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May112012

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The text of the story is included below. Click here to go the King 5 page.

Executive pay soars as one of Washington state's largest non-profits makes cuts.
King 5 Investigative Report - May 10, 2012

Many dentists in Washington are still reeling from big cuts in payments to providers made last year by the state's largest dental insurer. To make up, dentists say they've had to increase the number of patients they see each day to make up for the losses.

"It's the patient that loses," said longtime north Seattle dentist Dr. Chris Pickel. "We basically have to see more patients. It's something we don't like to do. We want to spend time with people. We like to spend time educating them."
Last year, Washington Dental Service, part of the nationwide Delta Dental network, made across-the-board 15 percent cuts to the fees it pays to dentists for all procedures. WDS said the cuts allowed it to reduce the premiums it charges employers for dental insurance, a move that makes its service more competitive in the marketplace.
 
All Smiles for Top Executives
 
A KING 5 investigation shows that Washington Dental's top executives have been feeling no pain.
 
An examination of tax records shows that executive at WDS have enjoyed a 32 percent pay raise over the five-year period ending in 2010.  Executive pay totaled $5.8 million in 2010.
 
The highest paid officer that year was WDS CEO James Dwyer, who earned $1.2 million.
 
"I'm happy with my compensation," Dwyer said in an interview with the KING 5 investigators. "There's no hubris in this. I am really very happy. I gave 10 percent of it back this year."
 
Non-profit Status
 
Washington Dental Service may sound like your typical corporation. But it's not. It's a non-profit organization that enjoys millions of dollars in tax breaks each year. IRS records show that WDS was exempted from paying taxes on $13.7 million in net income in 2010.
 
"If they spend so much money compensating executives and generating profit and returning less of that money to patient care then, obviously, we are very concerned about that," said Dr. Pickel.
 
Social Mission
 
CEO Dwyer emphasized that Washington Dental is not a charity; it's what the IRS calls a "social welfare" organization. Its mission is promoting oral health in Washington State.
 
"We fund our foundation to the tune of $5 million a year," said Dwyer.
 
WDS spent $5 million to help fund The Center for Pediatric Dentistry in Seattle. It's a ground-breaking clinic that targets the oral health of infants and children.
 
"These are initiatives that require a lot of money and we're quite proud that we don't have shareholders that we dividend the profits to," said Dwyer. "We put it into our tax exempt mission."
 
State Senator Cheryl Pflug (R-Maple Valley) applauds the big dollar commitment. Yet she said she still has concerns about non-profits like Washington Dental Service.
 
Pflug has been a vocal critic of health care organizations, primarily hospitals, that receive millions of dollars in tax breaks and pass the rewards onto executives instead of the community.
 
"I don't know a lot of people that got a 45 percent increase over the last 5 or 6 years. So that sounds suspicious," Pflug said of WDS executives' pay.
 
Dwyer said last year's cuts to providers followed a study that showed that WDS paid dentists among the highest fees in the nation, and that WDS needed to cut those rates to remain competitive.
 
Dentists may not appreciate Dwyer's million-dollar advice on how they can make up for the lost revenue – work harder.
 
"Number one: They could start working five days a week," said Dwyer.

Reader Comments (17)

The CEO of WDS is arrogant!!!!!!!
It may be time for the board to do some "soul searching" of how they are treating their most valuable asset the Providers.
I feel that Jim Dwyer needs to be reprimanded.

05.16.2012 | Unregistered Commenterwds provider

It saddens me to see WDS executives prosper during these very difficult times and at the same time decrease compensation to its member dentists who in the 1980’s gave a portion of their compensation to keep WDS floating. WDS has grown so large over the years they have become a monster that legally bullies its very reason to be: the member dentists who provide the very care that keeps it in existence. All emotion aside, this is a mistake that will set WDS back many years. It may take time for this to happen, but it will come back to bite them.

05.16.2012 | Unregistered CommenterMichael LaMarche

As a dental professional I have seen several people in my office lose their jobs over this change. People really don't understand the cost behind dentistry, lab fees, expensive equipment and supply costs just to name a few. Reimbursement levels are so low that many offices are now limiting themselves on how many WDS/Delta pts they take (sound suspiciously familiar aka medicare?) The other problem is that patients now see their insurance coverage as their right (benefit) when really it is only a discount plan any more. In tough times everyone (including Mr. Super Happy Pants with his salary) need to tighten their belts. 10% ? Is that all he can afford to give up? People have lost a lot more then that!

05.16.2012 | Unregistered CommenterT Luke RDH

Having practiced for 27 years I have my own perspective; with the cost of new techniques, technologies, and labor costs, the fixed overhead for a typical dental office is approaching 70 cents of every dollar earned. The recent 15% reduction does not reduce the overhead but the profit. The profit is used to fund continuing education and replacing aging equipment. Profit leftover is for the Doctors expenses at home and raises for the staff, so as to retain the quality experience all patients deserve.
Our office has chosen to step away from WDS so as to continue to provide the predictable care our patients expect from a professional.

