Episode #367: Building Financial Freedom in Dental Practice with Scott Plantenberg

Intro: This is the Less Insurance Dependence podcast show with my good friend Gary Takacs and myself, Naren Arulrajah.

We appreciate your listenership, your time, and most of all, we appreciate your intention to reduce insurance dependence in your practice. Our goal is to provide information that will help you successfully reduce insurance dependence and convert your practice into a thriving and profitable dental practice that provides you with personal, professional, and financial satisfaction.

Lester De Alwis: Welcome to another episode of the Less Insurance Dependence podcast — your trusted source for social strategies and expert insights to help dental professionals build profitable independent practices. I’m your co-host, Lester De Alwis, and today we are diving into a crucial topic for every dentist: thinking long-term — how reducing insurance reliance can increase the value of your practice.

I’m joined by Scott Plantenberg, respected industry expert. With over 30 years of experience in dental business consulting, growth strategy, and practice transitions, Scott has helped countless dentists prepare their practices for successful growth or sale. And today, he’ll share how independence from insurance can directly boost both profitability and practice valuation.

But before we jump in, a quick message from our sponsor.

Ekwa Marketing is offering a complimentary marketing strategy meeting, where the experts will help you attract high-quality patients, rank number one on Google locally, and grow your patient flow steadily.

So if you’ve ever wondered about how your local or online visibility is ranking, visit lessinsurancedependence.com/marketing-strategy-meeting

Lester De Alwis: So let’s start with this. How does reducing reliance on an insurance-driven model set dentists up for greater financial freedom, especially when it comes to the value of their practice and planning for the future?

Scott Plantenberg: Certainly, being a fee-for-service practice gives you control of your fees and helps increase your profitability. It boosts your EBITDA, and certainly this is one of the most important metrics in valuing a practice for both a private buyer and a DSO buyer.

Higher per-patient revenue, stronger EBITDA margins — it makes a practice more attractive. But this is important — it’s not the only driver to practice values. You also have to focus on controlling costs, scheduling philosophy, procedure mix, systems within the practice that boost overall productivity. All of these create a more sustainable business.

Add in the higher reimbursement for the work that’s already being done, and the practice value increases dramatically. Private buyers love this, as they can see themselves assuming those same practice characteristics. The DSO buyers are certainly focused on higher-margin, higher-EBITDA practices.

However, they also look long term at how do they grow the practice post-partnership. And they view diversified revenue sources — so fee-for-service, higher-reimbursing PPOs, in-house savings plans, etc. — as lower risk and more scalable, which, in their world, leads to better terms. Certainly better terms for the seller.

In our world as a broker, we’re trying to bring as many potential buyers as possible to a seller, which ultimately increases the value that the seller’s getting. And so, when they’ve strengthened their profitability upfront, really streamlined their operations, they’ve got much more flexibility and ultimately more opportunity to choose among all these multiple offers with differing deal terms.

Lester De Alwis: I think that’s such a powerful way to connect the financial freedom to long-term value. Now, let’s go deeper. When you’re evaluating a practice, what specific red flags or warning signs show that a dentist might be too reliant on PPOs?

Scott Plantenberg: Yeah, there’s certainly a number of warning signs. If a significant percentage of the practice collections are coming from PPOs and a minimal amount of collections are coming from fee-for-service patients, that’s probably the first.

It indicates that the patients are really only choosing this practice due to insurance — not the overall patient experience. Patients really do want quality, and strong practices that promote quality first and not a dependence on PPO plans are going to have significantly higher loyalty, especially if a local employer possibly changes the dental plan.

Another big warning sign would be a really narrow payer mix, where one or maybe two PPOs represent a large share of the overall collections. That practice is extremely vulnerable. If a local employer, again, was to make a change and, all of a sudden, these patients followed that new PPO plan that the practice isn’t part of, then the practice could really be in a lot of trouble.

The PPO, in that scenario, has the leverage, and the practice owner is very much at risk.

The final warning sign is a really high patient volume but low profitability per chair. How many times do we hear a doctor or a team say, "We’re really busy," but then, when you look at the collections, you just don’t see a very big number?

We like to see larger cases, more procedures, and more collections per chair.

As far as steps towards healthier revenue and healthier measuring parameters, we would suggest a formal practice valuation. Our valuations take a really deep dive into all aspects of your practice. We compare them to industry standards so you can better understand things like payer mix, PPO utilization, profitability, and how your expenses stack up as a percentage of the practice collections.

🔗 Book a free marketing strategy session: lessinsurancedependence.com/marketing-strategy-meeting

Scott Plantenberg: We’d also typically recommend some type of an audit of the insurance plans you’re on. Identify who your lowest-paying PPOs are and how much they really impact the practice. Those would be the ones we would consider phasing out first.

We would recommend expanding newer fee-for-service offerings — things like implants, aligners — things that are just not as heavily dictated by insurance fee schedules.

We’d recommend that you strengthen the in-house membership plans to retain any uninsured patients or out-of-network patients.

And then, you know, significant reinvestment in marketing that emphasizes the quality of care, the patient experience, the convenience, and value — instead of just network participation.

Lester De Alwis: Amazing. Amazing. Those are important insights. Now, I think from the part where we’re talking about valuation — so once a dentist recognizes those signs, the next challenge is shifting without hurting their valuation. How can they do that successfully?

