Study of Alternative Dental Providers Kansas

Transcription

1 Study of Alternative Dental Providers Kansas April 9, 2012 P Third Avenue, Suite 2700 F Seattle, WA ecgmc.com Boston San Diego San Francisco Seattle St. Louis Washington, D.C.

2 TABLE OF CONTENTS Page I. Executive Summary... 1 II. Introduction... 3 III. Approach... 6 IV. Results The Economic Viability of Alternative Providers V. Conclusion Appendix A Overview of Methodological Approach Appendix B Practice Economics Revenue Calculations Appendix C Estimated Revenue for DHĀR Appendix D Estimated Revenue for DT Appendix E Estimated Revenue for ADHP Appendix F Reimbursement Appendix G Reimbursement Rates Appendix H Productivity Calculations Appendix I Provider Scope of Practice Appendix J Estimated Production DHAT Appendix K Estimated Production DT Appendix L Estimated Production ADHP Appendix M Salaries and Benefits Calculations Appendix N Dentist Supervision Expense Calculations Appendix O Depreciation Calculations Appendix P Equipment List Low-Range Operatory Option Appendix Q Finance Expense Calculations Appendix R Rent/Lease Calculations Appendix S Other Operating Expenses Calculations Appendix T Tuition Appendix U Cost of Living Appendix V Cost-of-Living Estimates by School Appendix W Student Loan Calculations Appendix X Salary Requirements and Tuition Subsidies 1920\01\190257(docx)-E2 i

3 I. Executive Summary ECG Management Consultants, Inc., was engaged by the American Dental Association (ADA) to assist in assessing the economic viability of alternative mid-level provider models for the provision of dental care to the underserved in five selected states Connecticut, Kansas, Maine, New Hampshire, and Washington. The three alternative mid-level providers were dental therapists (DTs), dental health aide therapists (DHATs), and advanced dental hygiene providers (ADHPs) based on existing models and those in proposed legislation. The assessment of these mid-level provider types included evaluating compensation levels, cost of training, operating expenses, estimated productivity, and potential revenue. The feasibility of each alternative provider was evaluated for three payor mix scenarios. See Table 1 below for the composition of each payor mix. Furthermore, the attractiveness of the career was evaluated through an analysis of educational debt levels relative to compensation levels. Table 1 Composition Public Fee Schedule Sliding Fee Schedule Private Fee Schedule A 75% 25% 0% B 50% 25% 25% C 50% 0% 50% To prepare these analyses for Kansas, ECG obtained data from the ADA, Kansas Dental Association (KDA), tertiary dental educational programs, community dental health centers, and online sources. ECG also interviewed KDA leaders, dentists in public practice clinics and clinic administrators, and representatives from dentist and dental provider educational institutions familiar with tuition and program finances. As shown in Table 2 below, only under the most generous model, C, is the DHAT model economically viable. Under all other payor mixes, none of the three models are economically viable. The ADHP model is less favorable than the DT and DHAT models, primarily due to significantly higher expenses (higher provider salaries). Of all the payor mixes (see Table 1), C generates the largest revenue due to its higher concentration of private dental beneficiaries. With the exception of the DHAT model with C, the practice is likely to operate at a loss. Integrating mid-level providers into an existing clinic would lower equipment, finance, and rent expenses, but even under this scenario the practice is still likely to operate at a loss under all three payor mixes (the exception is the DHAT in C). 1920\01\190257(docx)-E2 1

4 Table 2 Practice Economics Annual Income (in thousands of dollars) DHAT DT ADHP A B C A B C A B C Total Revenue $103 $150 $201 $ 105 $151 $203 $ 102 $149 $201 Total Expenses Net Income/(Loss) $ (90) $ (43) $ 8 $(120) $ (74) $ (22) $(136) $ (89) $ (37) Table 3 below indicates that the debt burden for all the provider models is much greater than the sustainable range of a 15 percent debt load. 1 The DHAT provider model is closest to the 15 percent debt load range at 22 percent, which suggests that there could be sufficient interest in this occupation to attract applicants. In order for the DHAT, DT, and ADHP models to be sustainable, significant tuition subsidies or loan repayment programs would be necessary. Table 3 Mid-Level Provider Economics Debt Burden DHAT DT ADHP Provider Salary $51,000 $76,000 $90,000 Educational Debt (annual, over 25 years) $11,000 $22,000 $27,000 Debt as a Percentage of Salary 22% 29% 30% Based on an analysis for the state of Kansas, with the exception of the DHAT model with Payor Mix C, none of the three alternative mid-level providers are economically viable. The inadequacy of current public reimbursement levels for dental providers is highlighted by the results of the practice economics. If serving patients at the public reimbursement level is not economically feasible for providers with salaries below 50 percent of those of a dentist, then one of the limitations of greater access to dental treatment is clearly that existing fee schedules in public settings do not cover the cost of treating these patients. In Kansas, the DHAT salary is less than 50 percent of a public dentist s salary, while the DT salary is 66 percent, and the ADHP salary is 78 percent. The ADHP salary is 57 percent of a private dentist s salary. The introduction of additional providers does nothing to address this issue. The educational debt burden for all the mid-level providers relative to projected salaries was found to be unsustainable. In order to attract candidates into these careers, tuition subsidies or loan repayment programs will be needed. 1 U.S. Department of Education, Federal Student Aid, Administrative Wage Garnishment. Available at: www2.ed.gov/offices/osfap/dcs/awg.html. 1920\01\190257(docx)-E2 2

