Less than 10 percent of the practices in the United States are purely fee-for-service. In 2010, preferred-provider organizations accounted for 74 percent of the total dental benefits market, making PPOs the most popular type of dental plans in the U.S. The remaining reimbursements are from government, Medicaid and state, but the majority of this patient population is children.
As you know, a PPO plan is regular indemnity insurance in combination with a network of dentists contracted with the insurance company to deliver certain services for set fees according to the contract. Dentists under contract usually must accept the maximum allowable fee as directed by the plan, but non-contracted dentists may have different fees from the plan allowance. Given that about 90 percent of dentists’ pay comes from third parties, shouldn’t dentists and their representative organizations be interested in what’s coming up in the future of reimbursement?
When you look at the landscape of insurance, what you see is vertical integration, which is happening at a rapid-fire pace — and is reshaping the entire industry. The emergence of talks between Walmart and Humana is creating pressure on health-care companies to make deals. A Walmart-Humana deal would be another telltale sign of the sector’s accelerated move toward combinations that unite healthcare businesses under one banner.
The Walmart-Humana negotiations come after the $69 billion deal between the drugstore chain and pharmacy-benefit manager CVS Health and insurer Aetna, and insurer Cigna’s $54 billion-dollar deal to acquire Express Scripts Holding Co. UnitedHealth Group, the parent group of the biggest U.S. insurer, is already vertically integrated — its ownership includes a growing number of doctor groups and surgery centers. UnitedHealth is on a mergers and acquisitions run, demonstrated by its recent purchase of DaVita Inc.’s biggest physician group. And let’s not forget about Amazon, which is now diving deeper into the healthcare industry, exploring supplies, pharma, and delivery.
In addition, it is now well-known that oral inflammatory disease is a primary contributor to many chronic diseases, and controlling oral inflammation decreases costs across the board in healthcare. This factor is adding fuel to the fire. Acquisitions, mergers, and vertical integration are raging, and it doesn’t take much speculation to see that dental insurers will soon be acquired and merged into this vortex of integration.
A Rising Tide
We see this emerging force beginning now occurring in dentistry. Insurers are buying dental practices. Hospitals are establishing dental clinics. Suppliers are trying to figure out how to use their profits to get into the vertical-integration spectacle. Venture capital is looking for the next vertical integration. Dental insurers have captured enormous amounts of data on the dentists in their networks. What will that be worth to companies as they move forward with their consolidation efforts? And where is dentistry as these enormous changes are happening? At the table with the other players? Engaged in carving out its future? Or, are they paying little — if any — attention to the future that is coming right at them and which will totally alter how they get paid?
When I hear dentists and their organizations complain in the future about how they are being manipulated by these new healthcare conglomerates, they have no one to blame but themselves for not stepping up to the table. But first, they need to know the location of the table.
— Marc
