A dental office’s collection policies describe how it plans to collect payment from people who owe it money. These people represent failures of the office’s financial policies, because if the financial policies qualified people properly and established timely payment procedures, nobody would fail to pay on time. This, of course, only happens in an ideal world. In the real world, people intentionally abuse kindness with no plan ever to pay their bills. Others may have life circumstances (a family death or job loss) that make it difficult to meet payments as agreed. Still others may fully intend to pay what they owe but decide to use their currently limited financial resources elsewhere.

The office collection policies should integrate with patient financial policies. Patient financial policies describe how patients usually pay for services. The collection policy describes what happens when they do not (Box 22.2).

An issue that healthcare providers face that non‐health business people do not is whether to continue treatment on patients who have not paid for past or current treatments. The dentist–patient relationship demands that a patient not be abandoned or harmed by failure to pay. This means that if a patient has treatment partially completed, the dentist should not stop in the middle of treatment because the patient might be harmed. So, if a patient has several teeth prepared for crowns, the practitioner must complete those treatments because the patient might be harmed by the dentist’s failure to complete treatment. However, if a patient has had several quadrants of restorations and needs several more, the dentist could halt treatment until payment is up to date. Patients also have an obligation in the relationship to pay for the service. With large‐ticket items, be sure that the financial policy calls for an adequate down payment and that the office staff follow the policy.

ACCOUNTS RECEIVABLE

Accounts receivable (AR) are the amounts that patients owe. This is a running tally. It changes when the office bills a procedure, opens the mail, and posts a payment. There is no absolute acceptable level for AR. That depends on the office production level, insurance amounts, practice philosophy, and even the time during the year. (Patients are notoriously slow paying just after the holidays.) As a rule, the practice is healthy if the AR value is about 0.5–1 month’s net production. This amount may be higher in practices with significant (greater than 80%) numbers of insurance patients, especially with those insurance companies that do not process claims electronically. It may be lower in practices that accept no assignment of benefits and have other strict credit policies. AR will change over time. If the dentist has an excellent month (from a production standpoint), it may take several months to see all those payments across the receptionist’s desk as payment.

BILLING SYSTEMS

Most dental offices with computer management systems process bills and send them to patients. The sequence of sending bills to patients is important. Most offices send bills once per month. The office should be sure to use a consistent date so that the patient remembers the bill. Larger offices may need to send bills several times per month. This helps smooth the workload and cash flowing through the office. For example, an office may send accounts with last names beginning with letters A–M on the first of the month and N–Z on the fifteenth. Other offices send a second bill two weeks after the primary bill with a special “dunning message” (see later in the chapter) to all accounts over 60 days old. This is an attempt to encourage the older accounts to pay.

Billing is expensive. It involves staff time to process entries, staff time to review and print bills, mailing charges, costs of stationery and other paper products, and lost implied interest earned. Some estimates have put the total cost of sending a single bill at $16.00. If it requires two statements to collect, the cost rises to $32.00 for each patient, essentially eating away the profit on smaller cases. It obviously pays to collect fees as soon as possible. Box 22.3 shows that in a typical dental practice, offices collect about a third of the fees at the front desk. The collection ratio on these accounts is 100%. Offices send about a third of the fees to insurance carriers. The insurance also pays these at virtually 100%. The fees that offices send through statements (the last third) account for almost all the uncollectible amounts. If the total collection ratio is 97%, the actual collection ratio (on the billed amount) is much less, perhaps 91%. The uncollectible ratio is then in fact 9%. Few practice owners would be happy with a 91% collection ratio, although that number is a more accurate reflection of the actual collection percentage in this practice. The obvious solution is to move more collections to the front desk, leaving less in AR. Dental practices do this by asking for payment, making payments easy, and providing an accurate estimate of insurance payments.

COLLECTION POLICY

If the office financial (credit) policy has failed to screen bad credit risks adequately, the office will have a problem collecting money owed by patients. The collection policy determines the office’s rules for collecting that money. It establishes collection techniques, defines a delinquent account, and decides on methods outside the office that the dental practice uses for collecting problem accounts (Box 22.4). Offices can use any or all of several different collection methods.

COLLECTION TECHNIQUES

Collection techniques describe the methods the dental office uses to collect money from patients.