Fix Collections and Start Growing Practice Profits

By Sally McKenzie, CEO Printer Friendly Version

When patients don’t pay on time, it hurts your practice. You’re not able to invest in efficiency-boosting technologies or make necessary updates, which is something patients will notice. Team morale begins to suffer and stress levels rise, further hurting practice efficiencies and ultimately your bottom line.

That’s why it’s so important for you, as the practice CEO, to focus on the financial aspects of running a practice. I know that’s not what you signed up for, but managing financials is part of the deal. You really have to become comfortable with the business side of running a practice, which is something many dentists struggle with. That’s where I can help.

I suggest you start by creating a financial policy and clear collections protocols. No idea how to do that? That’s OK. I can help walk you through it. By the time we’re done, you’ll have more steady cash flow and the money you need to invest in those technologies you’ve been eying, or to finally update the reception area.

Let’s start with collections. These tips will help you fix collections and begin growing practice profits:

Add a Financial Coordinator to Your Team
Hiring a Financial Coordinator will do wonders for your collections rate—but only if you hire the right person. This is a difficult role that not everyone can handle. You need to find someone who is goal-oriented, assertive, polite, confident and tactful. This team member must be comfortable working with numbers and handling confrontation, because both are part of the job. Your coordinator will be responsible for collecting payment, generating accounts receivable and following up on delinquent accounts.

Provide Your Financial Coordinator with Proper Training
Bringing on the right person for this role is key, but you can’t expect him or her to fix your collections without proper training. Part of that training is developing a script the coordinator can use during collections calls. Remind your coordinator that these calls should never be confrontational, and that he or she should work with patients to resolve any issues that are keeping them from making payments.

Track Accounts Receivable
Tracking accounts receivable probably isn’t high on your priority list, but it should be. It’s vital to keeping your practice financially healthy.

When you look at these numbers (which is something I suggest you do soon if it’s been awhile) just remember they’re probably not going to be all that great if your practice is struggling. I understand this is frustrating, but don’t get discouraged.

OK, so what’s the best way to keep track of your accounts receivable? I’ve put together a few steps you can follow:

Generate an aged accounts receivable report once a month. This report will show you every account with an outstanding balance as well as when the last payment was made. Try not to stress out if this month’s list is long. We’re going to work on shortening it.

Make sure the report “ages” the receivables showing the “current” column. This is revenues produced in the last 29 days that have not been collected. You’ll see it provides a breakdown of accounts that are 30, 60 and 90 days past due.

Keep this in mind when looking at the current column: The practice should have a minimum of 45% over-the-counter collections for the month, and no more than 55% in the current column awaiting insurance reimbursement.

Total all monies that are more than 90 days delinquent. Remember the percentage shouldn’t be more than 10% of your total accounts receivable.

Run the report with credit balances. Add credit balances back to the total accounts receivable.

Once you have your totals, compare them to your monthly production. If they’re more, I’m willing to bet you have a billing and/or an insurance problem. I can help you get those back in order too:

Improve your billing system
If your practice is like most, you send out bills once a month. While that might seem like enough, sometimes it isn’t, which is why I suggest sending bills as often as necessary. Be sure to include a self-addressed stamped envelope and due date with every statement.

When reaching out to a patient who’s 30 days past due, I suggest you include a hand-written note. Keep it simple, but let patients know you didn’t receive payment on the requested due date, and give them a new one. Encourage them to contact the office if they’re having financial difficulties.

It’s also a good idea to implement electronic billing into your practice. Through electronic billing, patients can pay when it’s convenient for them, and that means you’ll get paid faster.

Communicate Insurance Coverage  
Train your Financial Coordinator to determine how much insurance will pay for treatment and then let patients know their portion of the bill—but don’t leave it at that. Make sure the coordinator knows to make it clear to patients the number given is just an estimate; insurance may cover less or it may even cover more. That way, patients won’t be totally caught off guard if the bill is above that original estimate (and irritated by the unwelcome surprise).

Improving collections will do wonders for your financial health. Embrace your role as practice CEO and start making these changes, and your practice will begin to flourish.

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Interested in speaking to Sally about your practice concerns? Email sallymck@mckenziemgmt.com
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