Published online Friday, August 26 at http://www.bizjournals.com/seattle/print-edition/2011/08/26/washington-state-dentists-feel-fee-cut.html
Peter Neurath — Contributing Writer
Dentists are reeling from stiff cuts in fees for dental care paid by Washington Dental Service, the state’s largest dental insurer.
But brokers say businesses can expect favorable effects in lower premiums charged by Washington Dental, and their employees may end up paying less out of pocket for dental care.
“Generally, it’s a two-thumbs-up situation,” said Peter Carpenter, CEO of ClearPoint LLC, a Seattle benefits consulting and insurance brokerage firm. “The employer reaction has been overwhelmingly positive.”
Though reduced fees paid to dentists by Washington Dental Service (WDS) may positively affect the cost of dental coverage, they may also mean sharp cuts in revenue for dentists, who warn this could affect the quality of patient care. Dentists with many patients covered by WDS will have less to spend on staff, materials, equipment and lab services. Some may have to lay off staff, work longer hours or more days or, in extreme cases, even go out of business.
“Any dentist who has a high WDS patient base and has seen a reduction in reimbursement of 15 percent to 22 percent is seeing a significant loss in net revenue,” said Dr. Doug Walsh, president of the Washington State Dental Association. “This is more prominent in areas such as Olympia, Everett, Pullman and Seattle, where there are high numbers of WDS subscribers.”
Employers initially worried that dentists might quit working with WDS, which would disrupt dental care for their patients. That fear has dissipated, though, said Kevin Cipoletti, a vice president at Gallagher Benefit Services Inc., in Bellevue.
“Overall, employers now are seeing this as a positive,” he said.
In mid-June, WDS reduced dental reimbursement fees by 15 percent for dentists in its “premier” network and 4 percent to 9 percent for dentists in its preferred provider network, in which dentists have agreed to lower fees in hopes of higher patient volume.
Statewide, cuts averaged about 5 percent, said WDS CEO James Dwyer, and these were made to make the insurer’s premiums competitive with other carriers in the small-group market, which comprises businesses with up to 200 employees.
Dwyer said research showed that dental fees paid by WDS had been among the highest among insurers nationally. Since the cuts, he said, “it appears that the WDS fees are comparable to other states but still higher than many other carriers.”
Benefits consultant Carpenter said WDS historically has paid more generous dental fees than its competitors in this market. “WDS has always been the Cadillac,” he said.
But when the recession set in, employers began scrutinizing their costs more closely. Dwyer said WDS has been paying to dentists 94 cents of every premium dollar, and employers started asking, “what are you doing to control that 94 cents?”
“Employers are demanding that we lower premium costs,” Dwyer said. “This action will ensure that dental care is affordable, allowing employers to continue offering high-quality dental benefits to their employees.”
WDS contracts with nearly 6,800 dentists statewide, which Dwyer said amounts to about 26 percent more than any of its competitors, including Premera Blue Cross, Regence BlueShield, Aetna and Cigna, among others.
Despite the fee cuts, Dwyer said, WDS expects to end the year with a slight increase in its preferred provider network.
Benefit consultants and brokers seem to agree about employer response to the WDS fee cuts. “I’d say that overall, the employer market has been supportive of the action,” said Todd Ringwood, senior vice president and Northwest market and practice leader at benefits consultant Aon Hewitt’s Seattle office.
Economic pressures, he said, are forcing employers to focus on controlling costs, and the cost of dental care is “not immune to that scrutiny.”
According to the Washington State Dental Association, the WDS cuts averaged 15 percent, and many dentists are upset.
Walsh, of the dental association, said the WDS fee cuts took dentists by surprise, and “right now they are still examining the effects.”
“They’re taking the time to evaluate their practice and determine the appropriate actions they can take to help level the ship without jeopardizing the care of their patients,” he said.
Lower fees will force some dental offices to close, Walsh warned.
In Lynnwood, Dr. Naghmeh Isadia called the cuts “truly shocking” and said she’s now operating at a loss. “I’ve been getting a line of credit,” she said, to keep her practice going.
In Olympia, Dr. John Weaver said patients covered by WDS account for about 75 percent of his practice. He calculates that the WDS fee cuts will slash his revenue this year by more than half. Weaver said his fees have been frozen for almost four years, so his 11-staff, two-dentist practice has had to lay off one employee, cut employee medical benefits, pressure suppliers for relief and withhold pay raises for the past three years.
“It appears that I myself will be a victim of the changing times and no longer be employed by this practice after the end of this year,” he said. Weaver, 59, sold his practice to his partner several years ago.
Weaver said he worries about the effects of WDS fee cuts on the quality of dental care. Dentists, he said, might use lower-cost dental materials and metals and outsource dental lab work “to offshore labs of dubious accountability.”
Weaver laments that WDS could have worked with its member dentists to find ways to lower costs rather than “unilaterally” slashing fees: “They did not call and say, we have a problem. They should have involved the members.”
However, he acknowledged WDS’ concern that many dentists have signed up with WDS competitors marketing lower-cost dental plans.
“You have to give WDS that,” he said. “They’re not all wrong.”