By John Jameson, DDS
Top dental-management consultants often urge practices to get out of the banking business and stop billing patients. Experts agree that although it's important to offer patients a payment-plan option in addition to cash, check, and major credit cards, it is too expensive and risky for doctors to extend credit through their practices. Instead, many consultants recommend outsourcing financing, which can increase treatment acceptance, reduce accounts receivable, and improve cash flow. Kerry Straine, Sally McKenzie, CMC, and Hugh Doherty, DDS, CFP — three highly regarded consultants and lecturers — discuss why outsourcing financing is an ideal solution for dental practices and their patients.
Dr. Jameson: Let's start with the fundamental question of why practices should receive payment at the time of treatment.
Kerry Straine One of the essential interchanges that must occur for a practice to meet its goals is the economic exchange between the patient and the practice. It is important to remember that dentists are not in the banking business. Dentists need to collect what they produce. If a practice bills its patients, it is estimated that, over an 18-month period, 10 percent of the money will not be collected and will end up as bad debt.
Dr. Hugh Doherty Cash is to a business what blood is to the human body. When you bill patients and don't get paid prior to treatment, you literally cut off the lifeblood of your practice. You don't have the cash flow to reinvest in your practice, and you certainly don't have the cash flow to invest in your retirement account.
Sally McKenzie Plus, it can be expensive to create an effective credit department in your practice. Even though you are accommodating your patients' needs by billing them, you also must deal with the issues of nonpayment and cash flow and require your staff to spend a significant portion of their workday chasing down payments. Wouldn't it be much healthier and more productive for your practice to allow these valuable team members to focus on patient care and other growth strategies?
Dr. Jameson: Each of you consistently recommends that practices add third-party financing as a payment option. How does this reduce or eliminate risks, and what other benefits can a practice expect?
Kerry Straine The ultimate goal of a practice should be to collect 100 percent of what patients owe. I believe a practice's best financial policy includes a third-party payment plan. With third-party financing, practices can offer patients a financial solution, but without the risk. This significantly reduces accounts receivable, billing costs, and the associated hassles.
And let me point out that not having accounts receivable doesn't mean you're decreasing production; it means you have already collected the fees and can use the cash to help your practice grow.
Sally McKenzie The number-one reason why treatment plans aren't closed is because the patient cannot find a way to pay for it. Third-party financing can provide patients with a comfortable, convenient way to pay for services. Practices can literally generate unscheduled treatment plans from their computer databases that contain several hundred or even thousands of dollars of unsold plans. Reactivating those patients is one way to increase any practice's productivity.
Dr. Hugh Doherty I specialize in retirement planning, and part of that is building a financially healthy, successful practice that can partially fund a doctor's retirement years. To build this type of practice, you must make sure you are using your money advantageously. This obviously means that you don't lend money interest-free to patients. With a third-party financing program, your practice gets paid in two business days with no recourse, which means that if your patient delays payment or defaults, you still get paid. So, you can take these profits and invest them, allowing your money to work for you instead of patiently waiting in your accounts receivable.
Sally McKenzie Third-party financing can significantly improve patient recall and retention. Here's how: It's very, very important that patients know they are paying an outside company, rather than the dentist. If they know they still owe the dentist, they may be hesitant about coming back for their regular visits and professional cleanings. They may even find another dentist, and you could lose this patient for good.
Dr. Jameson: What about the patients? Aren't they resistant to signing up for another line of credit?
Kerry Straine It's all about building value in the mind of the patient. Value is establishing a relationship with patients so they know we will treat them as if we were treating ourselves — that we will offer them solutions, including financing plans. If third-party financing is part of the financial presentation and offered to every patient — not just those that "look" like they need help — then patients will consider the benefits of beginning treatment today, rather than delaying treatment and experiencing the problems that may occur. Many patients consider the availability of several payment-plan options to be a value-added service provided by the dental practice.
Sally McKenzie Today, people are very comfortable with credit. The patients who are leading the demand for aesthetic procedures, the baby boomers, grew up with credit and are actually more comfortable paying this way than with cash. They love the concept of interest-free payment plans. By offering this type of financing solution, you can let your patients know they can reserve their consumer cards for household or unplanned expenses.
Dr. Hugh Doherty One thing to look for when evaluating third-party payment plans is to find one that offers interest-free payment plans, similar to those being heavily promoted by automobile manufacturers and appliance and electronics retailers.
I'm a big fan of interest-free payment programs ... and so are patients. They quickly realize how nice it is to be able to get what they want now and make payments over time without interest charges.
Dr. Jameson: So, how can a practice stop billing patients and implement a structured, effective financial policy that includes third-party financing?
Dr. Hugh Doherty First, you need to find the right third-party financing partner. Look for a company that offers a wide range of plans, including several interest-free options. Make sure they can give you the support and training you need to successfully integrate financing into your practice.
You may want to ask for references and endorsements from your state and national associations.
Kerry Straine Integrating third-party financing into your practice starts with explaining to patients in your welcome packet that there are many ways available for them to finance treatment plans: "We take checks, cash, credit cards, and have a monthly payment option through an outside financing company."
Don't make patients ask you for a payment plan; offer it upfront as a value-added service. Successfully integrating third-party financing can be easy, as long as you make it part of your daily routine. It's truly a win-win situation for your practice and your patients.
Sally McKenzie The next step is to begin communicating with your patient base, especially those patients to whom you have extended credit and who are still paying monthly. You may want to send them a letter and convert their payment plan to the third-party financing company. Then, go through your files and identify patients who may have declined or delayed treatment due to financial concerns.
It is worth a phone call to let them know you now have a convenient, low-monthly-payment plan that will allow them to get the treatment they want — now!