A recent survey by The Blair/McGill Advisory revealed that doctors are making significant progress in tightening in-office collection policies.
W. Charles Blair, DDS
A key strategy to maximizing collections involves asking for payment at the time service is rendered. A dollar collected at that time is a 100 percent collection. When a patient leaves your office without paying, the value of that account drops significantly as it ages. The Commercial Collection Law League of America estimates that practices routinely recover 93.8 percent of patient receivables 30 days past due, 73.6 percent of receivables 90 days past due, 57.8 percent of receivables 189 days past due, and only 26.6 percent of receivables one year past due.
The net fee received shrinks even further if not paid at the time service is rendered, because additional labor and supply costs are involved in sending and collecting patient bills. Ongoing patient relations are more positive if the practice is paid at the time of service, and billing and collecting activity is avoided.
Most doctors surveyed indicated that, when an insured patient owed part of the fee, they asked for that amount at the time of service. Sixty-eight percent of doctors responding to the survey said that this always was their practice, up from 67 percent in our 1996 survey. Another 21 percent "sometimes" followed this practice. Only 11 percent of doctors indicated that they never estimated the patient payment amount or asked for payment at the time of service.
Forty-four percent of respondents indicated that they collected 40 percent or less of their collectible charges at the front desk, down from 48 percent in the 1996 survey. On the positive side, 25 percent of the respondents indicated that they collected over 80 percent of collectible charges at the front desk, up significantly from 17 percent in the prior survey. (Of this 44 percent, 6 percent indicated that they collected less than 10 percent over-the counter, 15 percent collected 10-20 percent, and 23 percent said they collected 21-40 percent.)
Tracking the over-the-counter collection ratio
By tracking their over-the-counter collection ratio each month, doctors can determine how well their front-desk staffers collected in relation to how much could have been collected. To determine this ratio, divide the total amount collected at the front desk (including by credit card) into the total charges generated by your office that will not be paid by a third party, such as an insurance company. We were disappointed that only 40 percent of responding doctors actually tracked this ratio (although this was up from 37 percent in our 1996 survey). Unfortunately, the 60 percent of doctors who did not track this statistic are "flying by the seat of their pants," with little to gauge their collection staff`s effectiveness.
We recommend that doctors share this information with their front-desk staff and establish a percentage goal for over-the-counter collections each month. Future compensation increases should be based, at least in part, on the staff`s ability to reach or exceed the established goal. A declining percentage serves notice that more effort is needed, or else job changes will be required. Only 20 percent of respondents set such goals for their front-desk staff, which was down from 24 percent in the prior survey.
While there is not a universally desirable ratio, the important factor is the trend from month to month. For example, if your office currently has a 60 percent over-the-counter collection rate, the goal should be to reach 70 percent over the following 12 months.
Payment options
Offering discounts for cash payment in full at the time service is rendered is one strategy to improve your practice`s over-the-counter collection rate. Sixty percent of doctors responding indicated that they offered a discount or bookkeeping adjustment for payment in full by cash or check at the time of service. Seventy-three percent of responding doctors indicated that they offered a discount of between 3 and 6 percent for payment in full. Twenty-four percent offered a discount in the 7 to 10 percent range. We generally recommend a 5 percent bookkeeping adjustment for payment in full at the time of service, except in orthodontics where we recommend a 7.5 percent discount.
Increased emphasis on payment by credit card is another strategy to boost over-the-counter collection. We were pleased to see that payment by credit card continues to grow in dental offices. Ninety-nine percent of doctors responding to our survey said that their office accepts payment by general credit cards.
The percentage of patient payments made by credit card still is fairly low, but growing. Of the doctors surveyed, 60 percent indicated that they received 10 percent or less of total patient payments by credit card, down from 63 percent in the prior survey. Another 22 percent of doctors reported receiving 11-20 percent of payments by credit card. Twelve percent collected 21-40 percent by credit card, up significantly from 2 percent in the prior survey.
Special payment arrangements
We were pleased to see that more doctors are expanding their special payment arrangements through credit cards, as we have previously recommended.
One strategy we recommend is to allow patients to preauthorize charges for future service to their credit card. This provides expanded patient-financing options and increases the affordability of treatment. We were glad to see that 39 percent of doctors responding offered this option, up from 33 percent in the prior survey.
Another strategy we recommend is to have patients preauthorize your practice to automatically charge whatever balance remains after insurance payments are credited. Only 20 percent of responding doctors provided this option.
A third recommended strategy is to provide patients the option to pay their past-due accounts by credit card. Sixty percent of doctors followed our recommended practice of preprinting on their billing statement the information necessary (card type, card number, expiration date, and signature line) to allow patients to pay past-due balances in full by credit card. Previously, only 48 percent provided this information. Sixty-six percent of doctors also responded that they emphasized credit-card payment when making collection calls to delinquent accounts.
Credit-card costs
We also asked doctors what percentage their most active credit-card company charges them as a discount rate to process credit-card payments received through the office. On the whole, credit-card costs were up. The percentage of doctors being charged 2 percent or less dropped from 53 percent in our prior survey to 45 percent. More doctors - 33 percent - moved into the 2-3 percent cost range. We recommend that doctors being charged more than a 2 percent discount rate negotiate with their bank or seek a credit-card arrangement with a more favorable rate.
Other collection policies
Including the due date for payment on patients` statements is critical when in-office billing cannot be avoided. Otherwise, the patient simply relegates the bill to the lowest payment priority. We were pleased to see that 70 percent of doctors responding include such a due date on their statements.
We also recommend adding a finance charge for past-due accounts in order to elevate payment priority. Again, we were glad to see that 70 percent of practices already levy such a finance charge. Of those adding a finance charge, 12 percent charge 1 percent a month (12 percent annually), 65 percent levied a 1.5 percent monthly financing charge, and 2 percent added a 2 percent monthly charge. Twenty-one percent included some other type of finance charge.
Analyzing your practice`s collection policies against these survey results can pinpoint your deficiencies. Furthermore, implementing the recommended strategies will allow your practice to increase the percentage of collections received at the time of service and to collect any in-office billings on time for greater profitability.
