Dentist tax deductions are a crucial aspect of managing your practice’s finances, but navigating write-offs can be complex. Striking the right balance is essential to maintaining profitability while remaining competitive in your market.
Effective dental practice management requires a clear understanding of write-offs and ensuring they align with your financial goals. However, many practices miscalculate their write-off percentages, leading to inaccurate financial reporting and an unclear picture of overall performance.
In this blog, we’ll cover key areas to focus on when handling dental insurance write-off rules, common mistakes to avoid, and the ideal write-off percentage for your practice. Plus, we’ll explore strategies for renegotiating insurance contracts to create a more profitable and sustainable practice.
Common Issues With Tax Deductions for Dentists
Most practices want patients to clearly see the cost of their procedure and how much they owe after insurance. This transparency helps patients understand the value of their coverage and the true cost of dental care.
To achieve this, you might load a fee schedule into your practice management system. However, including both insurance-adjusted fees and standard rates can create accounting issues.
Here’s a common mistake — and how to prevent it:
Suppose you bill $300 for a procedure, but the patient’s insurance covers part of the cost, leaving them responsible for $200. That means you have a 30% write-off. If this isn’t entered correctly, your reporting may only reflect the $200 charge without the write-off, leading to an inaccurate financial picture.
As part of our dental practice management consulting, we ensure that gross charges and adjustments are properly recorded. By analyzing net charges and receipts, we provide a clear view of your practice’s productivity and billing trends, helping you identify areas for growth and improvement.
Evaluating Your Dental Insurance Claim Write-Offs
To gain insight into your dental insurance claim write-off percentages, start by pulling billing and case reports from your practice management system.
With so many reports available, it can feel overwhelming, but the simplest place to begin is with a report on your typical gross charges. If entered correctly, this report will show adjustments from the gross amount, allowing you to calculate your write-off percentage.
In North Carolina, dental practice write-offs should typically be around 10%. If your write-off percentage is approaching 30%, it’s time to take a closer look at your billing practices. A dental practice management consultant can help identify which payers contribute to the highest write-offs and develop a strategy to lower them.
On the other hand, if your reports show little to no write-offs, you may be pulling incorrect data. Partnering with a tax accountant for dentists can ensure you're analyzing the right information and making informed financial decisions for your practice.
Negotiating Insurance Rates
Once you have a clear understanding of your billing and patient write-offs, you may wonder whether it’s time to renegotiate your insurance contracts.
The short answer? Yes!
Contracts can always be revisited to secure better terms. Negotiation is often easier for high-volume practices in larger markets, as insurance companies value these providers.
To start, focus on carriers that reimburse the least, then work your way through the others. Before initiating discussions, gather copies of your contracts and review the language on reimbursement rates. Most agreements are structured in favor of insurance companies, so it’s crucial to fully understand your terms.
Given the complexities involved, many practices consult attorneys specializing in tax strategies for dentists to help navigate the process.
The Ideal Dental Insurance Claim Write-Off Percentage
The ideal dental patient write-off rate is around 12%, though it can vary slightly depending on your market.
In urban areas, competition among providers and employer-sponsored plans often leaves little room for negotiation. Patients tend to choose practices that accept their insurance, making it challenging to secure better reimbursement rates.
Similarly, in rural areas dominated by a single large employer, insurance companies and employers hold significant leverage, limiting your ability to negotiate favorable terms. However, if your practice is in a region with fewer large employers, you may have more flexibility to negotiate better rates and reduce your write-offs.
How The Dental CFO Can Help
Running a dental practice leaves little time to analyze write-offs, review contracts, or adjust your billing structure — yet these factors could be costing your business more than you realize.
With The Dental CFO, you gain access to financial experts and dental CPAs who will dive into your reporting, identify issues, and develop a strategy to minimize insurance claim write-offs. This isn’t a quick fix; it can take years to pinpoint unfavorable payors and renegotiate or phase out low-reimbursement plans.
Our team works alongside you, easing the burden and helping you build a stronger financial future. Getting started is easy. Reach out today and start the conversation with a dental practice tax expert.
