7.9.10 Issue #435 Forward This Newsletter To A Colleague

Nancy Caudill
Senior Consultant
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Job Descriptions - Why Does It Really Matter?
By Nancy Caudill, Senior Consultant McKenzie Management

Dr. Jamey Gleason – Case Study #211

One of the twenty-plus business operational systems of a dental practice is “Accounts Receivables” - the money that all your patients owe you, including their outstanding insurance claims.

Dr. Gleason was under the impression that his A/R was okay, understanding that “industry standards” indicate that if your A/R is no more than 1x your “NET” production, you are good to go.

Upon closer study of his report, this is what he learned:

Lesson #1 – Do Not Include “Credit” Balances
Most all practice management software systems have the capability of “filtering” out the credit balances.  Credit balances are those accounts where the account’s balance is a negative amount.  Reasons for credit balances can be:

  • Patient’s insurance paid more than was estimated after the patient’s portion was paid, therefore leaving a credit balance on the account
  • Patient is pre-paying for treatment that has not been performed yet
  • Patient is an orthodontic patient and paid for all or part of their treatment and the entire amount has not been charged out yet because of insurance billing
  • A fee was adjusted due to uncompleted treatment, leaving a credit balance since the treatment was paid in full

Be careful when reviewing an individual patient’s account within an account.  The patient could have a credit balance and another family member could have a debit balance that offsets the credit. Most software programs will make the transfers between family members automatically and some must be performed manually. This transfer should be conducted as soon as the credit balance is noted.

Why is it important to eliminate the credit balances? Because the credit balances REDUCE your true A/R!  See example below for Dr. Gleason:

A/R balance including credit balances: $151,500
Credit balance total: $30,000
True A/R: $181,500

Dr. Gleason’s monthly net production was $149,000 so he assumed that his A/R to net production ratio was $151,500 / $149,000 = 1.02. In actuality, his true A/R to net production was $181,500 / $149,000 = 1.22 or $32,500 higher than it should be!

Lesson #2 - Balances Over 90 Days
A healthy A/R should not have more than 10% of the total monies 90 days and over. In Dr. Gleason’s case, there was 15% that was over 90 days. Upon further evaluation, we determined that several of the accounts had not made payments in over 6 months and no action had been taken!

First – clear payment arrangements should be made with the patient to manage their treatment investment. If the patient has the assistance of an insurance “supplement,” his Financial Coordinator should “guestimate” the patient’s portion, inform the patient when the appointment is scheduled and ask for this payment when the treatment is completed.  Yes - patients will fail to pay even when they promised! Now they have a balance and the treatment has been completed. 

Next - this is when your verbal skills are tested! A commitment date should be established with the patient for receipt of the promised payment. A task or reminder should be created in the software to remind you to contact the patient if the payment has not been received.  A call is placed to the patient with a statement such as, “Mrs. Jones, this is Nancy at Dr. Gleason’s office. I didn’t receive your promised payment on June 20. Is it possible that I overlooked it?” Ask the patient to commit to another date or better, offer to take their payment over the phone with a credit card.

Lastly – if attempts have been made to collect the past due debt, you should have a relationship with a collection agency to assist in collecting delinquent accounts. Prior to sending the patient to collections, I would recommend that you send the patient a letter indicating that you will offer a 5-20% bookkeeping adjustment if the patient will pay their account in full within 15 days. Be sure to flag the account for payment in advance for future treatment.

How to Avoid Falling into the A/R Trap
When working with patients with insurance benefits, attempt to “guestimate” as closely as possible the patient’s portion and collect this at the time of service. This may require calling the insurance carrier and verifying their benefits, visiting the carrier’s website or using other eligibility tools.

  • Inform before you perform! Avoid prepping that tooth for a crown without your Financial Coordinator discussing with the patient their financial responsibility.  There is nothing worse than checking out an emergency patient and informing them that their investment for the crown that was just prepared is $500 and they are shocked because they thought that their insurance would pay for it.
  • Utilize CareCredit for patients that need additional time to pay for their treatment.  You can offer them interest-free payments for up to 24 months in some cases.
  • If statements must be sent due to the failure of the insurance carrier to pay the estimated portion, send the statement as soon as the insurance payment is posted.  Do not wait until the end of the month when statements are generated.
  • Remit statements electronically daily or weekly.  Do not send statements on the first of the month. It is too late! Sending statements on a regular basis improves cash flow and avoids all those blue envelopes hitting the Financial Coordinator all at one time.

Take your Accounts Receivable’s temperature and see if yours is healthy.  After 6 months, Dr. Gleason’s is!

If you would like more information on how McKenzie's Practice Enrichment Programs can help you IMPLEMENT proven strategies, email info@mckenziemgmt.com.

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