Membership Plans: Automation & Intelligence

Episode #579 with Kirk Behrendt & Dave Monahan

Patients want dental care, but they feel that it’s too expensive. Employers want to offer dental care, but they feel that it’s too complicated. Dentists want to provide dental care, but PPOs are getting in the way. How can we solve these problems? It’s called a membership plan, and it’s the solution to providing easier, affordable, more transparent care. To explain how it works and the intelligence behind it, Kirk Behrendt brings back Dave Monahan, founder and CEO of Kleer, a platform to liberate dental care for patients and dentists. With a membership plan, everyone wins! To learn more about Kleer and the benefits of offering a membership plan, listen to Episode 579 of The Best Practices Show! 

Episode Resources:

• Dave’s email: dave@kleer.com 
• Mention ACT for a special offer! https://www.kleer.com/partner/act-dental
• Kleer’s Facebook: https://www.facebook.com/KleerLLC
• Kleer’s social media: @kleerllc
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Links Mentioned in This Episode:

Kleer Intelligence: https://www.kleer.com/kleer-intelligence

Best Practices Show Episode 578 with Shelley DeGroff: https://www.youtube.com/watch?v=VIXlupM40DA

Main Takeaways:

Incorporate a membership plan to increase revenue.

Membership plans will increase uninsured patient visits.

You will have recurring revenue with a membership plan.

A membership plan will help you move away from PPOs.

Investors will pay much, much more for subscription practices.

Quotes:

“A membership plan will improve patient engagement, the retention, and the revenue you generate from your uninsured patients. That's typically the number-one reason to do a membership plan. Most practices assume their uninsured patients come in, accept treatment, and everything is great. If you actually pull the data out of practice management systems, uninsured patients, on average, come in once every two years. Let me say that again — once every two years. And they accept half the amount of treatment of your insured patients. And so, it looks great when your insured patients come in and accept treatment, and you use your UCR maybe with a discount, and things like that. But you can make that so much better if you focus on those patients and gave them what they want.” (4:08—4:53)

“So, what do [patients] want? Well, we've done a lot of research. We actually did interviews of uninsured patients. We did focus groups. We did a national survey. They want care. So, they value oral care. They actually relate it to their overall health, their quality of life, and their longevity. So, they get it. They get that oral care is very important to them. They don't come in because they're afraid of the cost and they don't have a plan. They feel exposed when they walk into your dental practice. They're unsure. And pricing in the dental market is anything but transparent, so they don't know what they should pay. So, what do they do? What's the reaction to that? They don't come in. So, that comes back to the coming in once every two years and accepting half the treatment.” (4:53—5:38)

“The first value proposition is, get those [uninsured] patients to come in more often. If you give them a membership plan, it’s a simple subscription. It includes preventative care. They come in a lot more often — like two to three times more often. They accept two to three times more treatment. You create a loyal patient that comes in more often and accepts more treatment. It works over and over again. It’s amazingly consistent how well it works.” (5:39—6:05)

“[Value proposition] number two is, you can create a nice recurring subscription revenue source in your practice. On average, on our platform, our practices charge $372 a year for their subscriptions. So, if you do some simple math and you add 300 patients to your membership plan, it’s over $100,000 of recurring revenue. A lot of our practices build up that recurring revenue and they use it to pay their recurring bills like their office lease or their equipment lease, things that are recurring in their practices. Their subscription offsets that, and they can rely on that revenue. You know it’s coming in, year after year, because of the high renewal rate on membership plans. So, that's really nice to have.” (6:08—6:52)

“The third [value proposition] is reducing your PPO dependence. Most practices, about 75% of their patients use PPOs. We’ve done a bunch of measuring of these, and about 50% of those PPOs are unprofitable for a dental practice. And I know everybody is feeling this pain. It’s getting worse and worse as costs go up in a practice, and reimbursement rates go down. At some point, you're crossing into unprofitability for these PPOs. And some of them are very unprofitable. You can start moving away from those PPOs. We never say just run away from the PPOs. You've got to manage it . . . If you can start that journey and maybe drop the low production, low profit plans, and move a membership plan in, you can start that journey of moving away from your PPOs.” (6:58—7:51)

“When you have a new patient come into your practice who is uninsured, the reappointment rate, on average, for those patients is about 45%. If you put them on a membership plan, it’s 100%. So, you can move from a reappointment rate of 45% to 100%. If they buy a membership plan, I guarantee you they are coming back. It’s a great way to get insurance on those new uninsured patients. And by insurance, insurance that they are going to come back. And I think, on average, a practice spends about $400 per new uninsured patient that walks into their practice. So, you're basically making sure that patient comes back.” (7:55—8:29)

