the state in which you practice.
Plan templates: You’ll get to customize the membership plan rates and options. But most of these platforms will give you the option to start off with one of their templates. They analyze data from across the thousands of other users on their platform to give you expert advice on what services and price points work well in a bundled package.
Dashboard: Manage everything within your plan from a centralized dashboard. Their software makes it super easy to track new members, renewals and payments at any time.
Marketing support: Often the biggest hurdle for successful membership plans rely on your ability to get the word out and educate your patient base. All of these companies will support you in the marketing effort by providing white-labeled brochures, email templates, plug-and-play website graphics, downloadable in-office displays, and even training videos for your staff.
Pricing model
These software companies usually price their services based on the number of patients you have on your plan, a flat fee, or some other hybrid model.
Per-member pricing example
If you’re just starting out and unsure how successful your program will be, it’s better to pay on a per-membership basis.
DentalHQ’s 3-2-1 pricing model is a good example. You pay $3/month/member for your first 100 members. Then the fee gradually decreases as your membership plan grows.
While this pricing model is nice for when you’re just starting out, it’s obviously not as cost effective once your membership grows.
Flat fee pricing example
BoomCloud’s pricing model is an example of the alternative approach.
For a flat fee based on the number of practice locations, BoomCloud lets you add an unlimited number of members to your plan without affecting the price.
This pricing model is obviously better as your membership base grows.
Accounting and practice management considerations
To properly evaluate the effectiveness of your membership plan you need a good accounting system.
Use your practice management system to help you see the difference in revenue between typical fee for service patients and the revenue of a membership plan patient.
This is important to making sure your membership plan is helping your bottom line.
You should also have a good handle on what it costs you to have a patient in the dental chair to receive the benefits of the membership plan.
Think about it, do you think Apple knows what their costs are of the newest Apple 6 watch? Of course they do!
Likewise, do you know what it costs you to have a patient in the office for a typical cleaning and exam?
Knowing your costs will help you price and maintain your membership plan effectively.
Our firm has worked with dentists for over 30 plus years. We know how hard dentists work to care for their patients.
Using a membership plan to help your patients that don’t have insurance or possibly help patients move away from costly insurance plans to receive the care they need is good for the patient.
And what’s good for the patient is good for your practice.
Conclusion
So that’s it for our guide to in-house dental membership plans.
We think they could provide a great opportunity for dentists looking to grow their revenue stream outside of PPO-insurance contracts.
But that’s just our opinion.
Now I’d like to hear from you.
Do you think your practice could benefit from one of these plans? Why or why not?
Either way, let us know by leaving a comment below.
Tyler DeVries
Business Systems Engineer
Tyler is passionate about helping small business owners lead and manage effective teams. His work is focused on developing digital practice management resources for independent healthcare providers.
This is a great article. The current status of the dental benefits industry is such that it serves only 2 parties, the employers and the benefit plan companies. The providers and patients have been reduced to commodities that are just part of the transaction. Abuses such as Network Leasing, Disallowed Procedures and antagonistic language in EOB’s are evidence of this. In short Dental “Insurance” has become the work of the Devil.
As a specialist, I wonder how our practice can position itself to be a “preferred provider” for such membership plans. Any advice would be appreciated.
Thanks for the feedback, Dr. Panek. I like the thought of having “preferred providers”. Something to consider for sure!
As a dental practice owner, I’ve been looking for ways to enhance our services and patient satisfaction. After reading about dental membership plans, I’m excited to implement one at our practice. This plan not only reduces our reliance on insurance companies but also generates recurring revenue and improves patient loyalty. With the latest state-of-the-art technology, like digital X-rays and intraoral scanners, our new dental practice in Wandsworth will offer top-notch care and exclusive benefits to our valued members. I can’t wait to see the positive impact this will have on our patients’ oral health and the growth of our practice.