Financiys CareCredit® program increases overall production an average of 25.3 percent
Each year, Dental Economics® conducts a practice survey to provide doctors with a benchmark to evaluate various aspects of their practices. One of the practice tools included in the 2004 survey was the use of a third-party patient financing program. According to study participants, the majority of practices (between 52 to 61 percent) offers third-party financing to patients as a payment option. But the question is, to what effect? How, exactly, does offering patients a third-party payment plan impact the practice financially? And, if it does positively impact financial performance, how can it be maximized?
These were some of the questions we were challenged to answer when CareCredit asked ADCPA (the Academy of Dental Certified Public Accountant) to independently conduct a nationwide analysis of the impact the introduction of CareCredit’s patient-financing program had on practices. As CPAs who specialize in the unique financial needs of the dental profession, most of our members had clients using third-party financing. But we never focused on this one financial tool. Our members had few expectations going into the study, thinking that we would verify third-party financing did indeed help the practice, but only marginally. When the analysis was complete, the thing that surprised us the most was the sheer magnitude of the positive effect. It was significant.
The goal of the study and analysis was to determine the impact third-party financing had on key practice financial metrics, and then compare the results with practices not involved in a program, to create a performance benchmark. The practices were contacted and visited by ADCPA member-account firm representatives, who collected the financial reports and conducted the interviews. The majority of the participating dental practices used the same practice-management software, thus the data provided was consistent and allowed for direct comparison. The financial data was collected from 37 dental practices located in 12 different states, with practice size ranging from one to six dentists, and from three to 25 employees.
Once the reports were collected, they were sent to Smart & Associates Healthcare Services Division for analysis. The four report areas analyzed were:
1 Treatment Plan Statistics Analysis
2 Production Summary by Category
3 Payment Summary
4 Accounts Receivable Trends
Key finding: 25.3 percent increase in production
The key finding of the analysis concluded that practices without a patient-financing program increased their gross annual production by 4.1 percent, compared with a 25.3 percent gain achieved by practices enrolled in CareCredit. When compared to the average annual gross practice production in the U.S. of $600,000, a 25.3 percent increase represents $151,800 per year! Practices that did not offer a patient-financing program had an average increase of $24,600 per year. This equpates to an incremental income of $127,200 ($151,800 - $24,600) for practices with the CareCredit program.
In addition, practices offering CareCredit experienced on average a:
√25.3 percent increase in the number of “procedures completed” in relation to “procedures planned”
√ 21 percent gain in the total dollar amount of procedures for “procedures completed” relative to “procedures planned”
√98 percent increase for implant services
√75 percent increase in acceptance of oral surgery
√71 percent increase in acceptance of restorative treatment
Key finding: 37.7 percent improvement in A/R aging
The accounts receivable trends report stratified outstanding payments by aging categories (i.e., 0-30 Days, 31-60 Days, 61-90 Days, and more than 90 Days) and by practitioner. With third-party financing, survey respondents realized a 37.7 percent improvement in total accounts receivable aging, compared with a 3.8 percent improvement by practice without a program. In addition, the average outstanding payment was reduced by 41 percent for practices with a patient financing program.
When you combine the increase in overall production of 25.3 percent with the 37.7 percent improvement in accounts receivable, you can clearly visualize the impact the third-party financing program has on the practice financially. You can grow a practice by doing more production, but if it remains uncollected in A/R, the net result is a loss. But, if you can increase your gross and improve your collections, that will create a significant impact on the practice’s overall financial performance.
Key finding: CareCredit exceeded expectations
In addition to the analysis of the data collected through the practice-management software, in-person surveys were administered by the ADCPA member firms with the office manager or doctor. The survey addressed several areas including:
⇒The role of CareCredit
⇒Likelihood to recommend CareCredit
In the interviews, 88.9 percent of the survey participants indicated that CareCredit “exceeded expectations,” while the remaining 11.1 percent felt the program “met expectations.”
When comparing the statistical impact of CareCredit in terms of production with the interview responses, one of the key discoveries focused on the role of CareCredit in the practice. It was concluded that practices experiencing greater success with CareCredit had integrated it into their payment policy and routinely offered it as an option to patients. Finally, a majority of practices - 97.8 percent - stated they were “likely” or “very likely” to recommend CareCredit to other practices and 95.4 percent found the program to have “excellent” or “very good” value.
To view a complete copy of “ADCPA’s Impact of CareCredit on U.S. Dental Practices,” you can visit carecreditworks.com.
Raymond “Rick” Willeford, MBA, CPA, CFP, is president of Willeford Haile & Associates, CPA, PC, and Willeford CPA Wealth Advisors, LLC. As a fee-only advisor, he has specialized in providing financial, tax, and transition strategies for dentists since 1975. Willeford is the president of the Academy of Dental CPAs, a consultant member of AADPA, and is available as a speaker nationwide. Contact him by phone at (770) 552-8500, or by e-mail at email@example.com.