5 II. Introduction Oral health is vital to the general health and well-being of all Americans. As stated in the 2011 Institute of Medicine report, In recent decades, advances in oral health science broadened understanding not just of healthy teeth but of the health of the entire craniofacial-oral dental complex and its relation to overall health. 2 The nation s overall oral health is improving (as shown by decreases in caries prevalence and edentulism, as well as increases in the delivery of preventive services such as sealants), and the U.S. population s access to dental care is excellent. Most Americans today receive the oral health care services that they need and want. Near-term and long-term outlooks for the affordability and accessibility of dental care for the majority of Americans remain excellent, a situation due in no small part to dentistry s outstanding record of prevention, efficiency, and cost-control. 3 Amidst an abundance of dental services for the huge majority of Americans, pockets of our citizens do not access dental services commensurate with the overall population. For individuals with meager incomes, especially those who live in areas with few dental personnel, access is more difficult. For individuals who have disabilities and other special problems, access to care can be exceedingly difficult. 2,3 There are many components to attempt to address the oral healthcare needs of the economically disadvantaged: charity care provided by private practice dentists, the dental safety net system, and Medicaid. Results of these efforts have shown some success. For example, national estimates from the Centers for Medicare & Medicaid Services (CMS) 4 show that the percentage of children enrolled in Medicaid with a dental visit during the past year rose from 27 percent in 2000 to 40 percent in The national trends, however, mask significant variation in progress among states. In Kansas, for example, in 2000 the utilization rate for Medicaid children 4 was 20 percent compared to 52 percent for privately insured children 5 in the U.S. a 32 percentage point utilization gap. Between 2000 and 2009, Kansas made significant progress in closing the utilization gap among poor children. The utilization rate for Medicaid children doubled to 40 percent in 2009, while the utilization rate among privately insured children in the U.S. increased to 57 percent resulting in a smaller utilization gap of 17 percentage points in Among adults, the utilization rate in 2010 was 72.9 percent in Kansas compared to 69.7 percent in the U.S. as a whole Institute of Medicine of the National Academies, Advancing Oral Health in America, The National Academies Press, Washington, D.C., L.J. Brown, Adequacy of Current and Future Dental Workforce: Theory and Analysis, Chicago, ADA, Health Policy Resources Center; CMS. Available at: Care/Quality-of-Care.html. U.S. Department of Health & Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS). Available at: Centers for Disease Control and Prevention; Office of Surveillance, Epidemiology, and Laboratory Services; Behavioral Risk Factor Surveillance System (RFSS). Available at: \01\190257(docx)-E2 3

6 As part of their efforts to improve the oral health of the economically disadvantaged population, some states are considering the addition of a mid-level provider to the dental workforce. Efforts to add a mid-level provider are taking place during a time when several new dental schools have opened and the number of dental school graduates has dramatically increased. When assessing various policy options in the state of Kansas, it is important to perform a costbenefit analysis of any proposed solution. ECG was engaged by the ADA to conduct a study to explore the economics of three types of midlevel providers currently being considered in several states. This economic feasibility assessment consists of two elements: Whether the DHAT, DT, and ADHP are financially viable in practice conditions that enhance dental care access to the underserved. Estimation of whether provider compensation can sustain the debt load associated with the cost of training programs. This report summarizes the analysis for Kansas. Table 4 below lists the general characteristics of the DHAT, DT, and ADHP as they have been introduced into legislation to provide increased access to dental care for the underserved, as well as locations where a similar model is currently deployed. Table 4 Comparison of Provider Models Characteristic DHAT DT ADHP Currently Active Alaska. Minnesota. No states. Prerequisite High school. High school. Bachelor s degree in dental hygiene. Education/Training Practice Setting Billing Practice Dental Supervision An 18- to 24-month community college/ technical school program and preceptorship. Modeled as a 24-month program. Predominantly public health setting. Procedural-based billing (done by employing entity). Dental supervision on site or remotely using teledentistry technology. A 48-month universitybased program after high school. Predominantly public health setting. Procedural-based billing (done by employing entity). Dental supervision on site or remotely using teledentistry technology. A 24-month universitybased master s degree program that follows a 48-month universitybased bachelor s degree program in dental hygiene. Predominantly public health setting. Procedural-based billing. Can bill independently (may be done by employing entity). Not required. 1920\01\190257(docx)-E2 4

7 Characteristic DHAT DT ADHP Expected Patient Population Served Underserved children and adults (50% or more of the patients are on public insurance or are uninsured). Underserved children and adults (50% or more of the patients are on public insurance or are uninsured). Underserved children and adults (50% or more of the patients are on public insurance or are uninsured). Table 5 broadly defines the scope of practice for each mid-level provider. Note that there are differences in scope within each procedure category for the various providers. The DHAT is the most limited in scope, and the ADHP has the broadest scope of practice of the three models examined. Table 5 Scope of Practice for Provider Models Procedure Category DHAT DT ADHP Diagnostic None None Moderate Radiographs Extensive Limited Interpretation Extensive Preventive Limited Extensive Extensive Restorative Some Extensive Direct Restorations Extensive Direct Restorations Endodontics Limited Limited Limited Periodontics None None Nonsurgical Prosthodontics None Limited Limited 1920\01\190257(docx)-E2 5

