Who Profits from Dental Non-Profits? Not you!

If you didn’t know the level of contempt that the dental insurance companies have for dentists, look no further than the actions and comments of Washington Dental Service and their CEO, James Dwyer.

Dwyer, in an interview with King5 TV station in Washington State this month, casually suggested that dentists “could start working five days a week” to make up for the 15% across-the-the board fee reimbursement cut WDS instituted in 2011.  Easy for him to say, as he makes $1.2 million a year.  He subsequently apologized, (which of course means nothing), saying also that his words were taken out of context.  So the TV station ran more of the video, where Dwyer says this not once but twice and also says, quite smugly, that dentists only work three and a half days a week.  “They certainly don’t work four days a week,” he adds, dripping with contempt.  I think this man believes that in saying this he will garner public support, that people don’t like dentists, and think that dentists make too much money already, and now he’s letting people know that they have short work weeks.  Excellent strategy, from an adversary.

And that’s my point. They are not in the dentists’ corner.  Washington Dental Services, part of Delta Dental, operates as a non-profit organization.   Of course, they are a non-profit in name only, and for one reason: to avoid paying taxes. WDS had a net income of $13.7 million in 2010, and paid no taxes on that.  On top of that, their executive compensation that year was $5.8 million (including Mr. Dwyer’s $1.2 million.)  Remarkably, the executive compensation of WDS has increased an average of 45% over the past five years, right through the recession.  How many dental practices grew 50% in the past five years? Only a few? Well, maybe they should work harder.  How many of your patients experienced that kind of salary growth? Maybe they should work harder too.

Why did they, and by “they” I mean Delta Dental, do an across-the-board cut?  They said to stay competitive.  Really?  They have 90% of the dentists in the market already.  They said they need to be able to lower their premiums to employers.  Why exactly should premiums go down?  Has the price of anything in dentistry gone down? I missed that.  Dwyer’s advice was “work harder”.  Work harder for less money is what he meant.  Making lots of money is for people like him, not for dentists.

Here’s the other reason why I think Delta did it.  They wanted to see  how the dentists and the societies would react, so that they could do it in other states.  To make more profit for their non-profit, and give bigger executive pay increases.  I mean, what better way to fulfill their stated mission, which is to promote oral health?

Yes, Mr. Dwyer actually stated, with no sense of irony, that the mission of WDS was to promote oral health.   How exactly are they doing that? The statement is ludicrous. Their clear purpose is to make money, crush the competition, pay no taxes, and pay themselves incredibly well.  You can’t do that and promote dental health, because that would result in more claims.  Which would hurt their profit.  I mean, their non-profit.

As I said, they are your adversaries.  Seldom are they so open about it, but Mr. Dwyer’s contempt is symbolic of an industry that is at crossed purposes to the health of Americans.  40 years ago in this country it was basically considered immoral and unethical to make a profit providing health insurance.  Now the opposite is true.  Now the  job is not to provide coverage and promote health, it is to be competitive, limit care, and pay extremely high salaries so you can attract better executives.  Recently, Blue Cross/Blue Shield of Massachusetts gave an $11 million severance package when they fired their CEO.  That would turn most businesses into a de facto non-profit, but BC/BS absorbed it nicely.  Because they don’t pay taxes.  It was chump change.

So what do I think the dental society should have done?  I think they should have recommended that their entire constituency drop WDS the next day–the old-fashioned American response to robber barons.  They didn’t do that, of course.  They sent a letter out recommending that dentists find cheaper dental suppliers. (Huh? How’s that going to offset 15% less in fees?)  And when an individual dentist did drop WDS, the company sent a letter out to all the dentist’s patients,  giving them a list of dentists who accepted their plan, and suggesting that their dentist simply wanted to make more money.

And there is that ridiculous statement: “They certainly don’t work four days a week.”  Really?  I personally know about 1,000 dentists, and virtually all of them work at least 4 days a week doing dentistry, and another day or more doing the business side of their practice or getting CE.  But Dwyer knows that.  He’s not an idiot. But he also knows how easy it is to turn public opinion against doctors and their incomes, which was exactly his intention.  So that WDS could maintain their fee cut, lower premiums and everyone still gets a raise next year.  Contemptible?  Reprehensible?  To be sure.  Does Dwyer care?  Not a bit.

