Will that be cash or credit card?

July 1, 1997
Timely collections for services rendered continue to be a major - and growing - challenge to the profitability of dental practices.

Credit cards are in your financial `tool kit,` so expand your payment options

Les Mann

Timely collections for services rendered continue to be a major - and growing - challenge to the profitability of dental practices.

Surveys show that more than 40 percent of a typical practice`s receivables are owed by patients as direct payments. The average collection time is drawn out over 48 days. The average annual patient out-of-pocket cost, which currently totals $267 a year, is expected to increase as more employers switch to managed-care plans and, along with health insurance companies, tighten reimbursements for health and dental care.

Unfortunately, many consumers are not prepared for this development. Consumers acknowledge that their share of dental bills is climbing, and they admit that they are not setting aside funds to cover those costs.

More collection problems ahead?

What effect will these trends have on profitability in the years ahead? This depends, to a large degree, on the payment policies and options that practices offer their patients.

While many dentists require at least a partial payment at the time of service, the vast majority of patients pay little or nothing until after they see how much of the bill will be covered by insurance.

This is where the high cost of patient receivables begins. It typically takes 30 to 45 days for the insurance claim to be settled, a few days for patient bills to be written and mailed and another 30 to 60 days for patients to send in their payment.

Having the bulk of its receivables on the books for 60 to 90 days is a heavy financial burden for any practice. Not only is interest income on the outstanding amount lost to the practice, but there are costs involved in sending out bills, making follow-up calls and in repeat billings.

In addition, there always is the risk of receiving only partial payment or having to write some bills off as bad debts.

A convenient solution

All this need not add up to a dreary outlook for the financial future of America`s dental practices.

A first step to avoiding the impact of a high volume of patient receivables is to adopt (if you do not already have one) a firm, fair patient-payment policy. You also need to communicate it to your patients, making certain that they understand their responsibility to pay for all services received in the agreed-upon time period.

Secondly, you can greatly improve the financial performance of your practice by increasing your patient`s use of a payment option that is in most dentists` financial tool kit (but is underutilized). This option is the credit or payment card - a powerful financial tool that can enhance the profitability of your practice.

When using a payment card, a patient can pay before, during or after treatment. The patient can pay at the time of the visit or after treatment by phone or mail. Patients also can pre-authorize you to bill their card accounts directly for balances not paid by insurance and for recurring treatment fees.

Whichever scenario is used, the patient`s payment is deposited quickly into your practice`s bank account. There is no 30-, 60- or 90-day delay. Card payment improves your cash flow, lowers outstanding receivables and bad debt and cuts collection costs. With recently developed new products and transaction procedures, card acceptance and use is faster, easier and more cost-effective than ever.

Practically all dental offices (92 percent) accept payment cards. Still, few dental practices are taking full advantage of the option. While card usage in dentistry is growing rapidly, less than 9 percent of patient payments are by card, which is an opportunity missed by both patient and dental practitioner.

An increasing number of dentists are discovering that promoting their acceptance of payment cards builds business three ways:

- Through the recruitment of new patients who prefer to pay by card.

- Through retention of patients who would otherwise have difficulty paying their bills without the flexibility that card payment provides.

- Through increases in the amount of treatment that patients agree to have performed.

While not many dental patients have used the payment-card option in the past, the number who do is increasing dramatically. Surveys of dental offices show the number of card payments on the rise, both at the time of service and afterwards. This is attributed to dentists` better understanding of how to integrate card-acceptance techniques in their practice. Also, consumers are more interested in paying by card. The most common reasons given are convenience, the amount of the bill and the fact that their provider accepts payment cards.

Patients want the option

From the patient`s perspective, card payment for dental services is an option whose time has come. As their portion of the bill increases, card payment offers a manageable means of meeting their financial obligations.

The appeal of card payment for dental services crosses socio-economic lines. Consumer surveys show that young, affluent consumers are most likely to pay dental bills with a credit card, but also that older, as well as less affluent, patients see card payment as a desirable option. Lower-income households express a strong interest in payment-card use because of their need for short-term credit.

According to Cathy Jameson, providing credit to patients is not the way to build the financial strength of your practice. Instead, Jameson, a management consultant and author of "Collect What You Produce," counsels her readers to promote the use of bank cards to their patients.

"Bank cards are very desirable options," she writes. "Running your own credit business is financially devastating and inadequate at best."

If your practice does not now accept bank cards, consider investigating that payment option. It will more than pay its own way, both in terms of your practice`s bottom line and in patient relations.