8 III. Approach Economic viability is determined by modeling expected revenues and expenses in the simplest practice model one chair and a dental assistant (DA). This approach ensures the greatest flexibility to provide dental care in underserved settings and applicability of results, whether the setting is school-based, rural, mobile, or a larger dental and/or medical clinic. The detailed methodology is described in APPENDIX A. Revenue is based on the three key elements illustrated in the figure below and is detailed in APPENDICES B through E: Blended procedural-based reimbursement scenarios from 0 percent of private payor fee schedules to a maximum of 50 percent of the ADA Survey of Dental Fees. See Table 1 for the exact composition of each payor mix. The sliding fee is calculated as 30 percent of the private fee schedule. The public reimbursement source is the most recent Kansas Medical Assistance Program fee schedule. See APPENDICES F through G for more detail. Volumes derived from estimated time to perform procedures in a public health clinic setting and adjusted for productivity in the one operatory setting. See APPENDIX H for more detail. Procedure and patient mix based on an average public dental clinic and within each provider s scope of practice. See APPENDICES I through L for more detail. As a result of using procedures performed in a generic public health clinic, the results are not biased by available coverage and more accurately represent the care that would be provided to the underserved. To ensure that reimbursement is recorded for all work, when a procedure is within the scope of practice and not covered, the sliding fee schedule is applied. 1920\01\190257(docx)-E2 6

9 Figure Derivation of Provider Revenues Revenues Type of Procedures Performed Volumes Reimbursement Public Clinic Patient/ Procedure Mix Provider Scope of Practice Productivity (Time to Complete Procedures) (Reimbursement Level) % Public Payor % Private Payor (Medicaid) % Sliding Fee Table 6 Composition Public Fee Schedule Sliding Fee Schedule Private Fee Schedule A 75% 25% 0% B 50% 25% 25% C 50% 0% 50% The following expenses are included in the income statement for the public dental practice: Provider Salary The salary for each provider is derived from actual salaries paid to the Alaska DHAT and Minnesota DT, as well as a projected salary for the ADHP, and is adjusted for income differentials between those states and Kansas. See APPENDIX M for more detail. Staff Salary Based on the average salary of a DA in a Kansas public dental clinic. Assumed that the staff assisting the mid-level provider is a DA. See APPENDIX M for more detail. Benefits A 27.5 percent benefits rate is applied to all providers, except for dental supervision below. See APPENDIX M for more detail. Dentist Compensation This is a salary estimate to meet the supervision requirement for the DHAT and DT only. It assumes 15 minutes a day for oversight. See APPENDIX N for more detail. 1920\01\190257(docx)-E2 7

10 Depreciation (Computer and Equipment) Depreciation based on the purchase of new, lowend operatory equipment to permit practicing independent of a larger clinic setting. In addition to basic operatory equipment to practice, this requires sterilization, lab, X-ray, and other machinery. Equipment cost includes a laptop. These expenses are identical for all providers, with the exception of intraoral cameras to be used for teledentistry and supervision excluded from the ADHP costs. See APPENDICES O and P for more detail. Finance Expense Financing of the previously described equipment at current market rates for 10 years. See APPENDIX Q for more detail. Rent/Lease Rent costs are based on square footage required for the operatory and equipment. Other areas are omitted, as they are not required in a mobile setting or common to a larger facility, such as a school or clinic setting. See APPENDIX R for more detail. Operating Expenses Operating expenses include dental supplies and maintenance costs, lab services, office supplies, and other miscellaneous expenses for cleaning and so forth and are based on average practice expenses from multiple public dental clinics normalized for provider FTEs and productivity. See APPENDIX S for more detail. The economic sustainability of a career as a DHAT, DT, or ADHP is determined by the cost of training (APPENDIX T) and associated debt load relative to the expected earnings in the context of other alternatives. In addition to the salary derivation described above, the cost of training was calculated using unsubsidized tuition and the average cost of living (e.g., room, board, books, transportation, personal expenses) (APPENDICES U and V) for the respective program durations (see Table 4). To determine the annual debt expense of each provider, standard student loan terms and current interest rates were applied. See APPENDIX W for more detail. There are three key features of this approach: 1. Identifying the unsubsidized or actual program cost per student provides decision makers with the true cost of the training per provider. 2. Including post-high school training costs for all providers: Ensures an equal basis for comparison of educational costs. Permits assessment of the cost of increasing the supply of providers rather than poaching from existing dental workers that may pursue additional training. 3. Assuming that 100 percent of the educational costs are borrowed, this approach ensures that the analysis is not biased by the socioeconomic limitations of potential applicants. It represents the full cost of the education, unsubsidized by the financial means available to some candidates. 1920\01\190257(docx)-E2 8

11 Unsubsidized tuition is based on the actual training cost of the Alaska DHAT students for a class size of 30 approximately $51,000 per year. It is expected that annual educational expenses for the other programs would be similar, as they require the same clinical equipment, facilities, and salary level for educators. Costs specific to the Alaska setting were excluded. 1920\01\190257(docx)-E2 9