So what is a dentist to do?  In the end, this is big business against the small businessperson.  So you work smarter, learn more procedures and techniques, and realize that some things are in your control, and some aren’t, and all your energy needs to go to those things that you can control, you can have an effect on.  And you’ll still have a great business.  And still change people’s lives for the better every day. The best revenge I think is doing good, and doing well.  I’d rather be you than Jim Dwyer any day.

About Fred Joyal

I am the Co-Founder of 1-800-DENTIST, and author of the book Everything Is Marketing: the Ultimate Strategy for Dental Practice Growth. I have worked in the dental industry for 26 years, and have helped thousands of practices grow with new patients and with marketing guidance. I speak all over the country on dental marketing, social media and practice management. Find me on Google Plus.

Posted on May 22, 2012, in dental insurance, Dental Marketing, Dentistry, Practice Management and tagged , , , . Bookmark the permalink. 27 Comments.

  1. The thing to do is ween your practice off WDS and organize to get control of the company again, or at least, the non-profit exemption removed.

    • You can imagine how reluctant they would be to lose that non-profit status, Mike. The challenge will be to get the public to see the facts. The TV station up there is doing a good job of it right now, but it’s a long game.

  2. Jim Hutchinson

    Very well said! Fred. Mr. Dyer’s contempt of our profession is scandalous. My God, even their own foundation (Washington Dental Service Foundation) is trying to distance themselves from Delta.

    • Can you blame them, Jim? It amazes me how some executives can live in such a rarified world that they have no clue about the repercussions of what comes out of their mouth.

  3. Thanks for an excellent summary of what’s going on in Washington State. The dental community here is standing up against the corporate greed exemplified by WDS. We have llost all patience with Mr. Dwyer. It’s time for him to step down.
    More can be learned by visiting http://www.facebook.com/ConcernedDentists

  4. I keep thinking of Hal the computer in Kubrick’s 2001 :A space Odyssey” Once the servant, now the master. I moved to Washington from California in !996 as “Hal” was taking over there. We had a good run until greed took over here , as well. I hope we’ll right the ship. I’m keeping the faith. I love my profession and my patients, not so much third parties.

  5. Thanks, Fred! You are so right – no one has ever made this guy look bad, but this interview did – sadly, there are still too many dentists that are too afraid to drop Delta, because it looks bad for us, too. Today, the only alternative to PPO dentistry is 5 star VIP customer service and marketing or selling out to corporate dentistry. It is time to get more business savvy for those of us that want to wean our practices away from PPO’s.

  6. What an awesome blog Fred!! I wish every dentist would read this!! Which is why I wish you would post this on http://www.DentalTown.com!!! 😉
    Create a great day!
    Howard Farran DDS, MBA
    Founder & CEO of:
    http://www.DentalTown.com
    http://www.DentalTown.com/Espanol
    http://www.DentalTown.com/Portugues
    http://www.OrthoTown.com
    http://www.HygieneTown.com
    http://www.FarranMedia.com
    http://www.TodaysDental.com

  7. The difficulty of weaning off of WDS is that Delta is constantly signing new contracts with employers. They dominate the dental insurance landscape in WA State with minimal competition. If we all dropped, it would send a message to WDS. Most of us are afraid to drop and those of us who have, have struggled. In a tough economy, patients sometimes vote with their pocketbook. They may love us and our offices, but large co-pays can be difficult to swallow, even for the most loyal patients. We continue to reinvent ourselves and satisfy our patients with great customer service.

    • Patients are naturally going to side with the insurers, Paul. Especially if they don’t get the difference between their health coverage and their dental coverage. It falls on us to educate them on this, and it’s hard to have credibility when guys like Dwyer out out this type of misinformation.

  8. Well written article Fred! I agree with what you are saying and appreciate you putting this out on to the web. The sad thing is that for many new dentists they will not know of how it used to be and might accept these new changes as the norm. With very strict anti-trust laws, we all have to be careful how we approach this topic through organized dentistry. I will be forwarding this on to my colleagues as they all need to read this!

