Episode #362: Financial Planning to Facilitate Less Insurance Dependence

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

Intro: 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 insights, strategies, and expert advice to help dental professionals take control of their practices and careers. I’m Lester De Alwis, your co-host, and I’m thrilled to bring you another powerful episode with a very special guest, and that’s Ed Gabriel.

At Less Insurance Dependence, our mission is simple: it’s to help dentists reduce their reliance on insurance and build profitable, patient-centered, and fulfilling practices. But before we dive in, a quick message from our sponsor.

Ekwa Marketing is offering a complimentary marketing strategy meeting where the experts will show you how to attract high-quality new patients, rank number one on Google locally, and grow your patient flow steadily. So if you want to know about your online visibility, visit lessinsurancedependence.com/marketing-strategy-meeting  to book a complimentary strategy session just for yourself and your practice.

And if you’re ready to create a thriving fee-for-service practice, schedule a complimentary coaching strategy meeting with Gary Takacs at thrivingdentist.com/csm. 

Now, onto today’s episode. I’m joined by Ed Gabriel, CPA, president of DrillDown Solution, who brings decades of experience helping dental professionals strengthen their financial foundation and reduce dependence on PPOs. In this episode, we’ll be exploring financial planning to facilitate less insurance dependence — a discussion on how proactive financial preparation, goal setting, and investment planning can help dentists confidently move towards a fee-for-service model.

Ed, we’re excited to have you here. Thank you so much for being part of the podcast.

Ed Gabriel: Well, I really appreciate the invitation. Anything we can do to help dentists, uh, have a better life, we’re all for it.

Lester De Alwis: Amazing. Amazing. So let’s start right here. Why, why is preparing a financial and retirement roadmap such an essential first step for dentists who want to reduce their insurance dependence?

Ed Gabriel: Well, it’s kind of a critical foundation to making any improvements in the practice. Um, we like to think that long-range planning’s really important. We always heard the term, uh, to know the end from the beginning. Uh, and so if we have a plan, if we have a long-range plan so that we know if I wanna get to point B, here’s what I need to do, starting from point A to get there.

If I know that, in a dentist’s situation, it would be knowing what I’m hoping to do for retirement. What do I need to retire? Uh, what kind of assets do I need? What kind of passive income am I going to be looking for? And based on what I want for income, that tells me, okay, if I want to have assets and they’re getting a 10%, or a 5%, or whatever return, I know now that I have to accumulate a certain amount year by year to reach that goal.

If I know those numbers, and if I have a plan, I can now be more relaxed and have less stress as I go year to year setting goals, uh, preparing budgets, and doing the things that I need to do to hit my annual savings, for example. So if I’m able to do that, I can go through my career with a lot less stress and know what my milestones need to be.

Um, and then we use, you know, good financial planning strategies, good tax strategies, uh, good profitability enhancement strategies within the practice to reach those goals. And that all creates a much more relaxed and intentional life. Stress is really the killer for a lot of dentists, and if they can practice with less stress by knowing their numbers, having a plan, then it makes life a lot easier, makes it better for the team, makes it better for the dentist. It’s better for the dentist’s family. Just this concept of planning and doing long-range planning is critically important to having a stress-free practice.

Lester De Alwis: Exactly. I think that’s a great perspective on why financial preparation matters. And just as you mentioned about stress, I think it’s all about the peace of mind — that matters more than anything else. Right. So

Ed Gabriel: I mean, it’s critical because we know that if we are giving up, um, some PPO revenue, it’s going to create some revenue pressure.

Lester De Alwis: Yeah.

Ed Gabriel: So we need to understand what that means and find ways to overcome that in the process.

Lester De Alwis: Yeah. Yes. So let’s talk about PPO analysis. When a dentist is considering to drop insurance plans, what financial data or benchmarks should they review to make an informed decision?

Ed Gabriel: Well, this is a really important issue. Uh, there are ways to analyze PPO profitability. Uh, just to give you an example, as we’ve been involved in some of this in the past, we ran into, uh, we ran some reports for a dental practice. They were done with a third party. We don’t do that in our CPA firm. We have qualified third parties that help with that.

But, uh, for example, we found that their UCR fee was lower than the, um, fee schedule. Oh. And their contract says, we’re gonna pay the lower of your UCR or the fee schedule. And so the solution to that was simply to increase the UCR. And so one of the elements of a PPO analysis is to compare the UCRs to the reimbursements, see if there are any mismatches there. Because by making a simple change that we can do ourselves, we can improve the dollars flowing into the practice.

