Unit 3: Finances
Unit 5. Finances

Section 1. Financial Viability


A contract proposal describes a commitment to provide specified services and the payment to be received for those services. Contracts with safety net dental clinics are most often with a public or private nonprofit agency or an oral-health-benefit program administrator. Examples of agencies that might wish to contract for services include correctional institutions, employment services agencies, Head Start programs, and long-term care facilities. Oral health benefit plans through these agencies, programs, or facilities may be PPO or capitation plans. New contracts for the same services may be written for each subsequent year. Contracts can be for a specific scope of work, such as contracting for clinical services for a patient group, or for a non-clinical service, such as developing oral-health-education materials or training child care workers about oral health.

Entering into a contract incurs an obligation to provide services to patients covered by the contract. Since the level of effort required to serve this new group may interfere with the clinic's ability to serve current patients of record, the clinic must be certain it will have the clinical capacity to meet both new and existing obligations. Clinics must consider the impact of a contract on its payer mix and revenue projections as well as how entering into the contract relates to the clinic's mission and goals. Contracts usually contain provisions with potential negative impacts (such as penalties for failure to perform).

If you are at a FQHC, don’t forget to include the services listed in the contract in your scope of project. 

Clinics must consider the risks and benefits of signing a contract and should obtain legal counsel before entering into one to provide oral health services.

Safety net dental clinics must recognize situations where the income provided by a contract or grant does not adequately cover the costs of required activities. For example, a $40,000 contract or grant awarded to a clinic to provide 600 additional oral health visits to families who are homeless could cost the clinic money. It is important to know your clinic's cost per unit for delivering services. If the contract is providing $100 per visit but the clinic's actual cost of providing oral health care is $190 per visit, the clinic loses $90 each visit! In this case, clinic administrators must decide whether the benefit of being able to serve additional patients outweighs the negative impact on longer-term financial sustainability. Clinics vary in the cost and reimbursement per visit based on several factors discussed previously. The national average cost per visit is reported on the Uniform Data System report.

In 2016, the national average cost per oral health visit was $191. When evaluating the viability of various grant opportunities, it’s helpful to determine the clinic’s actual cost to deliver the care and balance that number with the revenue of the grant and the expected deliverables. Knowing the actual cost per visit in each clinic will also help with the grant-request process.

ADA maintains a contract-analysis service that analyzes third-party contracts, including contracts from managed care companies, and informs members about the provisions of the contracts so they can make informed decisions about the implications of entering into the contract. The service is free but available only to ADA members, primarily through their state ADA affiliate.

Endorsed by ADA and reviewed by legal counsel of the National Association of Community Health Centers, the manual Increasing Access to Oral Health Care Through Public Private Partnerships: Contracting Between Private Dentists and Federally Qualified Health Centers An FQHC Handbook, although last updated in 2011, nonetheless provides valuable guidance in its review of the advantages and disadvantages of establishing contractual arrangements for the provision of oral health services. It includes a model contract and conforms to statutory and regulatory requirements for FQHCs. It was developed by the Children's Dental Health Project with support from the California Health Care Foundation.