12 IV. Results The Economic Viability of Alternative Providers Estimated revenue for each provider and for each payor mix is detailed in EXHIBIT I. As expected, C produces the highest revenue, due to a larger percentage (50 percent) of privately insured beneficiaries. Comparing across the providers, revenues are similar, with a maximum variability across providers of approximately $3,000 within a given payor mix. This indicates that for the same expected productivity level, the procedural mix/scope of practice has little impact on revenues. The practice variability has little effect on the expenses the DHAT and DT only differ in their salaries. In addition to the salary differential, the ADHP has no costs associated with supervision requirements such as dentist compensation and teledentistry equipment. This results in $5,000 less in expenses. Salaries are the primary driver of the varying practice expense. The resulting margins show a net loss for each provider model in a public health practice setting, with the exception of the DHAT model with C. Even assuming that the equipment is paid off, thereby reducing annual costs by approximately $32,000, only the DT model with C generates positive net income. This demonstrates that subsidies would be necessary to sustain most of these models. The magnitude of the practice loss for each margin is large and, with the exception of an increase in reimbursement, few realistic scenarios would change this considerably. However, two scenarios should be considered. The first scenario is to vary reimbursement. This model assumes that all mid-level providers are reimbursed, similar to a dentist, at 100 percent of the fee schedule for all procedures within their scope of practice. However, there is precedent for reimbursement to be a percentage of the dentists reimbursement, similar to how physician assistants (PAs) and advanced registered nurse practitioners (ARNPs) are currently reimbursed by some payors. For example, PAs are reimbursed at either 75 or 85 percent (depending on the service) of the Medicare Physician Fee Schedule, and ARNPs are reimbursed at 85 percent of the Medicare Physician Fee Schedule. 7 Were this to be the case for dental care, the loss per practice would be far greater than modeled in this study. The second scenario is to vary equipment expenses. DTs, DHATs, and ADHPs are expected to practice in public health settings. These can either be freestanding or integrated clinics. Integrated into an existing clinic, the equipment expenses could be reduced by approximately half, as the mechanical, lab, and sterilization equipment could be shared. Furthermore, this would reduce rent/lease costs equivalent to the space required for this equipment. The impact on the operating expenses would be approximately $10,000, which would be insufficient to change the outcome of the analysis. 7 CMS, Medicare Claims Processing Manual. 1920\01\190257(docx)-E2 10

13 EXHIBIT I REVENUE A B C A B C A B C Clinic Revenue 1,2,3 $ 103,000 $ 150,000 $ 201,000 $ 105,000 $ 151,000 $ 203,000 $ 102,000 $ 149,000 $ 201,000 Total Revenue $ 103,000 $ 150,000 $ 201,000 $ 105,000 $ 151,000 $ 203,000 $ 102,000 $ 149,000 $ 201,000 EXPENSES STUDY OF ALTERNATIVE DENTAL PROVIDERS INCOME STATEMENT PRACTICE Kansas DHAT DT ADHP Practitioner Salary & Benefits 4 $ 65,000 $ 65,000 $ 65,000 $ 97,000 $ 97,000 $ 97,000 $ 115,000 $ 115,000 $ 115,000 Staff Salaries & Benefits 4,5 41,000 41,000 41,000 41,000 41,000 41,000 41,000 41,000 41,000 Dentist Compensation 6 3,000 3,000 3,000 3,000 3,000 3, Depreciation (Computer & Equipment) 7 16,000 16,000 16,000 16,000 16,000 16,000 15,000 15,000 15,000 Finance Expense 8 16,000 16,000 16,000 16,000 16,000 16,000 15,000 15,000 15,000 Rent/Lease 9 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 Operating Expenses 10 46,000 46,000 46,000 46,000 46,000 46,000 46,000 46,000 46,000 Total Expenses $ 193,000 $ 193,000 $ 193,000 $ 225,000 $ 225,000 $ 225,000 $ 238,000 $ 238,000 $ 238,000 NET INCOME/(LOSS) $ (90,000) $ (43,000) $ 8,000 $ (120,000) $ (74,000) $ (22,000) $ (136,000) $ (89,000) $ (37,000) Expenses as a Percentage of Clinical Revenue 187% 129% 96% 214% 149% 111% 233% 160% 118% NOTE: Totals have been rounded to the nearest thousand A: 75% Public Fee Schedule, 25% Sliding Fee Schedule, and 0% Private Fee Schedule. B: 50% Public Fee Schedule, 25% Sliding Fee Schedule, and 25% Private Fee Schedule. C: 50% Public Fee Schedule, 0% Sliding Fee Schedule, and 50% Private Fee Schedule. Salary and benefit estimates based on data from Alaska DHAT program, public dental clinic in Minnesota, and U.S. Bureau of Labor Statistics. Salary based on average annual compensation for a dental assistant. Source: U.S. Bureau of Labor Statistics. Benefits are applied at a rate of 27.5% This includes a salary for supervision. Salary based on dentist in public health setting. Depreciation cost in Year 1. In accordance with IRS Publication 946, computer depreciation is based on a 5-year useful life, and office equipment and other nonspecified equipment depreciation is based on a 7-year useful life. Furthermore, the straight-line depreciation method is applied. Annual financing payment based on an interest rate of 7.5% for a 10-year term. Based on an average square foot estimate of 397 based on a mix of locations from Ms. Charmen Brummer, Patterson Dental. Includes space for sterilization, laboratory, gas storage, X-ray, and other areas. Operating expenses include dental supplies and maintenance costs, any contractual services, office supplies, and other miscellaneous expenses. 1920\01\190261(xlsx) EXHIBIT I