Lester De Alwis: Exactly.

Ed Gabriel: Other elements of this are, um, how profitable are the PPOs? Some PPOs reimburse better than others, and so we need to look at what procedures are the clients getting? How are the PPOs reimbursing those procedures?

We can identify the PPOs that are the least profitable and those that will have the least impact. Uh, we might have a different level of patients coming in from one PPO than another. So if a PPO has got a low number of patients that they’re bringing in the door and they’re not reimbursing well, uh, then the question is, can we do enough things to make it more profitable? Or is it one that we need to drop? If we are gonna drop it, what will the impact be? And how will we overcome those impacts?

Lester De Alwis: Amazing. Okay. So, uh, once a dentist has the PPO data, the next step is profitability. So I think you work with countless dental practices on profitability improvements. What are the key areas where practices can tighten up operations to boost profit margins before or during a shift away from PPOs?

Ed Gabriel: Yeah. One of the areas is, um, you know, budgeting and having a clear grasp of your financial statements. Mm-hmm. The numbers tell a story. And the challenge is that we need to understand what those numbers mean and how to read them.

So, for example, we need to know what our break-even is. So what is break-even? Yeah. When we talk about break-even, we’re trying to analyze our variable expenses versus our fixed expenses. My hygienist, my assistants, my dental supplies, my labs are what we call variable expenses. I can’t do dental procedures without those variable costs. The more patients come in, the more those costs are going to be, right? Because they’re directly related. So those variable costs have some kind of a profit margin to them.

So let’s say that we have a hundred thousand dollars of revenue coming in, and my variable costs are 50%.

Ed Gabriel: That leaves 50% to cover my fixed costs. Yeah. So if my fixed costs are a hundred thousand dollars, that means I need to bring in $200,000 to cover my fixed costs. That’s my break-even. Dollars coming in after that are gonna have a 50% profit margin that will add to my bottom line.

But knowing those numbers is important. If I know what my break-even is, I can say, okay, now what can I do to improve that? Are there expenses I can reduce? And are there ways I can increase my revenue and my profitability of my revenue?

Now, we all know that a prophy doesn’t have the same profit margin as a crown.

Lester De Alwis: Yeah.

Ed Gabriel: And so I may have to change the mix of my procedures so that I’m getting more profitable procedures. Right. I may need to do a better job in my hygiene department, um, identifying restorative opportunities so that I can do the higher-margin procedures.

And so all these things are important — to understand how does my practice work? How am I positioned? What are the ratios of different procedures? What’s my hygiene versus restorative revenue? Which PPOs are more profitable?

I mean, these are all things that contribute to the analysis of what I’m gonna do as far as dropping PPOs.

Lester De Alwis: Amazing. Amazing. Now, um, I think that’s an excellent insight that you just shared. And another key area that impacts financial freedom is the taxes. Now, taxes are one of the largest expenses dentists face. How can effective tax reduction and planning strategies free up cash flow and support a smoother move towards fee-for-service? Well…

Ed Gabriel: That’s an important area. One of the areas that DrillDown Solution has done well in, in my estimation in the past, and by the estimation of our clients, is that we’ve been proactive with financial planning. Um, there are a lot of strategies that most people are aware of that, uh, can help reduce taxes — you know, home office, our automobiles. Mm-hmm. Uh, retirement plans. Now, there are different types of retirement plans, too. Some are pretty basic.

Yes, but we have dentists that are putting six figures away a year into their retirement plans and deducting that. Yeah. So there are some basic strategies, but there are also more advanced strategies that people can use. If they’re in a very high-income situation or they have capital gain situations, there are advanced strategies that can be used to mitigate taxes.

Um, when we’re thinking about dropping a PPO, we know that’s going to impact our cash flow. So just one example would be, I’m probably used to paying estimated taxes at a certain level. Mm-hmm. If now my revenue’s going to drop, I can probably adjust my estimated tax payments.

Yeah. And if I think about that ahead of time, I’m gonna improve my cash flow, because when I drop a PPO, I need to have some cash in reserve to help make sure that I cover the bumps. Right.

Lester De Alwis: Yeah.

Ed Gabriel: So, um, doing that planning ahead of time — doing the budgeting, doing the tax planning — can help to smooth that cash flow or increase it so that dropping a PPO isn’t, uh, dangerous to my practice.

Lester De Alwis: Exactly. Exactly. And, uh, you mentioned, um, investing as part of the roadmap — not something that is often heard from their CPA. So let’s explore: how does passive income tie into reducing insurance dependence and achieving real freedom? So, uh, yeah.

