Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How One Dentist Scaled to 40 Million Without Selling Insurance
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- Lucas: There's a dentist in Omaha who built a 40-million-dollar practice group without ever accepting dental insurance. Not one plan. Luna: Wait — no insurance at all? So every single patient pays cash or card at the time of service? Lucas: Exactly. Dr. Megan Kroll started with one chair in a strip mall in 2014. She just crossed 40 million in annual revenue across nine locations. And her profit margin is about 30 percent, which is closer to a software company than a dental practice. Luna: Thirty percent profit in dentistry — that's unusual. Most independent dentists I've talked to run around 15 to 20 percent, and that's before student loans. Lucas: Right. And the standard advice in dentistry is that you have to accept insurance to get patients in the door. The big networks — Delta, Cigna, MetLife — they control a huge share of the market. But Kroll looked at the math and decided that the paperwork overhead and the reimbursement delays were destroying her operating leverage. Luna: What's her collections rate? Because if you're not taking insurance, you have to collect at the chair, or you get nothing. Lucas: She collects 95 cents of every dollar she bills. That's extraordinary. The industry average for fee for service practices is around 85 to 90 percent. She has a front-desk system where patients review the treatment plan, see the price, and pay before they sit in the chair. There's no billing department, no claims follow-up, no denials. That's a huge cost center she just eliminated. Luna: So the trade-off is she's effectively limiting her addressable market to people who can afford to pay out of pocket. That's got to be a smaller pool than an insurance-based practice. Lucas: Absolutely. She's in affluent suburbs — Omaha's west side, a couple of locations in the Kansas City suburbs, one in Des Moines. Household income in those ZIP codes averages well above 100,000. She's not trying to serve everyone. But within that niche, she's capturing a huge share because the patient experience is dramatically better. Luna: No waiting for pre-authorizations, no surprise bills later, no arguing with an insurance company over whether a crown is 'medically necessary.' I can see why patients might prefer that. Lucas: It also means her dentists can spend more time on dentistry and less on paperwork. She hires associates on a base salary plus a percentage of production — typically 30 percent of what they produce. That's a standard model, but because there's no insurance write-downs, the write-offs are zero. So the associate's production is the actual fee collected. Luna: So the associate knows exactly what they're earning per procedure. There's no mystery at the end of the month. Lucas: Exactly. And Kroll herself doesn't practice much anymore — she's the CEO. She spends her time on real estate and acquisitions. She buys existing practices that are insurance-heavy, converts them to fee for service, and typically sees revenue per location double within 18 months. Luna: Double? How? The patients who leave because they can't pay cash — she's losing those. But she must be gaining others. Lucas: She's gaining the high-value patients. The ones who want same-day appointments, premium materials, longer appointment times. She also raises prices. A typical practice she acquires might be charging 80 percent of the UCR — usual, customary, and reasonable — fee schedule. She bumps it to 100 percent. And because the service is better, people pay it. Luna: That's a bold move. If you raise prices and remove insurance at the same time, you're basically telling a chunk of the existing patient base, 'We don't want your business.' That takes confidence. Lucas: It does. And she's had failures. She acquired a practice in a less affluent part of Omaha a few years ago and the conversion tanked. Patient volume dropped 40 percent. She eventually sold it at a loss. So the model works in the right demographic, but it's not a universal formula. Luna: That's a useful counterpoint. So the lesson isn't 'just stop taking insurance.' The lesson is about the operating leverage you can unlock when you control your pricing end to end. Lucas: That's the takeaway for any service business. Kroll has what she calls a 'revenue per chair' target — she wants each operator to generate at least 500,000 dollars a year. Nine chairs per location, so 4.5 million per office. Her better offices are running at 80 percent occupancy, which means they're not even full, and they're still hitting those numbers. Luna: That's a really clean metric. Revenue per chair is basically revenue per unit of capacity. Every service business has that — revenue per seat, per room, per truck. Lucas: And if you know what your fixed costs are per chair — rent, equipment, front desk — you can calculate the break-even occupancy rate. For Kroll, it's around 45 percent. So once she hits that, every additional patient is mostly profit. Luna: That explains the 30 percent margin. She's operating with high fixed costs but very low variable costs per patient. The marginal cost of one more filling is just the materials and the dentist's time. Lucas: And she pays her dentists a percentage of production, so that cost scales with revenue. It's a variable expense that matches income. That's why her profit margin stays consistent even as revenue grows. Luna: It's a fascinating model. But one thing I keep coming back to: is this sustainable if the economy slows? If people start cutting discretionary spending, dentistry often takes a hit. And she's priced at a premium. Lucas: That's the biggest risk. Kroll is betting that her patient base has enough buffer that they won't skip their cleanings. But in a recession, you'd expect some attrition. However, she has no debt on her acquisitions — she pays cash. So she can weather a downturn without being forced to sell. She told me she's never taken a loan for a practice purchase. Luna: That's unusual. Most practice growth is funded by bank debt. She's basically self-funding from retained earnings. Lucas: Which means her growth rate is capped by how much profit she generates. She's growing at about 15 to 20 percent a year, which is fast for a service business, but not hypergrowth. She could grow faster with leverage, but she chooses not to. Luna: That's a deliberate trade-off. She's prioritizing resilience over speed. Lucas: And it's working. She's at 40 million now, and her goal is 100 million within five years. If the model holds, she'll get there without any insurance contracts. Luna: That's a really concrete example of how operating leverage and pricing control can transform a traditional service business. I think a lot of our listeners — whether they run a landscaping company or a marketing agency — can look at their own 'revenue per chair' and ask whether their pricing and collections model is leaving money on the table. Lucas: Honestly, if today was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. It's the smallest possible ask, and it keeps this show ad-free. Luna: Yeah, it really adds up. Every bit helps us keep bringing you stories like this one. Lucas: So, back to Kroll's model — one more thing I found striking. She told me that her biggest cost savings from not taking insurance isn't the staff hours. It's the drug and supply cost. Because she doesn't have to deal with insurance formularies, she can buy whatever material she thinks is best, in bulk, and she gets a better price than most practices. Luna: Interesting. So the insurance companies indirectly dictate supply choices for most dentists, and she's freed from that. Lucas: Exactly. She uses a single brand of composite for all restorations, buys it by the pallet, and gets a 40 percent discount off retail. That alone saves her about 50,000 dollars a year per location. Luna: So the no-insurance model isn't just about pricing — it affects the entire cost structure. Lucas: It cascades. Fewer staff, simpler operations, better supply pricing, higher patient satisfaction. The whole system aligns around one decision. Luna: Alright, I think the key question for any business owner is: what is your equivalent of 'dropping insurance'? What constraint are you accepting that's actually destroying your operating leverage? Lucas: That's a great way to frame it. For Kroll, the constraint was the insurance system. For others it might be accepting credit cards only, or offering too many service lines, or using a commission-only sales model. The point is to find the one thing that, if removed, would simplify everything else. Luna: And be honest about whether your market can support it. Kroll's model only works in high-income suburbs. That's a constraint too. Lucas: Right. She chose her constraint intentionally. She said no to insurance so she could say yes to a better patient experience and higher margins. And she accepted that she'd never be the biggest practice in town — just the most profitable. Luna: That's a good note to end on. Thanks, Lucas.