14 As a first test of appeal, the alternative provider compensation has to be greater than that of existing providers with similar education levels. All pass this test. Table 7 Salary Comparison Salary DA DH DHAT DT ADHP Dentist Public $22,880 $58,500 $50,892 $75,717 $90,139 $115,000 Private $32,210 $64,310 $158,360 Based on debt levels, both the DT and the ADHP are less attractive career options than the DHAT. As shown in Table 3, the debt burden for the DHAT is 22 percent, for the DT is 29 percent, and for the ADHP is 30 percent, all of which exceed the 15 percent of salary threshold considered sustainable for educational loans. 8 Now that the emerging Minnesota providers have established earning expectations, students are unlikely to choose DT or ADHP as careers unless salaries increase or their tuition cost is subsidized, as at the University of Minnesota. To achieve a 15 percent debt-to-salary ratio, the DHAT, DT, and ADHP will require the tuition subsidies shown in Table 8. This subsidy should be $16,000 per year for the DHAT, $31,000 per year for the DT, and $26,000 per year for the ADHP. The total supplemental tuition funding for the program s duration is $32,000 for the 2-year DHAT, $124,000 for the 4-year DT, and up to $156,000 for the 6-year ADHP. See APPENDIX X for calculation details. Table 8 Tuition Subsidy Required to Maintain 15 Percent Debt-to-Salary Ratio DHAT DT ADHP Debt-to-Salary Ratio and Salary Required Provider Salary $51,000 $ 76,000 $ 90,000 Annual Debt Expense (Actual) $11,000 $ 22,000 $ 27,000 Debt Percentage of Salary (Actual) 22% 29% 30% Salary Required Each Year of Loan for 15% Ratio $73,000 $147,000 $180,000 Tuition Subsidy Required Total Loan Amount $ 95,000 $131,000 $166,000 Average Annual Unsubsidized Tuition (Per Student) 51,000 51,000 41,000 Required Tuition to Meet Debt Ratio (Annual) 35,000 20,000 15,000 Tuition Subsidy (Annual Per Student) $ 16,000 $ 31,000 $ 26,000 Total Subsidy for Duration of Training (Per Student) $ 32,000 $124,000 $156,000 8 U.S. Department of Education, Federal Student Aid, Administrative Wage Garnishment. Available at: www2.ed.gov/offices/osfap/dcs/awg.html. 1920\01\190257(docx)-E2 11

15 V. Conclusion Financially, the only mid-level provider model that is independently sustainable is the DHAT with a 50 percent private payor patient mix. Addressing the access issue will require more public subsidies for practices as a result of the following factors: 1. Dental care in Dental Health Professional Shortage Areas (DHPSAs) is impacted by the economics of remote locations and small populations. Bringing care into these areas is less efficient. Costs increase when practices must be small scale because the population cannot support the more productive large clinic-based multi-operatory and provider model. 2. Public procedural-based reimbursement and sliding fees are too low. Although mid-level providers are likely to require lower salaries than dentists, available reimbursement through Medicaid is insufficient. At a 75 percent minimum, Medicaid patient mix reimbursement does not cover salary and benefits for any of the mid-level provider types. Medicaid and sliding fee payments are insufficient to cover direct salaries, benefits and operating expenses. These are covered only for the DHAT and assuming a 50 percent private payor patient mix ( C) and no overhead for administrative salaries or lease. Based on an analysis for the state of Kansas, only the DHAT model with C is economically viable. The educational debt burden for all mid-level providers relative to projected salaries was found to be unsustainable at the projected salaries. The DHAT, DT, and ADHP would not be viable without considerable tuition subsidies. However, it is important to note that this analysis is based on the very lean expense structure of the Alaska DHAT program. Does the introduction of these providers increase access? The inadequacy of current public payor and indigent reimbursement levels for dental providers is highlighted by the results of the practice economics. If serving patients at the public reimbursement level is not economically feasible for providers with salaries below 50 percent of the dentists, then one of the limitations of greater access to dental treatment is clearly that existing fee schedules do not cover the cost of treating these patients. The introduction of additional providers does nothing to address this issue. 1920\01\190257(docx)-E2 12

16 APPENDIX A STUDY OF ALTERNATIVE DENTAL PROVIDERS KANSAS OVERVIEW OF METHODOLOGICAL APPROACH The figure below presents a summary of our approach to deriving net income for each provider. The details of each sub-calculation, as well as assumptions, are provided in the subsections that follow. A guide to the appendices is provided in the table below. Figure Calculation of Net Income Net Income = Revenue Expenses = F i Q i [Salaries and Benefits + Supervision + Depreciation + Finance Expense + Rent/Lease + Other Operating Expenses] Table Location of Detailed Methodology Appendix B C D E F G H I J K L M N O P Q R S T U V W X Description Practice Economics Revenue Calculations Estimated Revenue for DHAT Estimated Revenue for DT Estimated Revenue for ADHP Reimbursement Reimbursement Rates Productivity Calculations Provider Scope of Practice Estimated Production DHAT Estimated Production DT Estimated Production ADHP Salaries and Benefits Calculations Dentist Supervision Expense Calculations Depreciation Calculations Equipment List Low-Range Operatory Option Finance Expense Calculations Rent/Lease Calculations Other Operating Expenses Calculations Tuition Cost of Living Cost-of-Living Estimates by School Student Loan Calculations Salary Requirements and Tuition Subsidies 1920\01\190257(docx)-E2

17 APPENDIX B STUDY OF ALTERNATIVE DENTAL PROVIDERS KANSAS PRACTICE ECONOMICS REVENUE CALCULATIONS Revenue is calculated for each provider based on his/her annual volume of procedures. Reimbursement is on a procedural basis; thus, the reimbursement results from one of three payor mix scenarios. The table below demonstrates the calculation for an adult patient of the DHAT provider applying B. Each element in this calculation is detailed in the subsequent appendices. Total revenues for each provider are in APPENDICES C, D, and E. Revenue Calculation Example Public Fee Sliding Private Fee Calculation Schedule 1 Fee Schedule 2 CDT: D0210 A $32 $32 $108 Percentage Payor Option B: Adult B 50% 25% 25% Weighted Average Payment C = A B $16 $8 $27 $51 Production D 80 Revenue Option B E = C D $4, Source: Kansas Medical Assistance Program. Source: American Dental Association, 2009 Survey of Dental Fees. 1920\01\190257(docx)-E2

