How Dental Savings Plans Work: A Practitioner’s Guide to Recurring Revenue

If you look at your P&L statement, you likely see two glaring issues: overhead is rising, and insurance reimbursements are stagnant (or dropping). The “PPO Hamster Wheel” is the most common frustration I hear from the practices I consult with. You are working harder, seeing more patients, but taking home less.

For years, the industry solution was simply “add more new patients.” But volume is not the answer if you are losing 45% of every dollar to insurance write-offs.

The real solution lies in a fundamental shift in your business model: The In-House Dental Savings Plan.

But how do dental savings plans work for the practice owner? Are they just a discount card, or are they a legitimate vehicle for growth? When structured correctly, a membership plan does more than just help uninsured patients—it stabilizes your cash flow, increases your practice valuation, and provides the exit ramp you need to finally drop those low-paying PPOs.

Here is the blueprint for how they work and why your practice needs one.

How It Works (The Business Model)

To the patient, a dental savings plan looks like a simple discount club. But to the practice owner, it is a fundamental shift in your business model: moving from transactional dentistry (getting paid only when you work) to subscription dentistry (getting paid whether the patient comes in or not).

When you strip away the marketing, the model works by stabilizing your hygiene department revenue and “locking in” patient loyalty. Here is the breakdown of the mechanics.

The “Included Value” Strategy

The genius of the model is in what the subscription fee covers. Typically, the fee is priced to cover the standard of care for hygiene (2 prophys, 2 exams, necessary X-rays, and an emergency exam).

• Why this works: You are essentially pre-selling your hygiene appointments. Because the patient has “already paid for it,” they are significantly less likely to cancel or no-show. You are securing 100% compliance for recall visits, which is the lifeblood of your restorative schedule.

The “Sticky” Factor: Shifting Patient Psychology

The third component is the discount on restorative treatment (usually a flat 15–20% off crown, bridge, and operative work).

• The Psychology: When a PPO patient needs a crown, they ask, “Does my insurance cover this?” If the answer is no, they often decline.
• The Member Psychology: When a membership patient needs a crown, they think, “I have a membership that gives me 20% off.” They view the discount as a perk they need to “utilize” to get the most value out of their plan.

The Result: Data consistently shows that membership patients have higher case acceptance rates than uninsured cash patients because they feel invested in the practice. They stop shopping around because they are “members” of your office.

The “Triple Win” of Membership Plans

When I consult with practice owners, they often hesitate to launch a plan because they view it as “just another discount.” They worry about eroding their profit margins.

However, when you analyze the data, a well-structured membership plan actually increases profitability. It creates a “Triple Win” scenario that strengthens the fundamental health of your business in ways that fee-for-service or insurance models cannot.

Win 1: Predictable Cash Flow (The “Snow Day” Buffer)

In dentistry, overhead doesn’t take a day off. Rent, payroll, and equipment leases are due whether your schedule is full or empty.

• The Problem: A snowstorm, a flu wave, or a hygienist calling in sick can tank production for a week, leaving you scrambling to cover fixed costs.
• The Membership Win: Subscription revenue hits your bank account on the 1st of the month, regardless of production. It provides a financial floor. If your practice generates $20,000/month in membership fees, that is $20,000 guaranteed—even if the office is closed. This stability eliminates the “feast or famine” stress that keeps many owners awake at night.

Win 3: Increased Practice Valuation (The Exit Strategy)

This is the factor most dentists overlook until they are ready to sell.

• The Reality: When Private Equity (PE) firms or DSOs value a practice, they look at EBITDA (profitability) and risk.
• The PPO Risk: A practice heavy on PPOs is risky; insurance reimbursement rates can drop at any moment (and often do).
• The Subscription Premium: Recurring revenue is the “Holy Grail” of business valuation. Buyers will pay a higher multiple for a practice with a sticky, predictable subscription revenue stream than they will for a practice with volatile transactional revenue. By building a membership plan today, you are actively increasing the check you will eventually receive when you sell your practice.

Savings Plan vs. Insurance Write-Offs (The Math)

The biggest mental hurdle for most dentists is the idea of offering a discount. You think, “My margins are already tight; I can’t afford to give 20% off.”

But you aren’t comparing the membership plan to your full UCR (Usual, Customary, and Reasonable) fees. You need to compare it to your PPO write-offs, which are likely hemorrhaging your profitability.

The PPO Reality

Let’s look at the numbers. If you are in network with major carriers like Delta or Cigna, you are likely accepting a 35% to 45% write-off on every procedure.

• The Math: You do a crown for $1,500. The insurance allowable fee is $900. You instantly lose $600 (40%) before you even pick up a handpiece.
• The Cost: On top of that $600 loss, you are paying your front desk team to spend hours verifying eligibility, submitting claims, and chasing denials.

The Membership Reality

With an in-house plan, the economics flip in your favor.

• The Math: You charge the same $1,500 for a crown. You give a 20% member discount ($300). You collect $1,200.
• The Difference: You just made $300 more on the same procedure than you would have with the PPO patient.
• The Bonus: You collect that $1,200 today. No claims to file. No waiting 90 days for a check. No denials.

Comparison: PPO Patient vs. Membership Patient

When you stack them side-by-side, the membership patient is vastly more profitable, even with the discount.

