Episode #379: Financial steps that help dentists reduce PPO pressure with Jim Alley

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

Gary Takacs: 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: Hello everyone. Welcome to the Less Insurance Dependence podcast. I’m your co-host, Lester De Alwis. This podcast helps dental professionals gain more control of their practice and depend less on insurance. Before we begin, here’s a quick note from our sponsor. Ekwa Marketing is offering a complimentary marketing strategy meeting, where their experts will actually show you how to bring in high quality patients and grow with strong online visibility.

If you’re ever wondering how to get a health checkup for your website, you can visit lessinsurancedependence.com/marketing-strategy-meeting to schedule your session. And if you are looking for mentorship to create a fee for service practice, you can also book a complimentary coaching strategy meeting with Gary Takacs at thrivingdentist.com/csm.

Now, today I’m excited to welcome Jim Alley. Jim is our dental CPA, who helps dentists understand the numbers and make smart financial decisions that support real growth.

So in this episode, Financial Steps That Help Dentists Reduce PPO Pressure, Jim will share the signs of heavy PPO dependence, the key numbers dentists should watch, and the steps that help practices move towards a stronger fee for service model.

Jim, thank you for joining us. We’re very excited to have you here.

Jim Alley: Yeah, thanks for having me, Lester.

Lester De Alwis: So, to begin, what signs do you see that show a practice is too dependent on PPO plans?

Jim Alley: Sure. You know, PPO dependence usually shows up as a busy practice that doesn’t feel financially rewarding. So, you know, kind of that owner burnout feeling. You know, the dentist is producing more clinically, but not seeing proportionally those financial rewards. So, I mean, that’s kind of the first thing—if that’s the way you’re feeling in your practice and you are PPO-based, then maybe you’re there already.

Some other things to think through are just kind of a high PPO mix with thin margins. So if you’re, say, 70 to 80% plus of collections are tied to PPOs, and while you’ve got compressed net income, that can be a good sign—or, you know, a problem.

Jim Alley: You know, other things to think through are: is your production not equating to profitability? So, as the practice gets busier, schedules are full, but cash flow and owner compensation feel tight. And then you’ve got rising overhead—sorry, grabbing a little sip of water here.

You know, rising overhead as a percentage of collections, especially labor and supplies, which PPO schedules aren’t really adjusting for. So, it’s thinking those things through. And then sort of your inability to raise fees meaningfully—because you’re PPO-reliant, you’re limited in what your actual revenue or collections can be. You’ve lost some flexibility.

So, are you on that top end of the reimbursement rates, and now it’s a volume game? Those are kind of the things I think to start out looking for.

Lester De Alwis: Yeah. Just to follow up on that—so, out of the signs that you just mentioned, which ones do you think are the most critical?

Jim Alley: I mean, I think that burnout feeling. Because if you’re just feeling burnout and don’t like what you’re doing, I mean, that’s just not good all the way around. I think that impacts more than just your practice—that bleeds into your personal life. So for me, that’s a huge thing.

Probably the next highest one would be that production doesn’t equal profitability. Because that could be a sign of a couple of different things. So I think if that’s the way things are looking, then it’s like, yeah, you probably need to just maybe look into your practice generally—not just the PPO versus fee-for-service. You might have some other procedural issues going on within your practice, or process issues that maybe you need to fix.

Lester De Alwis: Amazing. So now that we know the warning signs, let’s talk about planning. When a practice wants to reduce PPO—sorry, many dentists fear dropping PPO plans because of loss of revenue. Now, what numbers should they track to see the real financial impact?

Jim Alley: Yeah. So that reduction of PPO reliance—you want that to be sort of a calculated financial decision and not an emotional one. I know there’s a strong debate out there all the time. I see it in Facebook like crazy. It’s just fee-for-service versus PPO, and people are butting heads like mad. So yeah, there’s a lot of emotion wrapped up, but really, you want to make it a calculated change.

So, I’d say understand profitability by procedures and by hour—not just your total production. Because it could be a very targeted thing that’s causing your profitability issues.

You want to normalize your financial statements, so clean up the P&L so it reflects your true operating performance. And then benchmark overhead against healthy dental practice standards, just so you can easily identify those inefficiencies.

You want to build up your cash reserve so you can absorb any short-term volatility that comes with PPO participation changes. And then just model out different scenarios—so what happens if 10 to 20% of PPO patients leave? Can the practice still cover fixed costs? Knowing those sorts of things.

So, it’s all about being prepared and then targeting what you want to change.

Lester De Alwis: Alright. Alright. I think basically now, when it comes to systems, how can budgeting, cash flow planning, and strong systems help a practice feel ready to move towards fee-for-service?

Jim Alley: Yeah. So, you know, a fee-for-service practice doesn’t happen—doesn’t work—without discipline. So budgeting sort of provides that discipline. Budgeting creates predictability—knowing your monthly targets so you can help reduce fear around those insurance changes.

