By Clint Sallee
Dentists face a very high likelihood of being stiffed by patients as compared to other medical professionals. It’s a sad but true statement. So it is imperative that as a business owner you understand that insufficient collections efforts are the beginning of cash flow constraints for a dental practice. And, since many dentists are willing to give their patients the benefit of the doubt, they often find themselves in the precarious position of spending additional resources trying to collect what they’re rightfully entitled to.
A membership survey recently conducted by the Commercial Collection Agency Section of the Commercial Law League of America showed that after just three months, the likelihood is that you’ll collect only about 70 cents of each dollar owed. After six months, that figure drops to 50 cents, and after a year it shrinks to 23 cents. This proves that time is money. Money earned today is more valuable that money earned in the future because it is available sooner to be invested.
How do you embark on effective collections management? First, know your patient. Prior to providing service, gather all demographic information you can on a patient. Key identifiers include their social security number, date of birth, and driver’s license number. Other demographic information includes their contact information (home and work), emergency contact information (which can also be good for contacting a patient if they “disappear” during a collections process), and all relevant phone numbers.
For good measure, get a photocopy of a picture identification so there can be no doubt that the person you provided services to is the one who owes you. And, in today’s rapidly evolving technology landscape, it’s helpful to get the patient’s signature on a consent form authorizing you or your agents to contact the person at any phone number, email address, or cell phone number provided. At this stage in the process, patients are very willing to provide their information (if they aren’t, that should be a warning sign). Once bills become delinquent, you will no longer have the leverage to gather this information, so complete this step at the outset of any new relationship.
While many business owners downplay the repercussions, poor accounts receivable management can actually drive a company into bankruptcy. In a dental practice, where financing options are limited, the need for cash flow is even more acute. When you allow a patient not to pay you on time and in accordance with your contract, you are depleting your cash flow, and worse yet, spending more money trying to collect what is owed to you, further eroding your margin and negatively impacting your cash flow. If you make $500 in profit on your services and you have to spend five hours collecting on that debt, depending on the value of your time it may cost you more than your profit to recover the debt. If you don’t pay attention to your accounts receivable, you may wake up one day and find that you simply don’t have the resources to continue to run your practice.
Once services are provided, look for ways to accelerate your collections process. If you currently send multiple statements, assess whether you can shorten the intervals between statements, such as 30 days instead of 90, or eliminate some statements altogether. Statistically, second and third statements rarely justify the cost associated with production, much less mailing. Mail has become a less effective collection tool. Don’t be bashful about making calls, leaving voice mails, or sending text messages. While many patients can actively ignore mail, fewer are willing to disregard communication on their mobile device. Be polite and professional, but focus on making your obligation their priority. Don’t become casual in your mobile communication – remember, they’re not your friend, but your patient.
Keys to successful collections in the dental practice
Take your accounts receivable in for a checkup
Once you have exercised reasonable effort and been unable to create the desire result, you should consider your options and act decisively. Depending on the balance and your willingness to engage in the collections process, the next steps may include a letter from your attorney, a small claims action, or outsourcing the account to a third party collection agency. If a patient breaks promises, becomes unresponsive, or is otherwise unreachable, escalate the account quickly.
Collections are a very personal matter. To many, it may not feel right to ask a patient because of the fear it might jeopardize the relationship. But remember that you are in a business, and effective accounts receivable management is a key component to running a successful dental practice. Generating bills is important, but receiving the revenue is the most critical step.
Clint Sallee is president of Fidelity Creditor Service.