Ed Gabriel: So part of my views on this is because I spent a few years in the financial planning industry. Mm-hmm. And so I tend to take a pretty broad view to how we plan for clients. Yeah. I have dentists that come to me and say, “You know what? I hate 401(k)s. They never, you know, the returns aren’t good enough.” And I say, “Well, okay, a 401(k) is a tax umbrella. It’s not your investment. It’s the underlying investments that you need to understand.”

The 401(k) is great. It all depends on whether it’s good or bad — it’s what you put into it and how you manage that. So dentists need to understand that there are tools for investments, and then there are the underlying investments.

Um, one of the challenges — because dentists are so busy in their careers — they usually are not familiar with much more than maybe real estate and public securities.

Ed Gabriel: And we know that the public securities market goes up and down and up and down. You know, it goes through drops and then it recovers. And sometimes that can take years.

Um, so one of the things I tell dentists is that you need to get experience early with investing, because you need to understand how you emotionally react when the market’s high, when the market’s low. You need to get experience with good advisors and understand the differences between various types of advisors in the financial realm and the different opportunities that you have.

One of the things that we’ve done recently is we’ve developed a relationship with a shared family office. And what we’ve discovered — and what our clients are discovering — is that with the right investments, you can actually have better returns with less risk.

Lester De Alwis: Yes.

Ed Gabriel: And there are investment opportunities and vehicles that most people are really not even aware of. Uh, just as an example, if you go into, like, real estate — we all know that people have created immense wealth with real estate.

Lester De Alwis: Hmm.

Ed Gabriel: Well, if I’m not a full-time real estate investor, I might think of investing in a real estate fund or in a REIT or something like that. Uh, and I might expect returns of 8 to 10%. Yeah. On the other hand, in a family office where they curate their private deals and they’re doing deals with other family offices, they might expect to get an 18 to 22% return on real estate.

There aren’t so many middlemen taking this piece of the pie and that piece of the pie. Right now, they’re getting — yeah — they’re curating it themselves. They’re finding the right deals, and they’re making sure that those deals align with what their goals are and what their return on investment requirements are. So in the end, they end up having more control, less risk, and better returns.

Um, and so education and knowledge are really important in the investment arena, because there are — I mean, we see dentists opening a practice and the first person on their doorstep is an insurance agent that wants to sell them a whole life policy.

Lester De Alwis: Yes.

Ed Gabriel: Which — whole life has its place, but may not be the first thing you want to invest in and be committed to for the long term.

Lester De Alwis: Exactly.

Ed Gabriel: So having the right advisors in place is really important so that you can understand and learn about all the options you have. But then the other part of that is developing the discipline and having the accountability to develop a plan, put it in place, and stay on track with your plan year by year.

Lester De Alwis: Exactly. Exactly. Now, of course, having that education or having that trusted advice is something very important. So if anyone — if anyone listening to this episode wants to get in contact with you or with your team, what is the best way that they can reach out to you?

Ed Gabriel: Probably the easiest way is to go to our website, drilldownsolution.com.  Uh, we have an opportunity there to schedule meetings with us or to email me: ed@drilldownsolution.com.

Lester De Alwis: Thank you so much. Now that’s a powerful way to wrap it up all together — from PPO analysis to long-term investing. Thank you so much for joining us today. You’re welcome, and actually sharing your deep insights on how financial preparation can empower dentists to reduce insurance dependence and build long-term wealth.

Now, the key takeaway of today is simple: having a financial roadmap doesn’t just guide your retirement — it shapes every important business decision, from PPO participation to investment strategy. When you understand your numbers, you gain the freedom to practice on your terms.

So, and as always, this podcast is about taking action. First, if you are looking to analyze your digital presence, schedule a complimentary marketing strategy meeting with Ekwa Marketing at lessinsurancedependence.com/marketing-strategy-meeting  to learn how to replace PPOs with strong organic SEO.

Secondly, if you’re looking for mentorship — if you’re looking for personal coaching to help you achieve financial independence — schedule a complimentary coaching strategy meeting with Gary at thethrivingdentist.com/csm. 

Now, both of these are complimentary resources designed to help you take the next step toward your ideal practice and lifestyle. If you found value in today’s episode, please share it with a colleague or a friend who could benefit from reducing their insurance dependence.

Thank you for spending your time with us, and we look forward to having you join us again on the next episode of the Less Insurance Dependence podcast. Until then, keep moving forward — a thriving, independent practice.