18 APPENDIX C Page 1 of 3 CDT Code Pediatric Adult Total Payor Mix A 75/25/0 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR DHAT Kansas Procedures 1 Child 2 Adult 2 Total Revenue B 50/25/25 4 Payor Mix C 50/0/50 5 Payor Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D $ - $ - $ - $ - $ - $ - $ - $ - $ - D D D D ,898 2,449 3,203 2,592 4,104 5,616 4,490 6,553 8,819 D ,566 2,066 2,717 2,146 3,398 4,649 3,712 5,464 7,366 D ,007 1,378 1,139 1,675 2,258 D ,284 2,560 3, ,436 1,966 3,191 3,996 5,186 D ,048 2,652 3,471 2,190 3,468 4,745 4,238 6,120 8,216 D D D D ,161 11,339 15,516 7,380 11,608 15,864 D ,924 13,678 17, ,924 13,678 17,748 D D D ,250 1,978 2, ,250 1,978 2,707 D D D ,004 6,402 8, ,178 1,612 5,748 7,580 9,966 D D D D D D ,226 1,550 2,016 1,197 1,895 2,594 2,423 3,445 4,610 D ,033 4,028 5,304 3,276 5,187 7,098 6,309 9,215 12,402 D ,703 2,297 3,036 1,721 2,724 3,728 3,423 5,021 6,764 D ,140 D ,729 2,229 2,915 1,997 3,161 4,326 3,726 5,391 7,240 D ,159 1,503 1,968 1,642 2,599 3,557 2,801 4,102 5,525 (see page 3 for footnotes) 1920\01\190262(xlsx) APPENDIX C

19 APPENDIX C Page 2 of 3 CDT Code Pediatric Adult Total Payor Mix A 75/25/0 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR DHAT Kansas Procedures 1 Child 2 Adult 2 Total Revenue B 50/25/25 4 Payor Mix C 50/0/50 5 Payor Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D ,015 1,332 1,296 2,052 2,808 2,073 3,067 4,140 D ,278 1,386 2,195 3,003 2,097 3,160 4,281 D ,676 4,763 6,235 3,822 6,052 8,281 7,498 10,815 14,516 D ,750 3,871 5,168 4,028 6,377 8,726 6,777 10,248 13,894 D ,039 1,404 1,419 2,247 3,075 2,116 3,285 4,479 D , ,115 1,521 D D , ,101 D , ,290 D D D D ,087 1,487 1,008 1,574 2,147 D D D D ,091 1, ,154 1,554 D D D D D D D D D D D D D ,526 8,402 11,405 10,725 16,981 23,238 16,251 25,384 34,642 D D \01\190262(xlsx) APPENDIX C

20 APPENDIX C Page 3 of 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR DHAT Kansas Procedures 1 Child 2 Adult 2 Total Revenue Payor Payor Payor CDT Code Pediatric Adult Total Mix A 75/25/0 3 B 50/25/25 4 Mix C 50/0/50 5 Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D ,069 1, ,115 1,526 D D D D D D D D D D Total 1,595 1,972 3,567 $ 50,843 $ 67,445 $ 88,795 $ 51,909 $ 82,189 $ 112,470 $ 102,752 $ 149,634 $ 201, Procedure volume and time data obtained from public health clinics in various states and averaged. Volumes adjusted by 60% productivity when converting two operatories to one operatory. Data was also adjusted to reflect 1.00 FTE (1,920 hours of provider time). Public reimbursement is based on the Medicaid fee schedule. Private reimbursement is based on the ADA 2009 Survey of Dental Fees. Sliding fee is 30% of private reimbursement. A: 75% Public Fee Schedule, 25% Sliding Fee Schedule, and 0% Private Fee Schedule. B: 50% Public Fee Schedule, 25% Sliding Fee Schedule, and 25% Private Fee Schedule. C: 50% Public Fee Schedule, 0% Sliding Fee Schedule, and 50% Private Fee Schedule. 1920\01\190262(xlsx) APPENDIX C

21 APPENDIX D Page 1 of 3 CDT Code Pediatric Adult Total STUDY OF ALTERNATIVE DENTAL PROVIDERS Payor Mix A 75/25/0 3 ESTIMATED REVENUE FOR DT Kansas Procedures 1 Child 2 Adult 2 Total Revenue B 50/25/25 4 C 50/0/50 5 Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 A B D $ - $ - $ - $ - $ - $ - $ - $ - $ - D D D D ,061 2,659 3,477 2,819 4,463 6,107 4,879 7,122 9,584 D ,719 2,269 2,983 2,346 3,715 5,083 4,065 5,983 8,066 D ,102 1,508 1,245 1,831 2,468 D ,507 2,810 3, ,573 2,153 3,501 4,384 5,688 D ,231 2,890 3,783 2,400 3,800 5,200 4,631 6,690 8,983 D D D D ,840 12,414 16,987 8,058 12,683 17,335 D ,968 14,986 19, ,968 14,986 19,445 D D D ,250 1,978 2, ,250 1,978 2,707 D D D ,475 7,005 9, ,178 1,612 6,219 8,183 10,752 D ,043 2,666 3, ,043 2,666 3,495 D ,148 1,509 1, ,148 1,509 1,983 D D D D ,328 1,679 2,184 1,292 2,045 2,798 2,619 3,724 4,982 D ,331 4,423 5,824 3,588 5,681 7,774 6,919 10,104 13,598 D ,845 2,488 3,289 1,860 2,945 4,030 3,705 5,433 7,319 D ,260 D ,848 2,383 3,116 2,178 3,449 4,719 4,026 5,832 7,835 D ,304 1,691 2,214 1,778 2,816 3,853 3,083 4,507 6,067 D ,128 1,480 1,404 2,223 3,042 2,267 3,351 4,522 D ,103 1,460 1,584 2,508 3,432 2,397 3,611 4,892 D ,056 5,256 6,880 4,212 6,669 9,126 8,268 11,925 16,006 (see page 3 for footnotes) C 1920\01\190262(xlsx) APPENDIX D