  9. It seems that we, as dentists in Washington, have three options. One, to roll over and wait for other benefit providers to follow the precedent set by WDS. Two, simply for each individual dentist to drop his or her membership in WDS. Or three, to fight for change. I am sure that the WDS execs expected some members to drop out after the fee reduction but are counting on the fact that the number who do so will be small. No skin off of their noses. I have elected to fight for change. Obviously Mr. Dwyer needs to go. I believe that the WSDA is working on that. I would hope that CEOs in other states will see him lose his job and think twice about following his lead.
    The next order of business is to rally together to reverse the fee reduction in light of the fact that WDS was not hurting so badly that they could not afford to give the execs hefty raises.

  10. Excerpt from an article I wrote about how dentists need help with the day-to-day management of their practices. There is an old term, “Chief Cook & Bottle Washer.” There is no truer example of this than a dentist. In the article, I did not reference the fact that dentistry is challenging both mentally and physically. Dentists deliver health care AND they bend, twist, lean, get up and down dozens of time each day. You could not do that 5 days a week for any reasonable length of time.

    EXCERPT:

    You strive to deliver to your patients the best possible oral health care in a safe, friendly and professional environment. At the same time, you owe it to yourself and your team to smoothly juggle the many components of a professional business: personnel, marketing, accounts payable, risk management and more. Oh, you also hope to reserve some time for family, community and personal interests.

    LINK TO ARTICLE; MOST RECENTLY POSTED ON THE ADCPA (Academy of Dental CPAs) WEBSITE:

    http://www.adcpa.org/pdf/leveraging-your-time-for-fun-and-profit.pdf

  11. Rod Wentworth

    Hi Fred, I enjoyed your article. You speak eloquently about how non profits are able to profit. I would like to clarify the WSDA’s response to the fee cuts. In addition you made one suggestion; however that could put anyone else that deals with this issue in serious trouble. WSDA or any group of two or more dentists recommending to others to drop any insurance plan is considered a boycott and illegal under federal antitrust laws. The FTC has precedent in charging health care practitioners in these matters and the WSDA spent hundreds of hours meeting with our members around the state to discuss these concerns with our attorney, staff and officers to make sure that any actions taken were legal and did not put them at risk. We did not just send a letter as you suggest. We had regular emails to our members, we started a blog to keep the lines of communication open, and the cost cutting you mention was from a series of webinars where practice management experts and an accountant showed members how to project lost revenue with or without WDS, lower overhead, and get information needed to make an informed decision to drop or not. This was one of the most difficult issues we have had to manage in our history and it involved hours and hours of human resources, legal consultations/opinions and communication amongst the membership. I can tell you their annual dues were repaid many times over in free legal advice by our staff attorney. Without the WSDA involvement I have no doubt that some dentists in our state would have been called out by the FTC for exactly what you suggested.
    I do want to express my appreciation for bringing this issue to the attention of others around the country. This is not an issue confined to Washington State!

    • In view of what I wrote in my subsequent blog, Rod, I appreciate your feedback. I think the FTC is way off the mark, despite the precedent, which wouldn’t be the first time they protected the wrong entity. Since when is boycotting unconstitutional? Nevertheless, the response by the society is certainly limited because of these rulings, and you did your best, it seems. My hope is to raise enough attention to the issue that the insurance companies do not have this kind of power over dentists.

      • Rod Wentworth

        Thanks Fred. (You can do a whole other blog on the FTC. Just look to North Carolina!) I appreciate your goal. Keep on raising the attention level!

  12. I am in the process of credentialing negotiations with PPO plans for my first practice (Delta doesn’t do much negotiating). This makes me hesitant to sign on with any plans. Thanks, Fred, for the insight. I just finished reading “Marketing is Everything” and LOVED it! Your book has inspired me so much for this new practice. Looking forward to your blog posts. Thank you! Even though we have to deal with the negatives of insurance, dentistry is still an incredible way to make a good contribution to the world!

    • Thanks, Ryan. You will do well, I’m sure. And there is some negotiating with Delta, but not much. As long as you communicate clearly to your patients why you don’t take the plans, and how it only is a discount plan, not health insurance, then you should be okay.

  1. Pingback: Message to Jim Dwyer, CEO of WDS: Open Mouth, Insert Foot! | Takacs Learning Center

  2. Pingback: Who Profits from Dental Non-Profits? Not you! | Gentle Dental

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