Make UCR work in your favor!

Del Webb, DDS

What does the acronym "UCR" stand for? For the past few years, I have asked thousands of people who work in dentistry that question during lectures. Every single person answers: "Usual, customary, and reasonable."

The next question, though, is the telling one. Who taught you that? The obvious answer is that the insurance industry has used that acronym on so many "Explanation of Benefits" (EOB) forms and at the bottom of the reimbursement checks that we in dentistry have adopted its definition. Yet, few dentists, if any, actually believe that the amount reimbursed is the "usual, customary, and reasonable" fee appropriate for dental services today.

Let`s quickly do some simple calculations to discover how reasonable - or unreasonable - certain UCR amounts are. As our example, we`ll use a hypothetical, but representative, dental practice grossing $400,000 per year. The average overhead in a $400,000 practice is 70 percent. If our hypothetical office is open 40 hours per week, 50 weeks per year, then the dentist works 2,000 hours per year. The office overhead is $280,000. Total overhead ($280,000) divided by 2,000 hours gives us an hourly overhead of $140. That is the fixed overhead before the doctor is paid a single penny.

A discussion about how much a dentist should be paid per hour can be very insightful. Ask your staff, your spouse, your accountant, and your peers what they think. The value they place on the care, skill, and judgment of a dentist probably varies a great deal. But, for purposes of this discussion, we simply will point out that the $140 per hour does not include the dentist`s pay and that the dentist must be paid for the care provided.

Now, let`s assume that an insured dental patient comes in for a prophylaxis. The numbers I have seen on the ratio of hygienists to dentists tell me that a lot of dentists are performing that prophy. The patient comes in without an insurance form or, if he does bring in a form, it is blank. The patient assures the doctor that his insurer provides "100 percent coverage" for a cleaning.

The prophy is done, the patient leaves the office without offering to pay, and the office submits the claim form. The fee for the cleaning was $85, the overhead cost was $140, and the doctor`s/hygienist`s salary must be added to that. The office just lost $55, plus the salary of the doctor/hygienist. On top of that, the insurance company is very likely to write on the EOB that the doctor`s fee exceeds the "usual, customary and reasonable" fee. How reasonable is it to lose $55-$135 per prophy? The term "reasonable" certainly is misleading!

Creating UCRs?

The insurance companies record the fee numbers as submitted by the practitioners on dental claims. They "sell the numbers" to a company, such as the Health Insurance Association of America (HIAA). Since HIAA is not an insurance company, it can compare and analyze fees without worrying about "restriction of trade" litigation. HIAA then "sells" the data back to the insurance companies. The insurance companies then have an entire range of fees from which to compose their very own UCRs.

There is no such thing as a "usual, customary, or reasonable" fee. It is a huge hoax perpetrated by the insurance industry upon the dental profession. What this means is there is no one, single UCR number; rather, there is a range of fees based upon percentiles.

A list with a single set of numbers is not a legitimate UCR table. The table must reflect several percentile levels to be authentic. Any list with a single set of fees will make money for the seller of the "homespun list," but it will not help you to discover the real UCR range for your area. Remember, percentile range and zip code are the critical factors in determining how much an insurance company will reimburse for a particular plan.

What is percentile?

In simple terms, percentile means, "How many out of 100 did you beat?" For example, the 80th percentile is that number, such as a fee, in which 80 percent of all fees fall below and 20 percent fall above that number.

Let`s use the SAT exam as another example. Suppose 8,935 people took the exam on May 1. The exam contains 731 questions, with each question worth one point. Suppose that a student had a raw score of 698. Although we could calculate the percentage of correct responses, the percentage itself would be meaningless. The people at SAT convert raw scores into percentiles. Percentile tells them how many students out of 100 scored higher than that particular student. If the student`s score fell into the 93rd percentile, that means that this student scored higher than 93 of 100 students taking the test. Seven out of every 100 students scored above the 93rd percentile.

The insurance industry sells policies with premiums based upon the scope of coverage purchased, including the percentile ranking of fees charged. An example might help here. During their initial boom years, a fictitious computer company that we will call "CW" bought the 90th percentile of dental-insurance coverage. Translated, that means that CW employees could go to nine out of 10 dentists in town and have their teeth cleaned without the fee the dentist charged exceeding the UCR. As a result, cleanings would be paid at 100 percent and CW employees would have no co-pay.