22 APPENDIX D Page 2 of 3 CDT Code Pediatric Adult Total STUDY OF ALTERNATIVE DENTAL PROVIDERS Payor Mix A 75/25/0 3 ESTIMATED REVENUE FOR DT Kansas Procedures 1 Child 2 Adult 2 Total Revenue B 50/25/25 4 C 50/0/50 5 Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 A B D ,032 4,268 5,698 4,403 6,972 9,541 7,435 11,240 15,238 D ,154 1,560 1,613 2,553 3,494 2,387 3,707 5,054 D , ,235 1,686 D D , ,285 D ,060 1, ,060 1,451 D D D D ,170 1,602 1,090 1,701 2,322 D D D D ,259 1, ,321 1,780 D D D D D D D D D D D D D ,066 9,224 12, ,066 9,224 12,520 D D D ,154 1, ,200 1,643 D D D D D D C 1920\01\190262(xlsx) APPENDIX D

23 APPENDIX D Page 3 of 3 CDT Code Pediatric Adult Total STUDY OF ALTERNATIVE DENTAL PROVIDERS Payor Mix A 75/25/0 3 ESTIMATED REVENUE FOR DT Kansas Procedures 1 Child 2 Adult 2 Total Revenue B 50/25/25 4 C 50/0/50 5 Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 A B D D D D Total 1,786 1,900 3,686 $ 59,406 $ 78,655 $ 103,506 $ 45,981 $ 72,804 $ 99,626 $ 105,388 $ 151,459 $ 203,132 C Procedure volume and time data obtained from public health clinics in various states and averaged. Volumes adjusted by 60% productivity when converting two operatories to one operatory. Data was also adjusted to reflect 1.00 FTE (1,920 hours of provider time). Public reimbursement is based on the Medicaid fee schedule. Private reimbursement is based on the ADA 2009 Survey of Dental Fees. Sliding fee is 30% of private reimbursement. A: 75% Public Fee Schedule, 25% Sliding Fee Schedule, and 0% Private Fee Schedule. B: 50% Public Fee Schedule, 25% Sliding Fee Schedule, and 25% Private Fee Schedule. C: 50% Public Fee Schedule, 0% Sliding Fee Schedule, and 50% Private Fee Schedule. 1920\01\190262(xlsx) APPENDIX D

24 APPENDIX E Page 1 of 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR ADHP Kansas Procedures 1 Child 2 Adult 2 Total Revenue CDT Code Pediatric Adult Total Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 Payor Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D $ 2,227 $ 2,952 $ 3,886 $ 2,305 $ 3,649 $ 4,994 $ 4,532 $ 6,602 $ 8,880 D ,493 1,950 2,558 2,508 3,971 5,434 4,001 5,921 7,992 D , ,024 D ,276 3,083 4,080 2,627 4,160 5,693 4,903 7,243 9,773 D ,464 1,889 2,471 1,976 3,129 4,282 3,440 5,019 6,753 D ,205 1,590 2,090 1,649 2,611 3,573 2,854 4,201 5,663 D , ,289 1,738 D ,763 1,976 2, ,094 1,498 2,454 3,070 3,983 D ,575 2,040 2,670 1,680 2,660 3,640 3,255 4,700 6,310 D D D D ,497 8,703 11,910 5,715 8,973 12,258 D ,381 10,493 13, ,381 10,493 13,616 D D D ,250 1,978 2, ,250 1,978 2,707 D D D ,837 4,909 6, ,178 1,612 4,581 6,087 8,018 D ,362 1,777 2, ,362 1,777 2,330 D ,006 1, ,006 1,322 D D D D ,162 1, ,446 1,979 1,833 2,609 3,491 (see page 3 for footnotes) 1920\01\190262(xlsx) APPENDIX E

25 APPENDIX E Page 2 of 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR ADHP Kansas Procedures 1 Child 2 Adult 2 Total Revenue CDT Code Pediatric Adult Total Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 Payor Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D ,320 3,080 4,056 2,496 3,952 5,408 4,816 7,032 9,464 D ,277 1,723 2,277 1,302 2,062 2,821 2,579 3,784 5,098 D D ,312 1,691 2,211 1,525 2,414 3,303 2,836 4,105 5,514 D ,221 1,599 1,231 1,949 2,668 2,173 3,171 4,267 D , ,539 2,106 1,576 2,329 3,142 D ,056 1,672 2,288 1,564 2,361 3,201 D ,852 3,696 4,838 2,925 4,631 6,338 5,777 8,327 11,175 D ,115 2,978 3,975 3,061 4,846 6,632 5,176 7,824 10,607 D ,092 1,097 1,736 2,376 1,638 2,544 3,468 D ,192 D D D D D D D , ,234 1,684 D D D D , ,215 D ,365 8,442 13,367 18,291 9,005 14,347 19,656 D D ,339 2,120 2,902 1,672 2,606 3,556 D D D D D \01\190262(xlsx) APPENDIX E

