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Howard Speaks Howard Farran, DDS, MAGD, MBA, Publisher, Dentaltown Magazine

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Be Up Front About Collecting Up Front
– by Howard Farran, DDS, MAGD, MBA, Publisher, Dentaltown Magazine

At one of my recent seminars, I was asked "What do you do when you practice in a town of 5,000 people, and one of your patients hasn't paid you for six months?" This is one of those questions I hate to answer because no matter how you slice it, Doc, you're never going to win. This is one of the lousiest situations in the history of lousy situations.
Reluctantly, I told the dentist, "You have a couple of options. None of them are good. You can turn Mr. Jones over to collections, which will likely ruin his credit, which means every time you run into Mr. Jones at the bank or the grocery store you will each feel major pangs of guilt – or worse. Or, you can write off Mr. Jones' bill, but that justifies to Mr. Jones that the dental work he received might not have been quality because you're not valuing it at all." Because of Mr. Jones' unwillingness to pay, it's lose-lose no matter how you slice it. Either you write it off and he gets away with hundreds or thousands of dollars in dentistry, or you unleash the hounds and destroy Mr. Jones' credit and your reputation around town as a "nice guy." Like I said, it's a lousy situation, for sure. But you can avoid it!

The problem is, when it comes to collecting dues, most dental offices do things backward. Take a look at fast-food restaurants. Does McDonald's have collection problems? No way. You order your meal, pay for it and they give you what you ordered. At most dental practices I see, the patient comes in with a problem, the doctor treats it and then spends the rest of his time tracking down the money owed to him. Why is this happening? I mean, you walk into any McDonald's and it's run by people no older than 18, and they have no problems with collecting money from their customers because of the simple policy the company has in place – no food unless you've paid for it. Why don't you make all new patients who join your practice read and sign a collections policy that states they have to pay their share of the treatment up front, instead of this ridiculous backward way you've been doing it?

Disclaimer: Before I get ahead of myself and you all say, "Howard, there's no way I'm making my patients pay for treatment before we give it to them," just know that by "up front" I mean – at the most extreme – "on the day of treatment." In the case that a new patient shows up at my practice in Phoenix, Arizona, with an emergency and no credit history, we will, in fact, charge them the treatment fee before treatment, because we've been burned before. But, as you know, dentistry is a complicated beast. You might begin a treatment plan to fill a tooth with composite only to find out, once you get in there, the tooth needs an onlay. If you charged the patient for the filling up front, you'd have to explain what's actually needed, and then delicately explain that you're going to have to charge more for your services. Patients don't like that. Or, let's say you schedule someone for a crown seating that takes two appointments. In that case, it's hard to live with yourself insisting the patient pays for everything up front. If you have a CEREC or E4D in your office and you can take care of it in one sitting – you can charge the patient on the day of treatment. But, for heaven's sake, don't treat the patient and let him walk out of your practice without him paying for his share of the fee – your accounts receivable person's head will explode! I know of these collections issues from experience. Years and years ago, my practice used to wait for insurance to pay out before we billed the patient – and our collections were a nightmare. Now we insist all of our patients pay their portion on the day of treatment – it took some getting used to for some of our patients, but they understand, and we can proudly say that our collections percentage is upward of 99 percent.

But getting back to my original point, when people are in excruciating pain and need a root canal, or they busted off their front tooth a day before their presentation in front of their board of directors and need immediate cosmetic treatment, they want their problem solved immediately. This is when your patients are most motivated to pay. They will give you $1,000 up front because they need a root canal to get out of pain. They will gladly shell out $300 so you can do that Class IV incisal on that chipped and unsightly front tooth.

When you perform dentistry on a patient who hasn't paid up front, they now have a reverse economic incentive not to pay you. When you do the work and they haven't paid you up front, you start to hear reasons why they shouldn't pay you at all. Humans can justify and rationalize anything, like this, "I'm not going to pay you $1,000 for the crown because it doesn't feel right, it doesn't match," or, "My bite is off," or something really flimsy like, "I am really not happy with the work you did."

And in some instances, you come across some really evil people who will threaten you with stuff like, "I'm not going to pay you and if you keep bothering me, I am going to report this to the state board of dental examiners because I am not happy with your work." Ouch! Then your stomach gets crimped in a knot and you have nightmares about facing the state board over this yayhoo. So rather than dealing with a potentially bigger mess, you write it off. But here's the thing, this threat-spewing deadbeat knows he did wrong. So he justifies in his own mind that you are not a good dentist, you are not a nice guy and your dental office is no good. He'll never come back to your practice. So not only do you not collect the money for the work you did on this guy, but now you just lost a patient. Oh, and by the way, he's probably connected to a spouse and a couple of kids and maybe an uncle or a niece or grandfather who goes to your practice, so you might as well count on them never coming back either. It's a disaster! All because you don't have a firm collections policy!

When you don't have a collections policy and you don't collect the patients' portion on the day of treatment, the most your practice will collect is about 90 cents on the dollar. Your practice's overhead is about two-thirds of your total revenue (this includes staff, your lab bill and supplies); the rest amounts to your take-home. If an average dental office does $500,000, the average dentist takes home $200,000. You do a crown for $1,000, $666 of that is going to pay for your overhead. When Mr. Deadbeat doesn't pay that, guess what? It drives up your overhead so that now you have to spend $2 on the dollar to produce the goods and services that you didn't collect!

Something else you don't think about is you spent an hour of your time doing Mr. Deadbeat's crown. And while you were working on this deadbeat, another patient of yours, Mr. Pays-On-Time, who has been with your practice for 10 years had a broken tooth and needed to come in (and would have paid for everything on a credit card), but you were so busy doing free dentistry on Mr. Deadbeat, you couldn't fit him in. That's not all. You're actually worse off than losing $1,000 from the deadbeat – because you could have collected $1,000 from Mr. Pays-On-Time. That's a $2,000 difference!

Get a collections policy in place and adhere to it, and once you start consistently collecting your patients' dues on the day of service, most of your collections headaches will disappear.

• To hear more of Howard's thoughts on this topic, go to Dentaltown.com and search: DTV Howard Speaks

Howard Farran, DDS, MBA, MAGD, is an international speaker who has written dozens of published articles. To schedule Howard to speak to your next national, state or local dental meeting, e-mail colleen@farranmedia.com.

Dr. Farran's next speaking engagement is March 24, 2011, at the San Joaquin Dental Society in Stockton, California. For more information, please call Colleen at 480-445-9712.
March 24 • Stockton, CA
San Joaquin Dental Society
www.sjds.org
sjdsstaff@sbcglobal.net
209-951-1311

April 8 • Walnut Creek, CA
Contra Costa Dental Society
www.ccdds.org
admin@ccdds.org
925-932-8662		 March 30 • Mahwah, NJ
Big Apple Dental Meeting
colleen@farranmedia.com



April 29 • St. Augustine, FL
Central Florida District Dental Association
colleen@farranmedia.com
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