The systems reduce dependence on volume. So strong scheduling, case acceptance, and hygiene systems just support higher value care. And then controlled overhead, which is sort of a byproduct of budgeting—it’s critical. When you’re shifting away from the PPO model, that volume-based type business can sort of hide a lot of issues you may have from budgeting.

You know, if, say, your office manager is buying supplies just willy-nilly, kind of like whenever a deal pops up—it’s like, yeah, in general, getting a good price is good, but do you need it? That sort of thing. So controlling that kind of stuff.

Then it’s just tracking your KPIs monthly so that you’re ensuring detection for needed adjustments early, and you’re catching things quicker. And then outside of that, it’s just being intentional with the reinvestment back into your practice—whether it’s marketing, technology, the patient experience—and making sure all that aligns with your financial modeling.

Lester De Alwis: Exactly. Exactly. Anyways, key takeaway from that is discipline is what matters at this point of the conversation when you’re talking about taking the decision on reducing PPO.

Jim Alley: Yeah. Oh, for sure. For sure.

Lester De Alwis: Exactly. So, exactly. So better systems make a big difference, but mistakes can still happen as well. So what are some common financial mistakes dentists make when dealing with insurance plans, and how can they avoid them?

Jim Alley: Yeah, I think it gets back to kind of what I was saying when we started about the emotional side. It’s kind of the biggest mistakes I see—dentists making these PPO decisions without going through the numbers. So it’s not really a hundred percent thought through.

Along with that would be dropping the PPOs without that financial modeling and without having adequate cash reserves. So you’re kind of at this whim, and then you find yourself stuck short term as you’re switching over from that PPO to fee-for-service, possibly.

Some other mistakes are just ignoring overhead creep—especially staffing levels relative to collections. That’s probably the biggest. And when they’re looking at things, they’re focusing purely on collections versus profitability.

So it could be possible that you’ve got a low-paying PPO, but maybe it is profitable for whatever reason. If you’re just looking at collections and not the pure profit per procedure, or by staffing, or whatever, that could be an issue.

And then just maybe not adjusting the clinical mix to support higher fees and value-based care.

Lester De Alwis: Right. So what three steps can—two or three steps—that they can take to avoid these things?

Jim Alley: Sure. Because you don’t reduce that insurance pressure overnight. You reduce it by taking small, smart financial steps and wins.

So, I’d start with financial clarity—know your real margins, not just your production. Review your PPO fee schedules and identify those worst-performing ones.

I’d say optimize hygiene, because that often carries a lot of PPO inefficiencies—so optimize that department. And then tighten your overhead before changing the insurance participation, so you’ve got that tied down and under control.

And then it’s taking into account all these things and putting together a phased plan—not an all-or-nothing approach.

Lester De Alwis: Yeah.

Jim Alley: And then, I think most importantly, it’s just work with advisors who understand dentistry—not just your CPA, and not just me, knowing general accounting. You want someone that understands what your business is.

So whether it’s, say, a consultant like you guys that can help move you to that fee-for-service, or if it’s relying on your CPA or someone else, just make sure they understand what you’re going through.

Lester De Alwis: Exactly. Great insights. Now to wrap it up—for a doctor who wants more control and less insurance stress in 2026, as we start this new year, what first steps should they take right now?

Jim Alley: I mean, I think it’s starting with getting an understanding of what your PPO situation looks like. Get those numbers and start putting together the data so that you can put a plan together, and then you can implement that plan.

That sort of goes back to the discipline side. That’s what you want to do—look at the data and see, is it really that you have a PPO problem, or do you have another problem? So identify that, and then put the plan together for your change, make that budget, and start implementing—and be disciplined.

Lester De Alwis: Amazing. Amazing. Now, James, if any of our listeners want to get in contact with you or talk to you and get some consultation about this, what is the best way that they can reach out to you?

Jim Alley: Yeah, so the best way would be my email, and that’s just jim.Alley@proactivetaxadvisory.com. Or you can give me a call—my office number is 202-350-0542. And you can check us out on the internet at proactivetaxadvisory.com. 

Lester De Alwis: Exactly. So to anyone listening in, you can also find James’s details on the show notes of this episode and on the website as well. So, Jim, thank you for joining us and sharing such helpful financial guidance.

Jim Alley: Yeah, thanks a lot. Thanks for having me. It was great.

Lester De Alwis: So here’s the key takeaway: when dentists understand the numbers and plan ahead, they can reduce PPO pressure with confidence and build a stronger, more predictable practice.

This podcast is all about taking action. So firstly, if you are looking for a health checkup on your website, you can schedule a complimentary marketing strategy meeting with Ekwa Marketing at lessinsurancedependence.com/marketing-strategy-meeting.

And secondly, if you’re looking for mentorship, book a complimentary coaching strategy meeting with Gary Takacs at thrivingdentist.com/csm.

Now, all these sessions are complimentary and will help you build a practice with more control and less insurance stress. Thank you for joining us today. We look forward to seeing you in the next episode. Keep moving forward to a stronger and more independent practice.