Scott Plantenberg: Above all, buyers want to view stable collections and patient loyalty as indicators of the practice. Is it an investable, sustainable practice? So you have to think like an investor who’s looking at ongoing practice performance post-partnership — whether that’s a private buyer or a group that wants to partner with the doctor.

Risk is by far the number one concern that a buyer is evaluating. So, reducing PPO participation should be done in a gradual fashion. The practice owner needs to closely track patient retention as PPOs are reduced to understand what its impact is going to be on the overall performance of the practice.

More than anything, the team needs to be focused on building strong relationships with the patients and communicating their value — not just, again, what’s the insurance coverage.

We certainly see a lot of dental practices where the treatment plans are presented strictly to cater to the plan and not the clinical need. Patients, in those environments, will typically only accept treatment based on insurance because that’s how it’s been portrayed to them.

The strong practices lead with what’s the clinical need — regardless of insurance involvement. And those types of practices maintain their value in the eyes of the patient.

If the PPOs have been reduced in the practice, loyal patients are going to remain because trust has been built with the team and with the doctor.

Lester De Alwis: Excellent points there. Now, you’ve also worked with both private practices and large groups. What can small offices learn from the way DSOs handle this balance?

Scott Plantenberg: So, interestingly, I actually was the buy-side representative for a DSO for three years, so I’ve had a front-row seat to how a lot of DSOs operate and how they think.

And certainly, as a broker now bringing a lot of practices and putting them in front of potential buyer DSOs, we see how they view things. They don’t just look at the practice like an owner-dentist would. They are really strong at optimizing data.

They look at metrics. They have teams in place that assist in implementing change in the practice once they’ve analyzed that data and determined a go-forward plan.

So they look at numerous statistics and key performance indicators, and individual practices need to do the same thing. They need to monitor things like payer mix, procedure profitability, referral patterns — how do the patients find your practice? Are they referred internally by satisfied patients, or are they coming because the practice was on some type of a preferred provider list?

Many DSOs grow collections after they partner by renegotiating PPO reimbursement, and they use their leverage with those payers. A practice that represents 50,000 or 100,000 lives has much more negotiating power than a single practice does.

But if PPO reimbursement can be close to or as high as the fee-for-service plan, they keep that plan in place — or consider adding that plan to the practice. If they can’t increase the reimbursement and it’s hurting the practice, then selectively a group would look to reduce PPO participation in a strategic way.

They don’t eliminate PPOs across the board, because again, helping to enhance margins is a strong point of a DSO — and a doctor should view it in the same way.

Lester De Alwis: Amazing, valuable perspective. Now, to wrap it up — for the dentist ready to reduce insurance dependence, what practical first steps should they take this year?

Scott Plantenberg: Yeah, really the first step is to get a really comprehensive valuation done on the practice to understand how that current payer mix impacts your practice’s value. And then we would consider modeling what the potential financial upside would be of making changes. Doesn’t mean we’re going to, but by at least getting that valuation done, we can see how much of an impact it might have.

Then we would talk about identifying one or two PPOs to consider exiting strategically, and we’d start with the ones with the deepest discounts.

We would certainly recommend pretty extensive training for the team — and certainly the front desk — on communicating the value of the practice even if it’s out of network, and explaining the financial options that a patient would have, like in-house practice memberships.

Take it a step further — really enhance the patient experience and the convenience. Things like online scheduling, again, membership plans, flexible financing terms — and show that the practice’s value far outweighs the question of: are we in-network or out-of-network?

And then the final thing would be to partner with advisors who really understand both the clinical and the business implications of these shifts in PPO participation. You want to make sure that those potential moves support the long-term growth of the practice so the doctor can be profitable in the short run — and then, when it does come time to consider a transition either to a private buyer or to a group — that they get the maximum return on their practice.

Lester De Alwis: Amazing, amazing. Now, for all our listeners who are listening to this episode — I’m pretty sure they’re very interested to understand how they do that first step you just mentioned. If they want to get in touch with you at all — get in contact with you — how can they best reach you?

Scott Plantenberg: Yeah, certainly — an email with questions is a great way to start. We conduct these valuations, and we do them for free. As a company, we do around 800 of them a year.

And interestingly, we’re probably transacting with about 80 to 100 practices a year. So that tells you there’s a whole lot of people we’re doing valuations for, providing recommendations and thoughts — and then they take that information, go make changes, and we’ll revisit.

We do these valuations annually or every six months to help folks see their practice from kind of an independent, third-party view. Then, when they’re ready to pursue some sort of transition or partnership, we assist at that time.

So, probably an email — and we would conduct that valuation.

Lester De Alwis: Amazing. Great advice, Scott. This has been such a practical discussion for any dentist thinking about their future.

Scott, thank you so much for joining us and sharing your insights on how reducing insurance reliance can increase a practice’s overall worth and future readiness.

Scott Plantenberg: Thank you.

🔗 Free coaching strategy session with Gary Takacs: thrivingdentist.com/csm

Lester De Alwis: So the key takeaway from today’s episode is — reducing insurance dependence isn’t just about day-to-day profitability. It’s about creating a business that’s financially healthy, resilient, and more attractive to buyers or partners down the road.

And as always, this podcast is about taking action.

First off, if you are looking to attract high-quality patients and reduce the reliance on PPOs, schedule a complimentary marketing strategy meeting with Ekwa Marketing at lessinsurancedependence.com/marketing-strategy-meeting