05.16.2012 | Unregistered CommenterDr. Ron Snyder

To Whom it may concern,
What follows is a copy of an e-mail that I sent to WDS in response to their published announcement of their improved A.M Best rating following the implementation of a 15% fee allowance reduction for all procedures performed by the 'provider' dentists with whom they were contracted .
My e-mail aside, hats off to whoever was responsible for this investigative report; I am sure this information was difficult to come by.
In the end, this is another example of socialist capitalism, which by definition is an oxymoron. For the state and federal governments to provide such non-profit tax breaks to what is clearly a for profit organization is yet another example of how capitalist who are lauded for the business risks they take are in fact not taking any risk at all. This is also another example of slick marketing that uses other people's money to fund their grand public health initiatives, all to their aggrandizement of their public image in the eyes of an uninformed and gullible public. All the risk appears to be on the shoulders of their contracted dentists whose compensation is drastically reduced, and their subscribers, who contrary to Mr. Dwyer's comment, are seeing their insurance premiums continue to rise while settling for progressively less benefit for their insurance dollar. Clearly they are making money at both ends of the provider-subscriber axis. Perhaps corporate giants like Boeing are saving money by avoiding an increase in premiums paid (by threatening to not renew their contracts with Delta) but I doubt that such savings are being passed on to their insured employees.
Sadly, short of a statewide or nationwide work stoppage by all dentists contracted with Delta until contracts can be renegotiated to be fair and acceptable to all parties (i.e. subscribers, providers and corporation) there is not much that participating dentists can do except terminate their individual contracts at their own risk, and then only if their insured clientele is so diversified that they can afford to do so. And based on the G.E. study about the impact of compensation reduction on production and net profit, I would surmise that any Delta contracted dentist who is maintaining their same level of profit despite these cuts is indeed working the equivalent of 5 days a week if not more, just to stay in the same place.


CONGRATULATIONS ON YOUR EXCELLENT RATING FROM A.M. BEST!

FROM WHERE I SIT AS ONE OF YOUR PREFERRED PROVIDERS CONTRACTED WITH TOO MANY REVENUE DRAINING DELTA DENTAL PLANS, IT WOULD APPEAR THAT YOUR COMPANY’S FINANCIAL STRENGTH CAME EXCLUSIVELY AT THE COST OF YOUR PARTICIPATING DENTISTS AND SUBSCRIBERS. THE LATTER ARE ASKED TO PAY MORE IN PREMIUM OR COPAYMENT PERCENTAGE FOR THE SAME OR LESS BENEFIT COVERAGE, WHILE PROVIDERS ARE ASKED TO ACCEPT LESS THAN EVER BEFORE RELATIVE TO THE COST OF DOING BUSINESS.
IF I AM MISTAKEN IN MY ASSESSMENT, PLEASE ENLIGHTEN ME AND THE REST OF YOUR PARTICIPATING DENTISTS WITH THE RESULTS OF AN ACCOUNTING AUDIT OF WDS, PERFORMED BY AN INDEPENDENT ACCOUNTING FIRM, THAT SHOWS THAT THIS RATING WAS OBTAINED BY SHARING THE FINANCIAL BURDEN OF COST EFFICIENCY MANAGEMENT AMONG NOT ONLY SUBSCRIBERS & PARTICIPATING DENTISTS, BUT ALSO EXECUTIVES AND EMPLOYEES OF DELTA DENTAL OF WASHINGTON. SPECIFICALLY, IT WOULD BE HELPFUL TO KNOW HOW MANY EMPLOYEES AND CORPORATE OFFICERS EXPERIENCED EMPLOYMENT TERMINATIONS, OR SALARY, WAGE & BENEFIT REDUCTIONS IN THE NAME OF BEST MANAGEMENT PRACTICES IN ORDER TO ACHIEVE LOWER OPERATING COSTS AND HIGHER NET PROFIT FOR DELTA DENTAL OF WASHINGTON.

IN THE MEANTIME, I WOULD ENCOURAGE YOUR STATISTICIANS AND ACTUARIES TO LOOK AT HOW THE NEW FEE SCHEDULE COMPARES TO THE NATIONAL UCR FEE SURVEY CONDUCTED BY THE AMERICAN DENTAL ASSOCIATION IN 2009, PUBLISHED IN MARCH OF THIS YEAR IN THE JADA. PAY PARTICULAR ATTENTION TO THE PERCENTILE RANK FOR DELTAS NEW FEES WHEN COMPARED TO THE ADA FEE DATA COLLECTED AT LEAST 2 YEARS AGO.

