The collection rate of your dreams

Feb. 1, 1999
Two methods of financial arrangements make collections automatic. These systems will work for you and turn your accounts receivables into money in your pocket.

Two methods of financial arrangements make collections automatic. These systems will work for you and turn your accounts receivables into money in your pocket.

Michael R. Gradeless, DDS

In the movie, "Field of Dreams," Kevin Costner repeated over and over, "If you build it, they will come." This common man in the cornfields of Iowa believed that if he sacrificed his entire savings to build a baseball park, people would come and he would be compensated automatically. Unfortunately, in our dental practices, cash flow is based on systems of operation instead of divine right. We do not automatically get paid for what we produce and our cash flow doesn`t always compensate us adequately for the sacrifices we have made in building our own "Field of Dreams."

In my practice, we have found ways to make financial arrangements so effectively that the collections are almost automatic. Our accounts receivables average less than one month of production! You can do this, too, while still being flexible with your financial arrangements.

Monitor your progress

The first step in developing great collections is to implement a system for monitoring your progress.

While this step is very easy, many of us don`t do this properly. The most important point is to record every procedure you perform as though it was being reimbursed in cash at your highest full-fee schedule. Any and all discounts are to be shown as an adjustment to your gross production. This is vitally important, as it will allow you to know at the end of the year exactly how much dentistry you gave away. You cannot achieve a 98 percent collection rate if you give away three percent of your dentistry.

I have a large, immediate family that receives free dentistry. Cousins, aunts, and uncles receive a 29 percent discount. I`m also generous with my staff and charitable dental work. Record all of the free dentistry you perform in a year because, when you examine your gross production for the year, you must recognize how hard you worked for the amount of money you collected. While I have a totally fee-for-service practice that gives no discounts to preferred-provider networks, I still gave away over 6 percent of my gross production last year. You can give away as much dentistry as you want to individuals or insurance companies. It is important, however, that you examine this amount regularly to be certain that your discounts are benefiting the proper parties. You must never allow discounts to interfere with your retirement funding or your family`s well-being. You most likely will not achieve a 98 percent collection rate, but you should collect 98-100 percent of your adjusted gross income.

Just as a 98 percent collection rate championed by management experts may not work for you, the current standard of accounts receivable also may be flawed. While management experts may encourage you to strive for a current accounts-receivable rate of less than two months` production, we are consistently able to keep our accounts-receivable rate at less than one month of production. We write off very few uncollectible accounts, we turn over very few accounts to collection agencies, and our patients are very happy with how our collections are handled.

This happens because we use a system that addresses collection issues before they become a problem, and because we have discovered two methods of financial arrangements that make collections automatic. These systems will work for you and turn your accounts receivable into money in your pocket.

Make financial arrangements

The first step in our system is to make financial arrangements for every service we provide except recare appointments. This means that before we place a buccal-pit restoration, the patient is informed of the cost of the service and given our estimate of its expected insurance coverage. Within our computer system, we track the actual payments we receive from insurance companies for our services and automatically adjust our estimate of coverage to reflect actual experience.

This means that when we know our fee may exceed the insurance schedule, we may estimate coverage at 70 percent instead of 80 percent or 45 percent, instead of 50 percent. The patient should never have to ask what a fee would be; he/she should always be told what it is! If there is a problem with the cost or if the patient would like to make a payment arrangement, it is better to find this out before the service is rendered. This may sound too cumbersome, but with a well-trained staff, it actually is easy. The process is the same whether we are discussing a $5,000 treatment plan or a single restoration that is to be completed during the patient`s recall visit. Before the assistant prepares the tray set-up for the procedure, she simply stops by the front desk to inform the staff of the pending work. While the assistant is preparing the necessary materials, the financial coordinator prepares a treatment plan.

Before any treatment is started, the financial coordinator discusses the plan with the patient. A complex financial arrangement is best handled in a private area dedicated to financial arrangements, while a plan involving procedures to be done immediately can be handled in the operatory. You must work out your own verbal skills.

We start by asking patients if they have any questions about the clinical aspects of the proposed treatment. We always fully explain our treatment plan, so we are then ready to discuss the cost of the treatment. After we have explained the portion of the fee we expect patients to cover, we ask if they have any questions or if they need to make any financial arrangements to cover their portion of the fee.

Whether patients accept the treatment plan or not, we ask them to sign the treatment plan. This does not obligate them to complete the plan, but simply indicates that we have informed them of the plan and, at the same time, it obligates us to honor the fees we presented for the proposed treatment for at least 90 days. Treatments that require no financial arrangements can be completed immediately, and these patients are expected to pay their portion of the cost when the service is rendered.

Automatic debit service

If patients want to extend their payments in any way, we have two arrangements that we favor. These arrangements are similar in that they both are automatic. Our first choice is a financial arrangement that provides an automatic debit service. The patient can elect to have a specific amount automatically deduced from a checking or savings account once or twice a month. There is a small fee to the patient for each debit. The amount collected will be automatically deposited into the office account. The application is very short and simple. It requires the financial coordinator to attach a patient-voided check or savings-account withdrawal slip. The ease with which it is done significantly helps to increase case acceptance.

