Part 1: Patient Financial Policies
Every tooth in a man’s head is more valuable than a diamond.
Miguel de Cervantes, Don Quixote, 1605
health care credit cards
interest on unpaid amounts
payment plan policy
practice production and profitability
Every dentist and every business has a financial policy, whether they know it or not. The consumer is well aware of the policy. When a person goes to a fast-food restaurant, he or she knows their credit policy: cash at time of purchase. Yet many patients continue to believe that they can (and should) get a bill from the dentist at the end of the month, let it set for another 20 days, then write a check for part of what is owed, without worrying about late charges or accrued interest. It is the dentist’s job to inform the patient if this is not the case.
Dentists 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 dentists spring 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 decreasing broken appointments), and makes more appreciative patients. Although they may not like a dentist’s policy, at least they know and understand it!
Elements of A Financial Policy
Dental office financial policies commonly contain several elements (Box 16.1).
What Patient Information a Dentist Collects
Every person that dentists agree to allow to pay them over time is essentially applying for an interest-free loan. If the dentist offers extended payment plans, he or she wants to have some indicators of the credit worthiness of the account guarantor or applicant for the loan. If someone does not pass the test, the dentist does not have to offer the patient credit. The patient must pay for services as the dentist provides them or the dentist 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 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 for an incapable adult. The account guarantor may or may not be a patient of the practice. Regardless, the dentist’s job is to ensure that he or she knows who the guarantor is and to let the guarantor know the financial policies of the practice. (The guarantor, not the custodial parent or anyone else who does not have payment responsibility, should sign financial agreements.) Dentists also must send any bills to the guarantor; so dentists need to keep a current address and telephone number for the guarantor. A Social Security number is important to have 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.
- Patient information collected
- Qualifications for credit
- Payment methods accepted
- Payment conditions accepted
- Charges for late payments
- Rules regarding dental insurance plans
- Marketing incentives in place
Dentists can legally make a credit check (order a credit report) on any patient who makes a financial commitment to them. In practice, dentists will use this only for large amounts. What is a “large” amount? That is up to the dentist to decide. A $1000 treatment for one dentist may be appropriate; another will not bother with amounts less than $10,000. Dentists can join a credit bureau. The cost is several hundred dollars per year. Individual credit histories may still cost an additional fee. The report does not give the dentist a yes–no reply, but instead describes the person’s history of payments on credit cards, loans, and mortgages. It is up to the dentist to interpret that information and decide if he or she wants to extend credit. To run a credit check on someone, the dentist must have the patient’s Social Security number. If the patient will not give it, the dentist can refuse to offer credit.
Who Does Not Have to Pay at Time of Service?
Credit occurs when a person buys a good or service but does not entirely pay for it until sometime in the future. A dentist’s credit policy dictates the conditions under which he or she allows patrons to pay in the future for dentistry done today. It describes to whom the dentist is willing to extend credit. In a sense, a dentist is lending patients money when he or she agrees to send a bill at the end of the month. Dentists should qualify ahead of time to whom they are willing to lend, to whom they are not, and under what terms they will lend it to the patients.
Dentists do not have to extend credit to anyone. They may require full cash payment at the time the service is rendered, 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 $8,000 of dentistry to be done. They are interested in having the work done. They can not really discriminate between a total price tag of $8,000 or $9,000. One price over the other will not make their decision. However, the difference between 100 percent immediate payment and a payment plan of $1,000 per month can help decide whether to have the treatment at all. The real issue becomes how they fit the payment into their monthly family budget, rather than the simple cost.
Remember, not everyone that dentists treat deserves credit. Dentists may think of the public’s creditworthiness as a continuum, from very credit worthy (will always pay as agreed) to not credit worthy (will never pay) and everything between. A dentist’s job is to decide how far he or she is willing to go on the continuum to go to generate the production he or she wants. Dentists should be aware that only 30 percent of Americans qualify for a VISA or MasterCard with more than a $500 limit. If these companies will not extend credit to someone, the dentist should seriously consider if he or she will.