The Bottom Line: You are not “losing” 20% by offering a membership plan. You are gaining the 20-25% margin you used to give away to the insurance company.

How to Structure a Plan That Works

The most common reason membership plans fail is complexity. If your front desk team cannot explain the plan in 30 seconds, or if the patient needs a calculator to figure out the benefits, no one will sign up.

To build a plan that scales, you need to follow the K.I.S.S. principle (Keep It Simple, Stupid). Here is the structure I recommend to 90% of the practices I consult with.

2. The Strategic Discount (Restorative)

Instead of complicated copay tables, offer a flat discount across the board.

• Recommendation: 15% to 20% off all restorative and cosmetic procedures.
• Why: It is easy for the team to calculate and easy for the patient to understand. “If you join today, you save $200 on this crown immediately.”

3. Pricing Your Plan (The “Break-Even+” Formula)

Do not just copy the dentist down the street. Your pricing must be based on your UCR fees.

• The Formula: Add up the UCR value of the preventive care included (2 cleanings, exams, X-rays). Discount that total by roughly 10–15% to create a “deal” for the patient.
• The Guardrail: Ensure the annual fee covers your hygienist’s hourly wage + overhead for those appointment hours. The membership fee covers the cost of the hygiene visit; the profit comes from the restorative work the patient accepts because of the discount.

Common Pitfalls (Why DIY Plans Fail)

The concept of a membership plan is simple, but the execution is where most practices stumble. I have walked into countless offices that claim to have a savings plan, only to find out they have five active members and a dusty binder hidden under the front desk.

If you are going to implement this, you must avoid these three “plan killers.”

1. The “Binder Method” (Manual Administration)

This is the single biggest mistake. You cannot run a subscription business on a spreadsheet or a physical binder.

• The Trap: Trying to manually track renewal dates, charge credit cards one by one every month, and update patient eligibility in your practice management software.
• The Result: Your front desk team gets overwhelmed. Cards get declined and nobody follows up. You lose revenue because the administrative friction is too high.
• The Fix: You must use membership software (like Kleer, BoomCloud, or DentalHQ). These platforms automate the billing, renewals, and compliance, allowing your team to focus on the patient, not the paperwork.

3. Ignoring Regulatory Compliance

While dental savings plans are not insurance, they are still regulated entities in many states.

• The Trap: Drafting a quick contract in Word without understanding your state’s specific “Direct Primary Care” or “Discount Medical Plan Organization” (DMPO) laws.
• The Result: Potential fines or consumer protection issues.
• The Fix: Ensure your plan’s legal language is ironclad. This distinguishes a legitimate business strategy from a casual discount club.

Frequently Asked Questions

Can I offer this to patients who already have insurance?

Technically, yes—but strategically, no. You cannot bill insurance and use a membership plan for the same procedure (that is considered “double dipping” or fee forgiveness). However, the membership plan is an excellent solution for your insured patients who have exhausted their annual maximum. Once they hit their $1,500 cap, you can offer them a “VIP Courtesy” (a flat discount similar to your member rate) to keep them in the chair for pending treatment.

• Consultant’s Tip: Do not try to “hybridize” the plan. Keep it simple: The Membership Plan is for uninsured patients or those you are transitioning off of a PPO you recently dropped.

Do I really need special software to manage this?

Absolutely. Attempting to run a subscription model manually is the fastest way to kill it. If you use a binder or a spreadsheet, you rely on your front desk to remember to run credit cards every month. When cards expire or decline, revenue stops, and your team is too busy to chase it. Platforms like Kleer, BoomCloud, or DentalHQ automate everything: sign-ups, recurring billing, dunning (failed payment recovery), and compliance. They charge a small fee per member, but the automation protects your Recurring Revenue (MRR), which is essential for your practice valuation.

How do I transition my PPO patients to this plan?

This is the most powerful use case for a membership plan: The PPO Exit Strategy. When you decide to drop a low-reimbursing PPO (e.g., Delta or Cigna), you don’t just send a letter saying “Goodbye.” You send a letter saying:“We are leaving X network to maintain our quality of care, but we have launched our own In-House VIP Plan that provides similar coverage without the waiting periods or denials.” This gives your patients a “soft landing.” Our data shows that when presented correctly, a significant percentage of patients will choose to stay with you and join your membership plan rather than finding a new in-network provider.

Are dental membership fees HSA/FSA eligible?

Generally, yes. Because the membership fee covers specific medical services (exams, cleanings, X-rays), most patients can use their Health Savings Account (HSA) or Flexible Spending Account (FSA) cards to pay for the membership. This makes the plan even more attractive to patients, as they are paying with pre-tax dollars. Always advise patients to check with their specific plan administrator.

Stop Renting Your Patients from Insurance Companies

For decades, dentists have accepted the “PPO Tax”, writing off 40% of their production, because they believed it was the only way to get new patients.

The industry has shifted. The most profitable, valuable, and low-stress practices I consult with today are those that have taken control of their revenue through In-House Membership Plans.

By implementing a structured savings plan, you aren’t just offering a discount. You are building a subscription business inside your practice that guarantees cash flow, increases patient loyalty, and builds an asset that will pay dividends when you eventually sell.

Ready to Build Your Exit Ramp?

You don’t have to guess at the pricing or the legal structure. If you are tired of the PPO hamster wheel and want to see how a membership plan would impact your specific P&L, let’s talk.