“On average, a practice has about 2,000 dormant patients in their practice management system. These are patients that came in at some point and haven't come back in 18 months. Those patients typically don't come back because they don't have coverage. They're much like the uninsured patients I described earlier. And so, if you get them on a membership plan, those dormant patients will reactivate and start to become loyal patients to your practice. So, I know it’s a lot, but there's a lot of value that you can create in your practice through a membership plan.” (8:36—9:04)

“For our practices on our platform, one thing that distinguishes Kleer from some of the other systems out there is, we actually measure results for a practice. So, we integrate with practice management systems and then pull the data back. And I'll give you the average on our platform of what a membership plan looks like compared to an average uninsured patient. They’ll come in twice as often. It’s almost right on that number. It might be a little lower than that, or a little above it, but on average, it’s two times more often. So, a membership plan patient, on average, comes in three times a year, whereas an uninsured patient comes in one-and-a-half times a year. So, it has a major impact on their visits.” (9:45—10:23)

“An uninsured patient will accept about 2.2 procedures a year and get 2.2 procedures completed in a year. A membership plan patient will accept 5.4 procedures a year. So, it’s well over two times more procedures that are accepted. What that all translates to is actually, from a revenue perspective, a membership plan patient will generate almost three times more revenue per practice. So, a membership plan patient will drive about $1,000 a year in revenue for a practice, whereas an uninsured patient will be about $370, $380 a year. So, it has a major impact.” (10:28—11:08)

“A membership plan patient, the preventative care is embedded in the plan. So, let's say you're paying $30 a month. You have your two cleanings, your exams, your X-rays embedded in that. The patient doesn't need to pay more for that. That's part of the subscription. So, what happens? They come in for their preventative care. So, they get their cleanings. They get their exams. They get their X-rays. And then, where does treatment come from? It comes from the hygiene appointment. About 75% of all treatment comes from hygiene appointments. And so, they’ll get their crowns or fillings, their whitening, things like that. So, it builds on itself. You build a subscription revenue, a recurring revenue model, patients come in more often, they accept more treatment, and it builds on itself.” (11:12—11:59)

“Our platform has a bunch of automation features in it from the get-go. So, from the very beginning, we have things like auto-renewal. So, a patient joins. They're put into auto-renewal, which means when they come up for renewal their membership plan automatically renews. They can opt out of it if they want. The practice can opt out a patient if they want as well. But what ends up happening is that automatic process and the patients agreeing to it drives about 75%, 80% renewals on your membership plan. It’s automated. Nobody needs to do anything. You don't need to call the patient. You don't need to email the patient. You don't need to recollect their credit card information. It just happens.” (13:40—14:14)

“We see about nine percent [of credit card] expirations. And basically, what you end up having there are some exceptions. In our example, when a credit card expires, the notification is sent to the patient and to the practice that this is expired and there's action to be taken. And so, you're handling the exceptions, and then 92% is going through automatically, which makes the job much easier. So, you have things like that. You have things like subscription payment processing happening in the background. You have these notifications happening, like I've described. There are lots of legal notifications that are required. You have things like receipts going out automatically, and all that stuff.” (14:26—15:09)

“[Automation] saves you time and money because it’s not cheap to have somebody enter information manually. That is an expensive — it’s hidden, but it’s expensive. We asked the office teams, ‘Do you like doing this?’ The obvious answer is, ‘No, I hate it.’ Who likes entering data into a system? It’s not fun. And so, they're happy that they can go do other things. It’s both saving money and time, and then, also, it’s a team satisfaction thing. It makes them feel better that they don't have to do that type of work.” (18:05—18:40)

“The data I referenced before, it doesn't matter if you're a PPO practice or a fee-for-service practice. Your uninsured [patients] are coming in about once every two years, and they're accepting about half the amount of treatment as a membership plan patient. So, it is what it is. And I don't care if you're fee-for-service or you're not. When you look at the data, that's what it says.” (19:07—19:27)

“This is the really interesting part about the discount. We actually measured fee-for-service practices and looked at the discounts that they're providing. It’s 10% to 15%, on average, because they give day-of-care discounts, and it adds up. It adds up fast. And the thing that is not smart about that is you give that away for free. You say, ‘If you get this treatment today, I'll give you a 10% discount.’ The patient is like, they're probably going to need treatment anyway, ‘Okay. Why not?’ I mean, they got the treatment. But you didn't ask them to commit any longer than that treatment. So, what's going to happen next time? What is that patient going to wait for? . . . So, now, there's a game in hand, and they know the price is not the price. They know they're now negotiating. But you haven't answered anything back except for, ‘I'm giving you a discount if you accept treatment,’ and therefore, I've trained you to ask for a discount every time you need treatment. Wouldn't it be better to give them a membership plan where you're giving a 15% discount — so they're getting that discount — but they're now committing to care? They're committing to coming in. They're committing to paying a subscription. And we also know they are going to come in and they are going to accept twice the amount of treatment. So, it’s a give-get. And that makes sense versus just throwing discounts at them.” (19:29—20:58)

