Unit 3: Finances
Unit 5. Finances

Section 1. Financial Viability

Balancing Access and Sustainability

People who operate safety net dental clinics have their hearts in the right place. They care about families with low incomes who have poor access to health care, and these clinic personnel want to make a difference. At the same time, a clinic is of no use to anyone if it can't keep its doors open. Many times, the more inclusive a clinic seeks to be in providing access, the greater its risk of operating in the red because of uncompensated care. By the same token, the more a clinic limits uncompensated care, the greater its risk of limiting access to oral health care for people with low incomes. Just remember, because of resource limitations, the decision to provide care to one person or group is a decision not to provide care to another person or group.

Start with clear mission and goal statements for your clinic, and then develop policies that support them. But you also have to keep in mind the business of operating and sustaining a clinic that strives to fulfill its mission and achieve its goals.

Payer mix refers to the combination of reimbursement sources (payers) that pay for patients' oral health care. Some clinics intentionally seek to increase patient-care revenue by increasing the proportion of patients for whom they receive higher reimbursement.

Other clinics would consider this inconsistent with their mission and, therefore, unacceptable. For example, patients who participate in Medicaid are preferable, from a revenue standpoint, to minimum-pay patients. By limiting clinic eligibility to women and children, who are more likely to have Medicaid coverage, the payer mix can be shifted from uncompensated care (resulting from the difference between actual costs and nominal fees) toward Medicaid. Clinics may establish policies that indirectly favor one payer source or another. Clinics also may market services to attract patients from a more desirable payment source.

The examples in the table below illustrate the impact of different missions and goals; policies on access; fee basis as a percentage of usual, customary, and reasonable (UCR) fees; and financial sustainability on three hypothetical safety net dental clinics.

Safety Net Dental Clinic Missions and Policies

Mission Provide oral health care to all who seek it, regardless of ability to pay. Operate a self-sustaining clinic that serves patients who participate in Medicaid and makes care more affordable for other individuals with low incomes who can pay for a reasonable portion of their care. Increase access to oral health care by serving patients who participate in Medicaid and others with low incomes in a clinic with limited subsidy (grants or fundraising).
Clinic policies
  • Full fees based on Medicaid fee schedule.
    (see Determining Appropriate Clinic Fees)
  • Sliding fee schedule discounts = 80%, 60%, 40%, 20%.
  • Nominal fee = $5/visit (will provide care even if the fee is not paid).
  • Payer mix = 60% self-pay/nominal fee, 13% self-pay/sliding fee scale, 25% Medicaid/CHIP, 2% commercial.
  • Full fees based on 75th percentile of UCR.
  • Sliding fee scale discounts of 50% and 25%.
  • Nominal fee = $50 (will provide emergent care if the fee is not paid)
  • Payer mix = 75% Medicaid/CHIP, 10% self-pay/nominal fee, 10% self-pay/sliding fee scale, 5% commercial.
  • Full fees based on 75th percentile of UCR.
  • Sliding fee schedule discounts of 75%, 50%, and 25%.
  • Nominal fee = $30/visit (will provide emergent care if the fee is not paid).
  • Payer mix = 50% Medicaid/CHIP, 25% self-pay/nominal fee, 20% self-pay/sliding fee scale, 5% commercial.
Patients treated 5,070 5,070 5,070
Medicaid/CHIP $126,800 $412,000 $253,500
Sliding fee schedule $32,950 $60,800 $50,700
Nominal fee $15,210 $38,000 $38,040
Commercial insurance $10,100 $31,750 $31,750
Patient-care revenue (net) $185,060 $542,550 $373,990
Non-patient-care revenue (grants, fundraising) $0 $0 $126,010
(FQHC grant and other grants)
Total revenue $185,060 $542,550 $500,000
Expenses $500,000 $500,000 $500,000
Bottom line ($314,940) $42,550 0
Other subsidy $314,940
City subsidy via recurring line item
$0 $55,500
from other cost centers at health center
Long term This clinic relies on a line item in the city budget to subsidize the cost of uncompensated care that results from maximizing access through a sliding-fee schedule that offers significant discounts. There is an extensive waiting list. In times of economic deficits, this clinic faces a significant threat to operations, should the subsidy be denied. This clinic is a standalone or part of a non-subsidized health center and therefore must generate enough revenue to cover the cost of operations. A subset of patients will be unable to afford the minimum fee and will need to find care elsewhere. There is no waiting list for the clinic, and the clinic operates in the black. This clinic relies on grants to offset the cost of uncompensated care owing to providing a sliding-fee schedule and nominal fees. There is a greater demand for care than the clinic can meet since it presents an affordable option for patients with low incomes.

The Dental Clinic Comparison Chart in Unit 2 illustrates typical costs for clinics of various sizes and recommended staffing patterns. Now that you are at the financial sustainability-determination stage, you will have to make additional decisions. Few costs stay stagnant year over year, including construction, fixed equipment, and human capital costs. It’s fair to say that these costs will increase between 1 to 5 percent annually.