Originally published in the October 2001 Dental Practice Report. Copyright 1999-2002 Medec Dental Communications.
If you find more patients postponing
dental care because of economic
uncertainty, you need to establish
a plan to make it more affordable.
by Deborah Odell MBA
Recently, several of my clients began noticing a drop in productivity and collections. When we analyzed their practice statistics we found the number of new patients per month was strong, and both the restorative and hygiene schedules were full. However, it was becoming increasingly difficult for them to motivate patients to accept treatment or to make and hold them to financial arrangements. This was a new trend for them
Why were things changing now? The threat of an economic recession.
Patients view dentistry as a discretionary expense. That means porcelain veneers, whitening and even crowns compete with new stereos, televisions or vacations. Traditionally, recessions result in a reduction of discretionary spending. People don't buy the new car or take the vacation they would have when the economy was stronger. The same is true for dentistry. Patients are more likely to postpone dental treatment (especially elective procedures) and rely on the belief that continuing to keep their cleaning appointments will suffice until there is more money. The unfortunate impact of these decisions on dentistry can be seen in a reduction in case acceptance, collections and productivity, and a corresponding increase in accounts receivables
That's why dentists, as small business owners, must be proactive in their approach to affordability—a key component to case acceptance, productivity and collections.
So what are you supposed to do? During a recession it feels riskier to broaden your financial options—you are already seeing your accounts receivables increase. Ironically, that is the exact strategy you need to employ. When patients perceive there isn't enough money to pay for the dentistry they need, dentists need to respond with increased flexibility in their financial arrangements.
There is a caveat, however. No dentist should increase his or her financial options without first establishing an effective collection system. Any effective collection system must begin with the financial arrangement process. What you do up front will ensure how successfully you collect in the end.
Before financial arrangements can be made, thorough guidelines must be in place within which your financial administrator can negotiate arrangements with patients. These guidelines outline the rules of the road from the first patient visit to the number of months you are willing to extend payments to outside financing sources. Each financial interaction needs to be addressed. Do patients have to pay up front for the first visit? How are worker's compensation claims or Medicare handled? How many months will you extend financing? What is the minimum monthly payment allowed? Are there alternative outside financing options? If yes, which plans? Answers to the previous questions, among others, will ensure effective financial arrangements and prompt payment. And in turn it will reduce the number of times your financial administrator has to ask you about what to do with a patient.
The financial negotiation process should begin during the consultation. The financial administrator should be included in the consultation so that she can hear any objections the patient may have. This will eliminate the end runs around the financial administrator that patients use when speaking to the doctor alone. For example, when the patient says, "I only want what my insurance will cover," the doctor can say, "It sounds as though you have some concerns about affording the treatment we've discussed." The doctor then can point to the financial administrator and add, "Jane is great at maximizing your dental benefits and making financial arrangements that will work within your budget and the practice's guidelines."
Once the negotiation process between patient and financial administrator begins, the financial administrator should implement the following steps:
This negotiation process ensures that the practice collects the majority of the production up front and also ensures that it can successfully manage any receivables.
Along with the negotiation process comes the appropriate documentation. All presented treatment should be accompanied by a written financial arrangement. There are essentially five types of written financial arrangements: checks, credit card receipts, internal financial forms, Truth in Lending statements, and outside financing agreements. Every patient, whether he or she agrees to pay in full or over six months, must have a written financial arrangement.
The purpose of written financial arrangements is twofold. First, each type of written arrangement requires the signature of the patient. Having a patient sign his or her name to a financial document increases the likelihood that the patient will take ownership of the agreement. The psychology is simple: Signatures are most commonly found on checks, credit card receipts, loan documents, etc. Every time a patient signs his or her name, he or she internalizes responsibility and accountability for the content of the document. Second, written arrangements translate into a paper trail. Patients leave with a copy of the arrangement and know that you have a copy too. Documentation reduces the chance of default.
If you are planning to extend financing internally, the Financial Agreement Form and Truth in Lending statement are essential. The Financial Agreement Form is simple and should be used for all arrangements with three installments or less. The form should include the patient's name, date, total for service, deposit amount, balance, number of and amount of installments, date of the month and start date (see sample).
The Truth in Lending statement is required by the Truth in Lending Act (TILA), Title I of the Consumer Credit Protection Act. This regulation applies to individuals or businesses that extend credit to consumers. It is used when there is a finance charge applied and the credit is payable in more than four installments. Sadly, many offices are not aware of this regulation and are not compliant. Remember, if you plan to allow financial arrangements with four or more payments, and you plan to add a finance charge or interest, you must document the arrangement using a standardized Truth in Lending statement (see sample).
Finally, many offices are choosing to offer outside financing options. Most financing companies require the patient to complete a credit application or registration form. This form also represents a written financial arrangement and provides the same benefits as the other forms.
The keys to an effective collection system are setting expectations and follow-through.
While the financial administrator is negotiating the financial arrangement, she has the best opportunity to set appropriate expectations with the patient. After completing the written financial arrangement, she informs the patient that she tracks payment dates, and that if she hasn't received payment within two days of the agreed upon date, she will call to find out if there is anything she needs to know. Notice that she is not calling to collect per se. Rather, by informing the patient she will call, she motivates the patient not to miss a payment. After all, no one likes collection calls.
Finally, creating a tickler system to remind the financial administrator of payment dates is critical. If she sets the expectation that she will call patients who are late in paying, and she doesn't follow through, the chances of patients disregarding the agreement increase. The tickler also keeps receivables in line and reduces the likelihood that an account will become delinquent because of a lack of attention.
The threat of an economic recession does not have to equal a reduction in productivity and collections. Proactive strategies like the financial arrangement process outlined here are ways to stave off the impact of a recession on your practice.