by Debra Engelhardt-Nash
If your accounts receivable over 90 days is more than 5 percent of your total AR, you are losing money. Collections experts estimate the value of every dollar owed past 90 days is worth 10 cents. Consider these factors that affect the value of money owed but not collected in your practice:
• The time it takes the staff to manage the account
• The cost of sending statements
• The loss of interest that could be earned if the dollar was in the bank
• The lost investment potential
• The increased difficulty in collecting the account.
But the cost is actually much greater. Another price you pay for personally financing patient treatment over a long period of time is inhibiting the patient from comfortably returning for care in your office. At the very least, it may prevent patients from pursuing future treatment. In some practices, even though the patient may have outstanding treatment needs, the office itself is reluctant to contact the patient to resume treatment due to the existing balance owed.
It is possible that your current collection ratio is 98 percent or better, but you still have patients carrying long-term debt appearing on your monthly accounts receivable report. Minimizing accounts receivable management in your office allows the team to focus on serving the patient instead of monitoring their accounts. Using outside patient financing can help clear up long- term debt, retain patients in the practice, and allow them to continue treatment in your office.
The good news
The invitation to redirect a patient's balance to your financing resource should be done on a personal level. The financial coordinator places a call to the patient and discusses the advantages of using an outside service to manage the balance of his or her account. The conversation might go something like this:
"Our office has enlisted the services of a dental-care financing resource so that we may continue offering long-term financing for your outstanding balance. In fact, it may be beneficial for you to choose to take advantage of their 12-month, interest-free payment plan."
If you are waiting to contact the patient about resuming incomplete treatment until the aged balance is clear, this provides you with an opportunity to offer a more timely solution. The person making the call to the patient (usually the financial or treatment coordinator) then might say:
"We appreciate your consideration in taking care of your existing balance before we continue treatment. We feel we have a solution that will meet both objectives. We can consolidate your existing balance with your current treatment costs. This may lower your monthly obligation by extending your payment plan to make it more comfortable for you."
The tone of this discussion is positive and upbeat. The office is providing outside financing as a better alternative for the patient.
Managing difficult accounts
On the other hand, you may also have some aged accounts that require more persistent attention. The patient must be called frequently to be reminded of his or her outstanding obligation. Promised monthly payments may be missed and the patient's accounts may be aging longer than anticipated. These patients may not see the debt they are accumulating with your office as a priority in their budget. Since your office personally financed the treatment, patients may not consider their accounts with you as seriously as they do their financial responsibilities to other institutions (such as banks, credit card companies, other finance companies). Although many of these patients may be credit-worthy, they may simply not place a priority on paying their dental bills because they view them differently.
For patients like this, the approach may need to be more direct. Still, the treatment coordinator must talk to these patients in a helpful way:
"We have a resource that will help manage your account in our office. This will help your account stay on track and be taken care of in a timely manner, and you can do this on an interest-free basis for one year!"
You may also decide you need to be more forceful in stating your objectives:
"We are transferring all of our accounts with balances over 90 days to an outside financial resource. Having these dental-financing experts help our patients will allow us to focus on caring for our patients better and continuing to improve our services to you."
If the horse is already out of the barn ...
If you have already chosen to finance patients who do not qualify for outside financing approval, then you must do your best to manage these accounts with great care and learn from the tribulations of handling a number of accounts that are old ... and getting older.
The idea of approaching existing account-holders and asking them to refinance their balances may challenge some standards of thinking. One question that might be asked is, "Why should I bother working on these aged receivables if the patient has already made arrangements and is paying on their account?"
Although these patients have made arrangements with your office to pay their outstanding balances, there is no guarantee that they will honor any agreements until the balance is paid.
When you use outside financing resources, everybody wins. The office is paid for what it produces, the patient continues to make payments over a period of time, and the relationship between the patient and the practice is sustained.
Consider the benefits of redirecting accounts-receivable balances to outside financing companies. Then your focus can be on the "people work" of providing dental care, not the paperwork!