If you do accept payment cards, but do not actively advertise that fact or encourage your patients to pay with plastic, it could pay you to do so. Card acceptance and use have never been easier or more cost-effective.

Card payment by mail and phone

The realities of higher copayments and deductibles are making it more difficult for patients to budget for such expenses. You can help them meet their financial obligations to you in a timely manner by adding a payment-card option to your patient statements. When patients call your office to give their credit-card numbers or write them in on your statements and mail them back to you, they obtain flexibility in paying their bills. When the credit-card bill arrives, your patient can pay it all at once or over time. Meanwhile, you have received payment without having to wait until it is convenient for your patient to write you a check.

Office training

The reason given by many consumers for not using their payment cards for dental bills is, "I didn`t know my dentist accepted payment cards."

If this is true in your practice, and you think increasing card payments would be good for your bottom line, you may need to do some promotional work with your office staff and patients regarding the benefits of card payment.

The major bank-card companies offer office signage and the "take one" brochures for patients that explain the advantages of paying dental bills with payment cards. The brochure also announces very clearly that your office accepts payment cards.

Staff-training aids also are available, including training videos that explain how to collect at the time of service and how that will benefit the patient as well as the practice. Your staff may need to be trained in how to politely ask for and receive payments at the time of service and to suggest payment by credit card.

If you want to learn more about the value of card acceptance and usage, attend one of the seminars on the subject that is available through many dental associations.

Success in the next millennium

As the clock ticks down on the 20th century, business people and professionals everywhere are girding for an increasingly competitive economic climate in the year 2000 and beyond. Prosperity in the 21st century will require a sound business strategy and a strong financial base. In the dental profession, this means offering patients payment options that meet their needs while making collecting and billing more efficient.

A fully implemented payment-card program is one of the best tools you can use to meet those challenges.

Les Mann is senior vice president, Market Development and Acceptance, at Visa USA., Inc.

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More than just a card

A variety of enhancements now available make card acceptance faster and more cost-effective, as well as more convenient for your patients to use both at the time of service and afterwards. Here is a run-down of some of those new tools that could help you solve the age-old issue of timely patient collections in your practice.

Patient Easy Pay - Millions of dollars of patient payments go uncollected every year because dentists find it too costly to issue invoices and follow up with collection calls and additional billings. Studies have shown that each billing or call costs a practice from $7 to $10.

Patient Easy Pay offers a convenient way to collect those payments at minimal cost: the Patient Easy Pay Consent form. A patient fills out the form at the time of service, authorizing the patient balance to be charged on his or her payment card (up to an estimated maximum amount) after the remittance advice is received from the insurance company. When the patient-payment amount is calculated, the provider retrieves the form from the file and initiates a credit-card transaction.

Automated Patient Easy Pay - This year, Hypercom, Inc. became the first POS terminal manufacturer to introduce an automated version of Patient Easy Pay - a payment-card, transaction-processing terminal that has Patient Easy Pay software installed. To use it, a provider swipes the patient`s bank card in the terminal slot, enters an estimated amount based on the terms of the patient`s insurance, prints a receipt from the terminal and gives it to the patient to sign. The terminal stores the card information for retrieval and authorization after the patient`s balance has been determined.

The patient`s signature authorizes the dental office to charge the balance due - up to the pre-arranged maximum - to the patient`s payment card. When the exact amount is determined, a conventional electronic payment authorization is initiated. If the amount due is known at the time of service, the payment is processed as a normal card transaction.

As a stand-alone system, the terminal can store more than 200 patient signatures-on-file. If the practice has several point-of-sale locations, terminals at each location can be used to transmit patient payment-card information over phone lines to a central computer that has accounts-receivable software. Terminals are available from credit-card processors and banks.

Patient Easy Pay Software - If your practice uses payment-system software, you may want to take a look at payment-card software designed especially for health-care providers` office systems. For example, software recently launched by Dentrix includes Patient Easy Pay capability and can replace providers` conventional credit-card terminals. It combines all of the benefits of conventional card terminals with new capabilities, while integrating its functions with the providers` office-management system. In this configuration, payment arrangements are made by having patients sign a signature-on-file receipt, produced by the software at the time of service. When a patient`s balance is determined by the accounts-receivable function, the system automatically authorizes a card transaction. Other practice-management system vendors are expected to launch products supporting Patient Easy Pay later this year.

Recurring Payments - Patient Easy Pay Consent also can be used to authorize your office to automatically bill specified treatments that take place regularly to the cardholder`s card account. This can assure your office of timely payment while providing a considerable convenience for your patients.

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