“I don't think you want to [discount 15%] unless you get something in return. That's my feeling about it. For me, yeah, I'll give that 10% to 15% if the patients are committing to something longer term. The membership plan, I'm committing to at least 12 months. And then, if you do it right, you'll get at least 80% renewals on that. Plus, you'll get two times the amount of treatment accepted. So, it’s not like the patient is sitting there going, ‘I'm going to accept twice the amount of treatment. I'm going to come in twice as often.’ But you know it's going to happen. You know it. And so, you're getting them to commit to something of value to you, and you're giving them a discount, which is of value to them.” (21:46—22:25)

“From the patient’s mindset, it’s two things when they look at a membership plan. Yeah, they like the discount. Who doesn't? Nobody doesn't like discounts. But the other side of it is, they want care. They want access to care. They want it to be transparent. They want to know what they're going to pay. They'd much rather pay $30, $40 than come in and be surprised by a $400 bill. The psychology of that has been proven. So, you're now making it transparent. You're making it affordable. I understand what I'm going to be paying. I understand what I'm going to be getting. It’s a good deal for the patient, and they accept that, and then they commit to it. So, there are a lot of dynamics there from the patient’s perspective. It’s not just about the discounts. It’s access to care and transparency as well.” (22:26—23:11)

“I don't have proof of an investor coming in and paying this, but what the average is on subscription businesses versus non-subscription businesses is investors pay three to five times more for a subscription business than a non-subscription business. So, let's say you have a fee-for-service practice and it’s doing $1 million a year and it’s all fee-for-service. It’s one-off. There are no subscriptions. Or you have a $1 million practice and let's say $500,000 of that is a subscription revenue business and it’s something that's proven. It’s been in place for a few years. They’ll pay three to five times more for the $500,000 piece of that business than they will the other $500,000 part of that business. Why? It’s really simple. They know they're going to get that revenue in the future. They know those patients are coming back. They can put a value on that. They can see renewal rates going into the past and what they can expect. So, you put a much higher value on the practice by having that recurring subscription business.” (23:52—24:45)

“If you get the implementation wrong, it’s trouble. We measure the performance of our dental practices all the time, every day. We know how well they perform, what makes them perform well, and what doesn't. The number-one factor on success or failure in a membership plan is the first 60 days, roughly. And what does the first 60 days actually get driven by? Well, first, the design of the membership plan and the pricing of the membership plan. You've got to get that right.” (25:29—25:59)

“The [practices] that were really successful weren't the highest priced ones. But they weren't the lowest priced ones. What they were was somewhere in between where there was basically a place where it was profitable for the dental practice, but also, the patient looked at it and said, ‘Hey, that's a pretty good deal.’ The ones that were priced really low, the patient looked at it and said, ‘That's cheap. There's something wrong, and I don't buy into it. It’s a trap.’ The ones that were priced really high, obviously, you exclude a certain amount of patients. So, you've got to get that price just right. We have something called Smart Pricing that will take your fee schedule and all the data we have on our platform for all the practices, and it'll come up with a range of the right pricing for your membership plan. It'll give you a range, let's say, from $28 to $32, something like that, and you need to pick what you want to do on that range. Do you want to be more aggressive and have higher volume, or go a little higher and have less volume? So, you've got to get that right.” (26:06—27:04)

“You also have to get the plan design right. So, we can have an infinite number of care plans, but we don't suggest that. We suggest three to five care plans. One for a child, one for an adult, one for perio. If you have older patients, maybe one for senior care. And then, if you have children, maybe multiple plans for children. And you customize treatment inside those plans for those patients sets. You've got to get that right. And our team, the success team, will actually, to get the pricing right and also to get the care plan design right, we’ll talk to you. We’ll understand your practice, the treatment philosophy of your practice. Some like fluoride. Other practices don't like fluoride. Fine. We’ll build that in, your preference from a treatment perspective. We’ll look at your patient demographics. We’ll figure out what type of care plans you need based on our experience. We’ll help you price them. So, you've got to get that all right.” (27:04—27:53)

“You also have patients coming in who own small businesses. You can start there and talk to your patients. Ask them what do they do for a living, and they're like, ‘I own a small business down the street. It’s a construction business.’ ‘Oh, great. Do you have dental benefits that you offer?’ Most of them will say no. Sixty percent of small businesses do not offer dental benefits. ‘Would you like to offer dental benefits?’ Almost all of them are going to say yes. Eighty-four percent will say, ‘Yes, I would like to do that. But it’s too expensive. Too complicated.’ Say, ‘I got your answer. I have this subscription plan you can offer to your employees. You can decide, as an employer, how much to contribute to the subscription.’ It can be $5. It can be $10. Whatever an employer can afford, they can put into the plan. And then, our system will, basically, once you set that up and the employer agrees to how much...