The automatic debit arrangement is especially helpful for the mid-level or smaller restorative cases where the amount to be financed doesn`t justify the patient taking out a loan. It is easy to develop a monthly payment to fit the patient`s budget because you are not locked into a six-month or one-year schedule. You can set the payment terms to any length you choose. It can be four payments over two months or, if you are in a position to do so, you can elect a multiple-year term. The length of the payment term - and thus the monthly payment amount - can be set to virtually any schedule that works for both your patients and your practice. With this system, it is much easier to allow your practice to finance patients` dentistry, because the patients are dependably on time.

One of the problems we used to experience when we allowed patients to make payments over a period of time was that they didn`t always send in their payments in a timely manner. When a patient failed to make a payment on time, we were faced with choosing between two courses of action, both of which were bad. We could either call the patient about his or her late payment or we simply could wait and hope the patient eventually would come in. In the first case, your financial coordinator does not want to make this call and the patient doesn`t want to receive such a call. If you do this, you have made a negative contact with your patient that invariably will create some level of embarrassment and bad feelings. If you do not make this call, you have just let your patient know that it is OK with you if his or her payment is late. Automatically debiting the patient`s account eliminates this frustration.

This system is very easy to set up and it is very easy for our patients to understand. It also is easier for our patients to discuss financial matters with us rather than a third party because we already have a relationship with them.

Certainly, you should set your own standards regarding the length of the term you are willing to extend credit, credit-reporting requirements, and the cash-flow requirements of your practice. There will continue to be some cases that you feel would be best financed by an outside credit source. However, overall, this program is a very professional method of collecting your fees, while freeing your staff from unpleasant collecting chores and allowing them to focus their energies on expanding production.

Credit card easy-pay

Another automatic payment program we use in our practice is what we call our "credit card easy-pay system." By filling out a short application form, patients can authorize us to charge their credit card periodincally for treatment. Once again, this is very easy to set up, provides you with a consistent cash flow, and puts someone else in charge of actually collecting from the patient.

Your patients will be charged their usual interest rage from their credit-card company and you will be charged your usual discount rate. This program has several other advantages. It allows you to tap an already approved credit line and requires no outside approval. You can begin treatment that day if you want and, depending on your bank`s processing time, the first payment should be in your bank account the next day. The more you use this program - and as your daily charge-card collections increase - you may be able to negotiate a reduced discount rate with the credit-card companies. This will benefit you not only with your easy-pay patients, but also with your charge-card payments. The cost to your practice of setting up these systems is very low, and the expanded-payment options available to your patients will increase your case-acceptance rate significantly.

Inform before you perform

The key to having a great collection rate, while maintaining a high case-acceptance rate, is in having an effective and flexible financial-arrangement system. The first step is to inform every patient as accurately as possible of the expected fee for treatment. After you Oinform before you perform,O you collect at the front desk. As mentioned before, our patients all sign their treatment plans and they all are given options for financing their share of the treatment cost. In addition to payment at the time of service, the automatic-debit program, and the credit card easy-pay system, we offer at least one outside loan program. Collecting the amount due at the time of service ? whether directly from the patient or indirectly from a financing source ? significantly reduces the time your financial coordinator will spend making collection calls. This timesaving bonus is what allows your financial coordinator to prepare treatment plans for each patient. The additional timesavings also can be used to activate patients from your delayed-treatment files that now may be ready to take advantage of your flexible financial arrangements.

The greatest advantage to these financial options is in having someone outside your practice actually collecting the fees. While many dentists worry that anyone collecting the money may be heavy-handed with their patients, the systems I have described don?t really have that problem. These automatic payment options make it so unlikely that a patient will fall behind on his or her financial obligations that there virtually are no unpleasant collection calls to make.

While nobody wants to ask about it, absolutely every patient wants to know about his or her financial obligations. It is time to take your practice to the next level by improving your collections and your financial arrangements. Decide what financial arrangements make sense for your practice and train your staff in the systems you select. Take the time before treatment to inform every patient of your payment options. As you watch your bank account increase and your accounts receivables decrease, your case-acceptance rate will skyrocket and the stress of collecting for the dentistry you already have produced will decrease dramatically.

Keys to collection

* Track the adjustments to your gross production. Improving your collections may be as simple as reducing the discounts and free dental services you provide.

* Inform each patient of the costs and expected payments before you perform any service.

* Decide which payment options you will offer your patients. Set parameters with your financial coordinator regarding the length of time you are willing to accept payments and any down-payment requirements.

* Extra training for your staff on the art of negotiation may be helpful. Give your staff the tools to make financial arrangements instead of collection calls.

If you have any questions about the automatic-debit program, the credit card easy-pay system, or an outside financing source, you may contact the author at (317) 841-3130.