OF THE 91 CODES IN COMMON BETWEEN DELTA’S FEE SCHEDULE AND THE ADA FEE SURVEY CONDUCTED MORE THAN 2 YEARS AGO, ONLY 14 OF THEM (15%) WERE COMPENSATED AT A RATE GREATER THAN THE 50TH PERCENTILE OF DENTISTS FOR THE PACIFIC REGION. 85% FELL AT OR BELOW THE 50TH PERCENTILE. 51% FELL AT OR BELOW THE 30TH PERCENTILE. 43% FELL AT OR BELOW THE 25TH PERCENTILE, AND 32% FELL AT OR BELOW THE 20TH PERCENTILE. THIS BEGS THE QUESTION OF WHY ANY GENERAL DENTIST, WHETHER QUALITY CARE ORIENTED OR NOT , WOULD BE SATISFIED WITH BEING PAID AT LESS THAN OR EQUAL TO 50% OF REGIONALLY PREVAILING FEES, FOR 85% OF THE PROCEDURES LISTED, AND A DEMEANING, INSULTING FEE THAT IS AT OR BELOW THE BOTTOM 20% FOR ALMOST 1/3RD OF THE LISTED PROCEDURES. LOOKING AT MEAN FEE VALUES, THE STATS DON’T GET ANY BETTER, WITH ONLY 7 PROCEDURES (8%) BEING PAID ABOVE THE MEAN VALUE.

PUT ANOTHER WAY, WOULD W.D.S. FIND IT GOOD BUSINESS TO ENTER INTO CONTRACTS WITH DENTISTS WHO PERFORMED PROCEDURES THAT WERE CLINICALLY ACCEPTABLE ONLY 15% OF THE TIME? HOW LONG COULD THEY EXPECT THEIR CONTRACTS TO LAST WITH EMPLOYERS WHEN THEIR RESPECTIVE HUMAN RESOURCES DEPARTMENTS COULD EXPECT TO RECEIVE COMPLAINTS ABOUT RECEIVING LESS THAN AVERAGE CARE 85% OF THE TIME, WHILE PAYING PREMIUMS THAT WERE RANKED ABOVE THE 50TH PERCENTILE 100% OF THE TIME? I DOUBT THAT ANY ACTUARY WOULD FIND SUCH A RISK TO BENEFIT RATIO EVEN WORTH CONSIDERING, AND FINANCIAL SUICIDE TO CONTRACT SUCH DENTAL CARE FOR IT’S POLICY OWNERS/SUBSCRIBERS. WHO WOULD KNOWINGLY PAY FOR SERVICES THAT WERE ABOVE THE MEAN IN VALUE AND PERFORMANCE ONLY 8% OF THE TIME?

AT AGE 59, AND HAVING RETURNED TO THE EXPENSIVE VENTURE OF PURCHASING A PRIVATE DENTAL PRACTICE AFTER 5 YEARS OF SERVING THE UNDERSERVED LOCAL NATIVE AMERICANS, I AM ACUTELY AWARE THAT IT’S ALWAYS ABOUT THE MONEY. BUT I HOPE THAT SOMEONE IN YOUR CORPORATION WILL READ THIS AND UNDERSTAND THE DISASTROUS BUSINESS CONSEQUENCES OF THEIR REVISED FEE SCHEDULE, BOTH FOR THEIR CONTRACTED PROVIDERS AND FOR THE CORPORATION. EVEN IF A DENTIST WERE WILLING TO WORK FOR NOTHING, THIS NEW, RETROGRADE FEE ALLOWANCE IS UNTENABLE WITH THE COST OF PROVIDING DENTAL SERVICES IN A PRIVATE PRACTICE SETTING, OR EVEN A CLINIC FOR THAT MATTER. IN MY OPINION,THERE IS NO ECONOMY OF SCALE WHEN PROVIDING DENTAL SERVICES. EACH PATIENT IS UNIQUE AND EACH SERVICE IS CUSTOMIZED TO THAT INDIVIDUAL. WE ARE NOT PRODUCING WIDGETS OR FAST FOOD ITEMS, AND OUR MUTUAL SUCCESS CANNOT BE DICTATED BY A BALANCE SHEET THAT BLINDLY APPLIES PRINCIPLES LEARNED IN MBA SCHOOL. CLEARLY, ETHICS IS NOT A CONSIDERATION IN BIG BUSINESS, AND CORPORATE VISION SEEMS TO BE EXTREMELY SHORT SIGHTED, WITHOUT REGARD FOR LONG TERM CONSEQUENCES. APPARENTLY, NOTHING HAS BEEN LEARNED FROM THE AMORAL, GREED DRIVEN BUSINESS PRACTICES THAT CREATED THE GREAT RECESSION WE ARE STILL LIVING WITH TODAY.

SINCERELY,

KENNETH A. TAYLOR D.D.S.

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