February 27th, 2020

The Pros and Cons of In-house Dental Membership Plans

I bet you’ve never thought of Amazon as competition for your dental practice.

No, Jeff Bezos hasn’t released a new, mail-order dental treatment service (yet), but he does have something you may have heard of called Amazon Prime. More than 100 million Americans subscribe to Prime, and why not? You pay a reasonable annual fee and in return get perks like free shipping, free services, and discounted offers.

What does that have to do with you? Well, that same type of discount subscription model has been gaining popularity in dental practices over the past decade, and if you don’t currently offer an in-house dental membership plan for your patients, your competitors may be. Before you fall too far behind, it may be time for you to at least consider the pros and cons of adding a subscription plan to your practice.

What an In-house Dental Membership Plan Is (and Isn’t)

As I mentioned above, dental membership plans are basically a subscription service where your patients can pay you a recurring monthly or annual fee and receive a defined package of free services and discounted pricing. Typical plans might include a certain number of free hygiene visits and discounted rates on elective or restorative care.

Patients like in-house dental membership plans because they make dental care more affordable, especially when they don’t have an employer-provided dental insurance plan.

Don’t confuse these with national and regional dental membership networks. Those are more like traditional insurance providers in the sense that patients choose from a list of participating dentists and show their membership card to receive discounts. The benefits are similar for patients, but not for dentists.

Why You Might Like an In-house Membership Plan for Your Dental Practice

There are a number of reasons why an in-house dental membership plan might make good business sense.

Attract New Fee for Service Patients

The discounted dental care that a membership provides can open the door for people who may have previously skipped preventive, restorative and elective procedures based on expense. According to the Centers for Disease Control and Prevention, more than a third of American adults haven’t seen a dentist in the past year, with 40 percent of those people not going because of cost.

More Patient Loyalty and Fewer Cancellations

Because patients pre-pay for services and discounts, their “use it or lose it” mindset will make them more likely to schedule appointments and keep them. Even if they do fail to redeem a free hygiene appointment, you’ve already collected the fee up front, so it ends up being their loss, not yours.

Case Acceptance

When presenting treatment plans, showing your patients exactly how much money they will save compared to what they would have paid without a membership can be an effective way to convince them to accept treatment. A two column comparison price sheet can be a great tool to demonstrate to them that they made a smart decision in subscribing to your plan.

Generate Consistent Recurring Revenue

With annual or monthly billing, you’ll know up front how much baseline revenue you’ll be collecting from your membership patients. And with accurate tracking, you’ll also be able to reliably predict how much in additional fees you can expect from restorative and elective procedures over the coming months. 

Increase the Value of Your Practice

If you’re thinking ahead to selling your practice, two primary factors that can increase its value are how much profit you expect your business to make in the future and the reliability of that estimate. With a predictable, recurring revenue stream, it becomes much easier to justify a higher value than if you were only doing inconsistent one-off treatment transactions and continually depending on attracting new patients. According to The Automatic Customer by John Warrillow, buyers may pay anywhere from 200% to 400% more for subscription-based businesses than for transactional businesses.

Why You Might NOT Like an In-house Membership Plan for Your Dental Practice

Discounting Rates

The idea of discounting rates doesn’t sit well with some dentists. After all, why would you want to offer lower fees if you already have patients who are willing to pay full price? Consider the big picture and look at a discounted membership in terms of overall return on investment (ROI). If you take into account the increases in new patients, treatment acceptance, and revenue, the positives should far outweigh the amount you sacrificed in reduced fees.

Cost

Unless you are building your own in-house dental membership plan from scratch, you will likely pay for third-party software or cloud based software as a service (SaaS). Typical billing models are flat rate, per member, or per transaction. Again, the benefit should outweigh the expense, but you can further reduce the cost by choosing a payment structure that makes the most sense for your practice and the number of members you expect to have.

Managing the Plan

If you decide to use one of the dozens of software solutions out there, most will help you with setting up your plan structures, implementation, management, marketing, and regulatory compliance. If you decide you want to save that cost and manage the plan on your own, it can be a handful. Keeping the plan as simple as possible can help, but it may still be more work than you or your staff is willing or able to take on.

Legalities

As of 2018, 34 states had discount health program laws, while 23 of those states required a license or registration for discount health programs including in-house dental plans. Some states may also consider them to be a form of prepaid insurance and, if so, require dentists to license or register with the state accordingly. This may not be enough to discourage you, but you should definitely consult with your legal advisor.

Conclusion

There’s really no right or wrong answer when it comes to deciding if an in-house dental membership is a good idea for your office. In the end, it needs to fit in with your treatment philosophy, business goals, and what is ultimately best for your patients.

If you would like to give it some additional consideration, we can offer our insight and share some of our experiences with clients who have gone through the process. Schedule a Marketing Breakthrough Call today to learn more!

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