What Payment Methods a Dentist Accepts
Dentists may or may not accept any of several methods of payment for their services. Each has advantages and disadvantages and may be part of a financial policy.
A patient may make a payment in cash. If dentists often have patients who pay with cash, they must have extra cash on hand to make change. Dentists know that cash will not “bounce” like a personal check might, but dentists also must be careful to account for all cash in the office accurately. Cash can be a problem in the office. Cash is difficult to track, and therefore easy to steal. In the unlikely event of a robbery, cash can be easily spent, while checks and credit card slips can not.
Dentists may refuse to take a personal check anytime. From their perspective, they want to ensure that a person’s check is “good.” In other words, dentists want to ensure that they have enough money in their account to cover the check. From the consumer’s perspective, they need to be sure dentists protect their personal information. If dentists put personal information on a check, that information is open not only to their office staff, but throughout the paper trail that the check travels. As a result, states have passed laws governing what dentists can and can not do regarding check verification. Each state is different, but the general rules are:
- Dentists can not require a consumer to show a credit card as a condition of accepting a check.
- Dentists can not condition accepting a check on a consumer’s authorizing charges to a credit card if the check is return from the bank (i.e., it bounces).
- Dentists can require and record a person’s name, address, and phone number on a check.
- Dentists can require a driver’s license or other form of photo identification.
If the bank returns a check, the dentist has a problem. The first thing to do is for the dentist to call the patient and determine what the problem is. The dentist may, and should, charge the consumer a “reasonable” fee for reprocessing the check. (Often the bank charges the dentist to reprocess the check.) It should be added onto the patient’s ledger as a separate code. (This is a charge adjustment, but not part of a dentist’s production numbers.)
When the bank returns a check from a patient, it will be stamped with one of four reasons:
- Insufficient funds means that the patient did not have enough money in the account; the check bounced. This is the most common reason for returned checks. It might not be a big problem. The receptionist should call the patient when this is discovered. The patient may have a reasonable explanation of the problem (“My pay check was late”). In this case, the dentist should tell the patient that he or she will be sending the check through a second time. If it clears, then great, the dentist has payment. If it bounces again, the dentist will need to take legal action. A dentist should give it to a lawyer or collection agency for immediate action.
- Payment stopped means that the patient has stopped payment on a check. The dentist should call patient immediately to find out the problem. More often than not, the patient is dissatisfied with work the dentist has done. (Hopefully, the dentist will know about this before the bank returns the check.) The dentist should discuss how he or she can correct the problem.
- Closed account means that the account has been closed. Often this shows intentional fraud by the patient. Sometimes, it may be an honest mistake, if a patient closed an account and “forgot” that he or she wrote the check or their spouse wrote the check. In these cases, the dentist may let the patient immediately make payment (generally in cash) rather than sending the check for prosecution.
- No account usually shows fraud because the bank has no record of any such account. The dentist should try to call the patient (but they may not be found). Unless they have some unusually inventive excuse, the dentist will probably need to turn this type of check over to a lawyer or call the local sheriff or police department to prosecute the patient for intentionally writing a bad check.
Credit and Debit Cards
Many practitioners accept bank cards (e.g., VISA, MasterCard) for payment of dental services. Dentists will have a bank that establishes a deposit account in their name, often the bank in which a dentist has his or her office checking account. The bank then deposits any charges that patients make to that account. The dentist then can withdraw money from that account whenever he or she chooses. The upside of this process is to speed cash flow through the practice and encourage patient payment. The down side is that the issuing bank retains approximately 2 to 4 percent of the amount charged as their fee for processing the account. The bank calls this a “discount.” In the end, this probably saves the dentist money if he or she sends these people bills at the end of the month. If the dentist collects well in the office at time of service, it is more costly.
