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Break-even analysis of Medicaid vs fee for service in orthodontic practice: North Carolina as a case study
John E Murdock1, Ceib Phillips, Richard Beane
1Department of Orthodontics, School of Dentistry, University of North Carolina, Chapel Hill, NC 27599-7450, USA.
Introduction:
Access to orthodontic services for children enrolled in Medicaid is limited nationwide. Orthodontists cite low fee reimbursement as a significant barrier to Medicaid participation. The purpose of this study was to examine, under a specific set of practice assumptions, the simulated effect on profitability of treating patients covered by Medicaid in orthodontic practices in North Carolina by using a break-even analysis for the 2005 fiscal year.
Methods:
Questionnaires were mailed to 154 orthodontists in active practice in North Carolina. The response rate was 58%. Seventy respondents met the eligibility criteria. Respondents were categorized into 4 groups based on the number of 2005 Medicaid case starts (I, 0; II, 1-5; III, 6-12; IV, 13 or more). By using the aggregated responses for treatment fees, treatment times, and overhead percentages for each group, average per-patient costs were calculated for each group and used in a break-even analysis.
Results:
Group I accounted for 60% of respondents; group II, 20%; group III, 9%; and group IV, 11%. Assuming that the break-even point had not been reached, the group I practice would have an average estimated loss of $164 per patient whereas groups II, III, and IV would realize average profits from $98 to $256. The break-even point increased slightly in groups I, II, and III after the total number of patients in the patient pool was increased by 5%, assuming that additional patients were enrolled in Medicaid: group I, 203 to 210; group II, 220 to 226; group III, 158 to 160. The break-even point for group IV was 234 patients. Assuming that the break-even point had been reached, all groups were estimated to realize average per-patient profits of $1483 to $1897.
Conclusions:
Break-even analysis is a basic economic concept applicable to orthodontic practices. Under the specific conditions of this study, the inclusion of 5% of patients enrolled in Medicaid in the active patient pool had minimal effect on the financial break-even point and, assuming that the break-even point had been reached, was unlikely to have a negative financial impact on the practice.
