Q&A: making your practice more productive

Dental Assistant, The, March-April, 2004 by Keith Drayer

Q: "I'm interested in making my practice more productive. However, I have some accounts receivable problems. I'm concerned that if I grow my practice, I'll end up with even bigger A/R problems. What can I do to avoid such difficulties?"

A: If you have the desire and ability to grow your practice, don't let your concerns with A/R stop you from making progress. You can start by changing your financial policy. That's what probably created your A/R problem in the first place. It goes without saying that dentists provide valuable services to their patients, and they deserve to be compensated appropriately--and promptly. Yet so many dentists feel they have to allow patients to pay on a schedule that meets their financial needs--not the needs of the practice. When a practice makes the decision to extend credit to patients, it assumes the risk and the consequences of not receiving full payment at the time of treatment.

You're currently experiencing a significant financial burden because of A/R problems. It affects your cash flow, and requires your team members to spend valuable time and resources chasing down patients for payments. When you extend credit to patients and allow them to pay over time, you put your practice's financial health at risk. Many industry consultants believe that carrying accounts receivable actually costs a practice about 40 percent of the billed amount when you factor in the real loss of uncollected accounts, the cost of billing and collections, and the receivables management cost or loss of the dollar. In one industry survey, where consumers were asked to rank their monthly payment commitments by importance, they placed dentists 36th out of 40 in line to be paid. Not good news.

There are three basic tenets to maintain a low A/R. All of these options will allow a more stress-free cash flow and the added benefit of reinvesting A/R funds back into your practice.

#1. Establish a firm financial policy.

Your practice probably accepts cash, checks, and major credit cards. All patients should be advised of the practice's financial policy both verbally and in print prior to the diagnosis and the financial discussion. It should then be reinforced during the treatment and fee discussion. Dentists should discuss the policy with the entire staff and support them when they enforce the policies with patients. In addition, ask for payment at the time of treatment.

#2. Offer a range of options so patients have choices.

Several years ago the only source of credit was through the practice. Even now, when a patient is unable to pay for treatment with cash, check, or a major credit card, many practices think their only other choice is to bill the patient. Many believe they'll receive their fees, even if it takes some time. This perspective usually outweighs the possibility of losing the case and the patient if they are unable to pay at the time of treatment.

Times have changed, and practices now have many other options available to them. One of my favorites is third-party financing. Patients are familiar with "no-interest" financing in their daily lives when they shop for appliances, electronics, jewelry, and other items. Dentistry can now also utilize no-interest financing as an option to offer a patient a convenient monthly payment plan without the risk and burden of carrying A/R.

There are several third-party financing companies available. Sullivan-Schein's choice is Care-Credit. By using third-party financing instead of offering credit through the practice, you reduce A/R and improve cash flow. Instead of waiting weeks or months, you receive payment usually within two business days. And with most of the better patient payment plans (including CareCredit), if your patients are late making their payments, or end up not paying their balance in full, you have no responsibility to the third-party financing company.

#3. Develop and train the team to support payment policies.

The clinical staff should be confident about the dentist's clinical skills and support the practice's fee schedule. The team should be assertive and understand that consistency and persistence is very important in reducing A/R balance. In today's world, having from two to four weeks average production is considered an ideal amount for a practice's A/R. Once A/R is reduced, team members can spend valuable time delivering the exceptional service needed to achieve the practice's goals, instead of chasing patients for payments.

So, take a hard look at the financial policy, the team, and the options offered to patients. Get out of the banking business and concentrate on great dentistry.

Keith Drayer is the director of Henry Schein Financial Services, which provides business solutions for dentists who are starting, growing, expanding, or purchasing dental practices. Mr. Drayer can be reached at 800-443-2756 or keidra@henryschein.com.