We’re nearing the end of our five-part metrics series. In this article, we’ll discuss the fourth key performance indicator (KPI) — accounts receivable. The thing about accounts receivable, or collections, is that they’re easy to measure but can be extremely difficult to collect. But to know whether or not your dental practice is making money, you need to track the accounts receivable management KPI.
Dentrix Mastery Part 1: Growing active patient revenue
Dentrix Mastery Part 2: Managing the hygienist's patient growth
Dentrix Mastery Part 3: Maximizing employee production
Most profitable practices set a goal of collecting at least 98% of their total adjusted production, which is their gross production minus their adjustments. The ideal range for a profitable practice with the production-to-collection ratio is between .5 and 1.5 each month. How your practice manages your accounts receivable, especially this ratio, determines your profitability.
There are five accounts receivable measures you should monitor at least once a month:
1. Account balance aging
2. Daily over-the-counter collections
3. Pending insurance claims aging
4. Total collections
5. Totals by providers
You know where your production-to-collection ratio number needs to be, so if and when it becomes greater than 1.5, you know your collections are too low. When your collections are too low, it’s time for the necessary steps to get that ratio number back in the safe zone. Here are ways you can do that:
Have a written financial policy in place—Having a written policy ensures that nothing can be argued when it comes to financing. Make sure your patients understand your policy and that your team reinforces it.
Implement a systematic billing system—If you’re going to get paid in a timely manner, then you have to bill your patients in a timely manner. Promptly send a billing statement after a patient’s visit, and make sure the bill provides all the necessary information correctly and in a straightforward manner. On your billing statement envelopes, stamp “Address Service Requested” so if a patient has moved without informing you, the post office will locate their change of address and send it to you for a small fee.
Flag balances that are overdue—Set up your software system so that when balances are overdue by 30 days or more, you will be notified. Once you see these flagged balances, immediately call the patients who owe you money. The longer you wait, the less likely you are to get paid. If it gets past a certain date, your practice will have potential losses more than the bill is even worth.
Pick up the phone and call patients with overdue bills—You will get much more from a phone conversation than if you keep sending bills to a patient. The phone is a much more effective form of communication, and something your patients will appreciate if you handle the calls correctly. Train your team to be firm but courteous, and to use a pleasant tone when dealing with patients who owe money. Have staff ask patients questions to understand why people are behind on their bills, and then be helpful by providing bill-paying options.
Set up electronic payment plans—These days, everything can be done online. It’s a quick and efficient way of doing things. So if your practice doesn’t have this already, set up an electronic payment plan so your patients have another option for paying their bills on time.
Follow your state’s collection laws—The last thing you want is to get into legal trouble when trying to collect money you deserve. Know what your state’s collections laws are, and make sure everyone on your team also knows so you or one of your team members doesn’t do anything that’s will be of negative consequence to you.
The sooner you address a collections issue, the more likely you’ll get paid, and get paid the full amount. Your practice’s goal should be to provide positive patient experiences during treatment as well as the bill paying process. Do what you can to make it the smoothest, most trouble-free experience you can for all patients. You don’t want the treatment phase to go extremely well, only to lose them during the bill paying phase.
For more information about the metrics you need to be tracking, feel free to download the latest eBooks from Dentrix at Dentrix.com/Solved.