Now, let`s change the scenario. To save money, CW decides to buy the 70th percentile of coverage, instead of the 90th percentile. The employee insurance booklet still says that Code 01110 is covered at 100 percent of UCR, but now UCR is set at the 70th percentile. This means that CW employees could go to seven out of 10 dentists, and the fee would not exceed UCR. However, at three offices out of 10, the fee would exceed UCR.

Obviously, it is cheaper to cover a group of people at the 70th percentile than it is to cover the group at the 90th percentile. That`s why companies do it! The 70th-percentile fee would be the fee at which 30 percent of the dentists in that area are charging more than the UCR and 70 percent are charging less than or equal to the UCR. In today`s market, more cheap policies are being sold. The UCR reflects the percentile of the policy coverage.

Make UCR work for you

The way to take advantage of this information is to recognize that if you exceed UCR, it does not mean that you are charging more than other doctors are in your area. What it does mean is that you are charging more than the insurance company`s percentile-reimbursement level.

As stated by Lincoln National Administrative Services Corpora-tion in an EOB received by my office: "This action is not an attempt to establish a fee nor to discuss the propriety of the provider`s charge, but the expression of the obligation accruing under your plan. Please refer to your plan booklet for further information." That is a good quote to have on hand to show to a patient. It also is a good quote for you to remember when setting your fees.

If you could access the insurance companies` UCR tables, you would find several different UCR levels in your area - all based upon percentile. The big problem comes when a company reimburses at the 70th percentile, for example, and you exceed that charge level. For a different policy in your same area, the company could pay at the 80th percentile or the 90th percentile. But, because your office was told once that it exceeded the UCR (at the 70th percentile level), you adjusted your fee because you were afraid of exceeding UCR.

Monitor your EOBs and you will find out which policies pay at which percentile. If you are charging $60 for a procedure, and the insurance company paid you based upon that $60, you know that your fee is too low ... or at least it is less than the UCR at that percentile.

Now, check other plans with other group numbers. If you are being paid based upon the same $60 for all the plans you check, you can be sure that you are at a very low percentile ranking. Based upon the insurance reimbursement only, you would need to seriously consider raising your fees.

Analyze your fees

If your fees are only 10 percent too low on 10 percent of the most common procedures you do, you could be losing $10,000 to $50,000 per year or more! If you are charging - say $100 - for a procedure and the insurance company is reimbursing it at $75, what do you know? You then know that the UCR at that percentile is $75. A day or two invested in the study of your fees, relative to UCR and percentiles, could yield several thousands of dollars per month in increased revenues. That`s why you should do your analysis today!

The following numbers represent an actual 1999 UCR table for a Southern California zip-code area:

Code 2790, Crown - Full-Cast, High-Noble Metal

Percentile Level Reimbursement Amount

60th percentile $679.71

70th percentile $699.95

75th percentile $709.95

80th percentile $720.46

85th percentile $737.75

90th percentile $752.10

95th percentile $778.73

As you can easily see, the difference between the 60th and the 95th percentile is $99. Now, suppose that you live in this area. If you submitted a fee of $800, each company or group would reveal its UCR percentile level to you, because each refers to the maximum amount it pays as the UCR.

For a group that pays at the 70th percentile, it would reimburse based upon 50 percent (typically) of $699.95. If you took this to be "the" UCR and set your fees based upon this number, you would lose $53 per crown for any policy that paid at the 90th percentile and $79 for all crowns done for the lower fee that could have been paid at the 95th percentile. Even at the 80th percentile, you would lose $21 per crown.

Take the middle number of $53 per crown: $53 x 2 crowns per day x 5 days per week = $530 per week x 50 weeks = $26,500 per year lost on one procedure alone. Suppose you were off 10 percent on all of your fees! It is not hard to see that you could lose $100,000 because of the fear of exceeding UCR.

Stated more positively, if you knew the UCR levels, you could increase your income very significantly without increasing your workload. This new money would all fall into the profit category, since no increase in overhead would be required to accomplish this increased income. So, how about an extra $100,000 per year? Get that UCR information ... and use it!