Successful Practices of the Future
In the rapidly changing dental marketplace, we see dental practices segregating onto three tiers. On the lower tier. there are a small percentage of practices that treat patients through managed care contracts only. The vast majority of practices reside in the middle tier; while predominately fee for service, they also have some managed care contracts. Finally, typical practices on the high end maintain a strictly fee-for-service operation, differentiating themselves on the basis of higher quality and higher fees.
Maintaining a successful practice in this higher quality tier requires a good conversion rate. The conversion rate is simply defined as the percentage of patients accepting treatment, where treatment has been recommended. The key to a good conversion rate is making patient treatment affordable. In most cases, affordability is more a matter of the patient's perception, than reality.
For example, let's review the current situation in orthodontics. Advances in treatment materials and modalities have significantly decreased treatment time for the average case. Maintaining monthly payments tied to the treatment duration has resulted in higher monthly payments. Since most patients are extremely sensitive to relatively small changes in monthly payment amounts, the doctor's ability to treat has outstripped the patient's ability to pay under these traditionally designed payment arrangements. While some doctors have sought to mitigate the problem by holding patients "hostage" until they can pay over a longer treatment period, this is both an unethical and inefficient alternative.
What's needed is a flexible payment arrangement to decrease the required down-payment and monthly payments in order to provide greater affordability. Through greater affordability, doctors can maintain or increase the percentage of patients who financially qualify for treatment and maintain a high conversion rate. The patient's perception of affordability is tied much more to payment arrangements than to price. Witness advertising for automobile and other big ticket items where down-payment and monthly payment amounts are heavily advertised and price is rarely mentioned.
Maintaining Labor Efficiency
Evidencing this trend, some practices have already begun offering more flexible payment arrangements in order to maintain or increase market share. This has typically been done through creation of a "financial coordinator" position, dedicated exclusively to establishing, maintaining, and enforcing a multitude of different payment arrangements for patients. Unfortunately, this dedicated position has proven extremely costly. What's needed is a system providing a few simple, but highly effective, flexible payment options that can be administered on a low labor cost basis.
Cost-effective Patient Financing Protocol
After reviewing this problem and examining current and emerging alternatives, we feel the following patient financing protocol will best serve the practice's needs. These options are presented in the order that they should be presented to patients, ranging from the most cost‑effective to the least cost‑effective for the practice:
1. 5% discount for full payment up front. While we recognize that few patients will accept this, the ones that do guarantee collectability to the practice. The 5% discount is more than offset by the cost of billing and collection, and potential bad debt write‑offs.
2. Credit card pre‑authorization to pay remaining balance in lump sum. The next option presented to the patient is for the patient to charge the balance remaining after insurance payment, directly to their generalized credit card (Visa, Mastercard. American Express, Discover, etc.). This can be structured by providing space on the new patient entry form for the patient to provide their credit card type, number, expiration date, and their signature preauthorizing this charge.
3. Credit card pre‑authorization to pay remaining balance in monthly payments over an agreed upon period. In many cases, patients will not have available limits on their credit cards in order to accommodate preauthorization of the remaining balance in a lump sum. In this case, the patient can agree to preauthorize a monthly charge to their credit card in an amount, and over a time period, necessary to make treatment affordable for them. While credit card charges typically involved a discount charge of around 3% to the practice, this is more than offset by the fact that collection remains in the hands of the practice, and no further billing and collection cost is incurred.
4. Electronic bank transfers. A rapidly emerging alternative involves a patient preauthorization to electronically transfer funds from their checking account into the practice checking account in a designated amount on a designated date each month. While this technology is now available and being generally offered to doctors by third party vendors who perform this service, the newest generation of software allows the practice to access patient funds, without the use of a third party servicing vendor. If the patient has no credit cards, or lacks available space on existing credit cards, in most cases they will have a checking account which can be accessed on this basis.
5. All of the above! Set your patients up with a payment plan with Preferred Payment Plans and never again have to worry about billing, processing payments, and collections. Plus, reduce your staff labor costs significantly. Preferred Payment Plans is a payment plan management program that allows your patients to make affordable monthly payment through their credit card or bank account. Click here for more information!
Doctors that can design flexible payment arrangements for patients to increase affordability improve conversion rates and market share. Providing patients with preprinted materials discussing these flexible payment options as part of their new patient entry materials will simplify their decision making process, and eliminate the need for a dedicated employee to handle this task, thereby reducing labor costs. Implement this system of the future in your office now to boost production, reduce labor costs and significantly boost practice profitability.