Bank Plan or Health Card
Another common payment mechanism is a bank line of credit for the patient. In rural areas, banks offer these more often. In urban areas, finance companies offer them more frequently. Either way, the method is the same. In this arrangement, the dentist tells the bank the estimated amount for treatment. The bank then qualifies the patient (checking credit history) and makes a loan to the patient for the amount of service. The bank pays the dentist for the dental services. The patient then pays the bank over time as an installment loan. These arrangements have the advantage of keeping the dentist out of the money-lending business, speeding payment, and decreasing billing costs. The bank generally charges the patient the costs of originating the loans.
Several national companies offer this service calling themselves “health credit cards” or other similar names. They often have Web sites and can qualify a patient for payment for services while they are in the office (Box 16.2). A dentist will need to sign up for these services as the practitioner. (This is generally at small charge.) The patient then pays the finance company over time, with interest included for the finance company. (Depending on the size of the case and the payment history, the loan may be interest free to the patient.) The finance company pays the dentist as the work is completed, or sometimes when the work is scheduled. Each has different rules, so a dentist should check them out to find the one that best suits his or her needs. These plans take the dentis out of the finance business. They do not approve everyone for credit. (Currently, they approve about 60 percent of the applicants.) If an independent credit agency refuses to extend credit to a person, the dentist should seriously consider whether he or she can offer them any credit as well.
Patients may have flexible spending accounts or other employer-sponsored payment methods. The tax advantage of these plans encourages many people to participate. This becomes a significant stimulus for demand. The plan may require patients to bring a receipt for reimbursement of services, or the sponsoring organization may issue a special debit card for the person to use in health care offices. Dentists process these cards like others.
What Payment Conditions a Dentist Accepts
If a dentist decides to extend credit to patients by sending a bill, he or she must decide the conditions of repayment in his or her financial policy. Will the dentist allow people to send $50 per month to pay off a $5,000 treatment plan? Will the dentist require 50 percent down, before starting any treatment or a specific procedure (e.g., a bridge)? Does the dentist’s payment plan policy differentiate between cash (fee-for-service accounts), traditional insurance accounts, and managed care accounts?
There are several points to consider when developing a payment plan policy. (Remember. This is for the patient portion of the total charge.)
Dentists should develop a payment plan for a complete treatment plan. If they develop separate requirements for individual procedures, the patient may become easily confused.
Dentists should have a definite plan of repayment for every patient to whom they extend credit. This arrangement should be written, not verbal. (An example agreement at the end of this part.) Require the account guarantor to sign it. This does not make the debt more legally binding. (The patient owes the dentist for the service whether or not he or she signed a piece of paper.) It does place in the patient’s mind the idea that he or she has signed an agreement to pay the dentist for the service. The patient thinks that it is more binding to see it in black and white.
The size of the required down payment affects treatment acceptance. A lower down payment is a means of easing the dentist’s credit policy. A requirement for a higher down payment tightens the dentist’s credit policy. The dentist should get an initial payment large enough to cover any lab bills. That way, at the least the dentist will not lose money if someone does not pay his or her bill. Many dentists require half the fee for the procedure as a down payment to begin treatment. Require a down payment of 33 to 50 percent, even if there is no laboratory work.
Length of Payment
Billing should not be extended beyond 3 months after treatment has been completed. If the payment period extends further out than this, patients often “forget” to complete their scheduled payments.
Amount of Plan
The total amount of the payment affects the options the dentist offers. A dentist might say, for example, that patients must pay all amounts less than $200 at time of service. Amounts more than $200, but less than $1,000 may be paid in three monthly installments (with an acceptable credit check). For amounts more than $1,000, the patients must gain financing through a health credit card.
Charges for Late Payments
Dentists may charge interest for any unpaid amounts. If a dentist does charge interest, he or she must be sure to meet the truth-in-lending laws. These laws state that dentists must make complete disclosure of all financing costs to the borrower; dentists must calculate the annual percentage rate; and the borrower must sign a statement containing this information. Dentists really need a computer system and software designed for this task. (Most of the major dental/>