26 APPENDIX E Page 3 of 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS ESTIMATED REVENUE FOR ADHP Kansas Procedures 1 Child 2 Adult 2 Total Revenue CDT Code Pediatric Adult Total Payor Mix A 75/25/0 3 B 50/25/25 4 Payor Mix C 50/0/50 5 Payor Mix A 75/25/0 3 B C 50/25/ /0/50 5 A B C D D D D D ,238 6,444 8,747 2,475 3,919 5,363 6,713 10,363 14,109 D D D , ,175 D D D D D D D D D D Total 1,590 2,094 3,684 $ 49,765 $ 66,289 $ 87,361 $ 52,297 $ 82,803 $ 113,310 $ 102,062 $ 149,093 $ 200, Procedure volume and time data obtained from public health clinics in various states and averaged. Volumes adjusted by 60% productivity when converting two operatories to one operatory. Data was also adjusted to reflect 1.00 FTE (1,920 hours of provider time). Public reimbursement is based on the Medicaid fee schedule. Private reimbursement is based on the ADA 2009 Survey of Dental Fees. Sliding fee is 30% of private reimbursement. A: 75% Public Fee Schedule, 25% Sliding Fee Schedule, and 0% Private Fee Schedule. B: 50% Public Fee Schedule, 25% Sliding Fee Schedule, and 25% Private Fee Schedule. C: 50% Public Fee Schedule, 0% Sliding Fee Schedule, and 50% Private Fee Schedule. 1920\01\190262(xlsx) APPENDIX E

27 APPENDIX F STUDY OF ALTERNATIVE DENTAL PROVIDERS KANSAS REIMBURSEMENT Payment per procedure is calculated based on three payor mix scenarios (shown in the table below) intended to signify a blend of payors that represent the provider s expanding access to care for the underinsured. Thus, the payor mix ranges from a 100 percent underinsured population in A (i.e., 25 percent qualifying for sliding fee and 75 percent Medicaid) to a maximum of 50 percent privately insured population in C. Pediatric and adult fees for each payor and the resulting reimbursement for each code are provided in APPENDIX G. Composition Public Fee Schedule Sliding Fee Schedule Private Fee Schedule A 75% 25% 0% B 50% 25% 25% C 50% 0% 50% Assumptions Sliding fee is 30 percent of the private fee schedule. It is assumed that the provider collects 100 percent of the stated reimbursement. In cases where the public fee schedule does not reimburse for a procedure, the default is the sliding fee. 1920\01\190257(docx)-E2

28 APPENDIX G Page 1 of 3 STUDY OF ALTERNATIVE DENTAL PROVIDERS REIMBURSEMENT RATES Kansas Reimbursement 2 Private Practice Plan 3 Sliding Scale 4 Collections Child Collections Adult Pediatric Adult Pediatric Adult Pediatric Adult A 75/25/0 5 B 50/25/25 6 C 50/0/50 7 A 75/25/0 5 B 50/25/25 6 C 50/0/50 7 Codes 1 D0120 $21.00 $11.70 $46.00 $39.00 $13.80 $11.70 $19.20 $25.45 $33.50 $11.70 $18.53 $25.35 D0140 $29.35 $16.50 $62.00 $55.00 $18.60 $16.50 $26.66 $34.83 $45.68 $16.50 $26.13 $35.75 D0145 $29.00 $12.30 $60.00 $41.00 $18.00 $12.30 $26.25 $34.00 $44.50 $12.30 $19.48 $26.65 D0150 $29.00 $17.40 $67.00 $58.00 $20.10 $17.40 $26.78 $36.28 $48.00 $17.40 $27.55 $37.70 D0210 $60.00 $32.40 $ $ $36.90 $32.40 $54.23 $69.98 $91.50 $32.40 $51.30 $70.20 D0220 $12.00 $6.90 $26.00 $23.00 $7.80 $6.90 $10.95 $14.45 $19.00 $6.90 $10.93 $14.95 D0230 $10.00 $6.00 $22.00 $20.00 $6.60 $6.00 $9.15 $12.15 $16.00 $6.00 $9.50 $13.00 D0272 $29.00 $10.80 $41.00 $36.00 $12.30 $10.80 $24.83 $27.83 $35.00 $10.80 $17.10 $23.40 D0274 $29.00 $15.00 $60.00 $50.00 $18.00 $15.00 $26.25 $34.00 $44.50 $15.00 $23.75 $32.50 D0277 $25.00 $22.80 $0.00 $76.00 $0.00 $22.80 $18.75 $12.50 $12.50 $22.80 $36.10 $49.40 D0350 $15.00 $0.00 $50.00 $0.00 $15.00 $0.00 $15.00 $23.75 $32.50 $0.00 $0.00 $0.00 D0460 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 D1110 $41.00 $21.90 $75.00 $73.00 $22.50 $21.90 $36.38 $44.88 $58.00 $21.90 $34.68 $47.45 D1120 $30.00 $15.30 $57.00 $51.00 $17.10 $15.30 $26.78 $33.53 $43.50 $15.30 $24.23 $33.15 D1230 $0.00 $ $ $ D1204 $9.60 $ $ $ D1206 $10.50 $8.70 $35.00 $29.00 $10.50 $8.70 $10.50 $16.63 $22.75 $8.70 $13.78 $18.85 D1310 $0.00 $0.00 $0.00 $ $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 D1330 $5.40 $4.50 $18.00 $15.00 $5.40 $4.50 $5.40 $8.55 $11.70 $4.50 $7.13 $9.75 D1351 $24.92 $12.00 $50.00 $40.00 $15.00 $12.00 $22.44 $28.71 $37.46 $12.00 $19.00 $26.00 D1510 $ $75.30 $ $ $94.80 $75.30 $ $ $ $75.30 $ $ D1515 $ $ $ $ $ $ $ $ $ $ $ $ D1520 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 D1525 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 D1555 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 D2140 $57.00 $31.50 $ $ $33.30 $31.50 $51.08 $64.58 $84.00 $31.50 $49.88 $68.25 D2150 $65.00 $39.00 $ $ $42.90 $39.00 $59.48 $78.98 $ $39.00 $61.75 $84.50 D2160 $77.00 $46.50 $ $ $52.80 $46.50 $70.95 $95.70 $ $46.50 $73.63 $ (see page 3 for footnotes) 1920\01\190262(xlsx) APPENDIX G