Part 1:
Patient Financial Policies
Every tooth in a man’s head is more valuable than a diamond.
Miguel de Cervantes, Don Quixote, 1605
Every dental office and every business has a financial policy, whether they know it or not. The consumer is aware of the policy. When someone goes to a fast‐food restaurant, they know their credit policy: cash at the time of purchase. Yet many patients continue to believe that they can (and should) get a bill from the dental office at the end of the month, let it sit for another 20 days, then write a check for the part they owe without worrying about late charges or accrued interest. The office’s job is to inform the patient if this is not the case.
There is a high cost to the business owner who does not collect the accounts promptly. Figure 22.1 shows the decrease in an account’s value as it ages. This is due to many factors. The older an account is, the less likely it is that the business will ever collect it. Collecting accounts has an associated cost, including office personnel cost, postage, and time taken from other essential tasks. The dentist loses the use of the money until they collect it. If they use an outside collection agency, then that agent also costs the business money. Finally, the dental practice may lose the patronage and goodwill of the patient, their family, and friends over misunderstood collection issues.
Practice owners must decide before the fact what their policy is regarding payment for services. Patients need to have this information to make informed treatment acceptance decisions. They will also become angry if a dentist springs a financial surprise on them without informing them ahead of time. Having a written policy improves patient compliance, increases collections, decreases uncollectible accounts, improves scheduling (by reducing broken appointments), and leads to more appreciative patients. Although they may not like the policy, at least they know and understand it.
FIGURE 22.1 Losses from slow accounts.
ELEMENTS OF A FINANCIAL POLICY
Dental office financial policies commonly contain several elements (Box 22.1).
WHAT PATIENT INFORMATION TO COLLECT
Every person that a dental practice agrees to allow to pay them over time is essentially applying for an interest‐free loan. If the practice offers extended payment plans, they want to have some indicators of the creditworthiness of the account guarantor or applicant for the loan. If a patient does not pass the test, the practice does not have to offer them credit. That patient must pay for services as the dentist provides them, or the office does not offer the patient another appointment.
The dentist (or office staff) needs to gather certain information to ensure payment for services from patients who do not pay in full at the time of service. The account guarantor is the person who is responsible for paying the bills. They “guarantee” the patient’s account. The guarantor may be the person themselves, a spouse, or the parent of a minor child. An adult child may be a guarantor for a marginally capable elderly adult. A divorced parent who lives in another city may be the guarantor for a child who comes to the dentist with their custodial parent. A trustee or guardian may have financial control over an incapable adult. The account guarantor may or may not be a patient of the practice. Regardless, the office’s job is to ensure that they know who the guarantor is and to let the guarantor know the practice’s financial policies. (The guarantor, not the custodial parent or anyone else who does not have payment responsibility, should sign financial agreements.) Offices also must send any bills to the guarantor, so offices need to keep a current address and telephone number for the guarantor. A Social Security number is important to track people down or check on credit histories, but they are becoming more difficult to obtain. Driver license numbers are also valuable for tracking people down.
Offices can legally make a credit check (order a credit report) on any patient who makes a financial commitment to them. In practice, dental offices will use this only for large amounts. What is a “large” amount? That is up to the practice owner to decide. A $1000 treatment for one dentist may be appropriate; another will not bother getting a credit report for amounts less than $10 000. Dental practices can join a credit bureau. The cost is several hundred dollars per year. Personal credit histories may still cost an additional fee. The report does not give the practice a yes–no reply, but instead describes the person’s history of payments on credit cards, loans, and mortgages. It is up to the practice owner to interpret that information and decide if they want to extend credit. The office must have the patient’s Social Security number to run a credit check on them. The office can refuse to offer credit if the patient does not provide that.
WHO QUALIFIES FOR CREDIT
Credit occurs when someone buys a good or service but does not entirely pay for it until some time in the future. The office credit policy dictates the conditions under which patrons are allowed to pay in the future for dentistry done today. It describes to whom the office is willing to extend credit. The practice lends patients money when it agrees to send a bill at the end of the month. Practice owners should qualify ahead of time to whom they are willing to lend, to whom they are not, and under what terms they will lend to patients.
Dentists do not have to extend credit to anyone. They may require a full cash payment when they provide service, with no exceptions. The problem is that a credit policy that is too strict may discourage people from proceeding with treatment plans (i.e. “buying the dentistry”) who might otherwise go on with treatment. Patients are not particularly sensitive to fees, but they are sensitive to credit and collection policies. Think about a patient who has $8000 of dentistry to be done. They are interested in having the work done. They cannot discriminate between a total price tag of $8000 and one of $9000. One price over the other will not make their decision. However, the difference between 100% immediate payment and a payment plan of $1000 per month can help them decide whether to have the treatment. The real issue becomes how they fit the payment into their monthly family budget rather than the simple cost.
Not everyone that a dental practitioner treats deserves credit. Dentists may consider the public’s creditworthiness a continuum, from very creditworthy (will always pay as agreed) to not creditworthy (will never pay) and everything in between. Their job is to decide how far they will go on the continuum to generate the desired production. Dentists should be aware that only 30% of Americans qualify for a VISA or MasterCard with more than a $1000 limit. If these companies do not extend credit to someone, the dentist should seriously consider if they will.
WHAT PAYMENT CONDITIONS TO ACCEPT
If a dentist decides to extend credit to patients by sending a bill, they must decide the repayment conditions in their financial policy. Will the dental practice allow people to send $50 per month to pay off a $5000 treatment plan? Will the practice require 50% down before starting any treatment or a specific procedure (e.g. a bridge)? Does the practice’s payment plan policy differentiate between cash (fee‐for‐service accounts), traditional insurance accounts, and managed care accounts? Some of these payment conditions include the following.
Written Plan
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