Capitation schemes – good for your business? Good for your patients?
Capitation schemes can be valuable profit centres for your business if managed correctly. There are however, risks associated with this type of scheme that can be costly in terms of profit and patient care.
Where it can go wrong
There are a number of areas that present risk:
- The correct distribution of patients throughout the bands within your scheme is very important. One of the major causes of lost profit within a practice is when patients are placed in the incorrect band when the dentist capitulates and places the patient in a lower band because of the cost
- A further cost can manifest itself in the fee charged for the banding itself. If this fee is fixed too low it will not provide sufficient income to the practice to compensate the business for the amount of clinical time spent with patients
- Some patients receive too many hygiene treatments compared to the number covered within their band. This can be particularly damaging when the hygienist is paid a fixed hourly rate as the result is a double hit on profit margins
- The ongoing management and re-banding of patients is also important, therefore as a patient’s dental needs change, the level of maintenance required is likely to increase and the dentist should re-assess the patient to establish whether they need to move into the next band
- Occasionally some dentists under-prescribe treatment to patients belonging to capitation schemes. This can lead to supervised neglect. Often this situation is only brought to light when a dentist retires or leaves the practice and the new dentist discovers significant amounts of treatment are required. The results can be damaging to the reputation of the practice and can lead to litigation.
Unfortunately, I find many of these areas are not being monitored or controlled in practices identified when we carry out our Capitation Scheme Audit.
When did you last audit your capitation plan?
Once your capitation scheme is ship shape you need to invest time and effort to monitor and manage it going forward so the same situation doesn’t recur.
And a final point to take note of – if you are looking to acquire a practice with a large capitation income you will find lenders are currently keen to support purchases of this nature because of the significant amount of predictable income coming into the business. However, you should undertake an audit to ensure you are not inheriting the types of issues discussed in this article.
Privilege Plan undertake annual audits of the Total Care Plans we provide to clients as a complimentary added value service.