Should you charge interest on 'late' payments?

I'd like to know if there is anybody who can help me with the following problem. I plan to start charging interest on 30+days accounts but I have no clue how I should put it in the announcement to patients. Does anyone have a sample letter that is legally 'correct'?
smile4u
Official Townie
Member # 8695

I don't know that I would put it in a special letter. Simply put it on the bottom of your billing statements--all accounts over 30 days incur a 12% annual/1% monthly interest charge and then highlight it in yellow. Also, add this to your financial sheet that new patients sign that also tells them they are responsible for all monies not paid by insurance. Works for us.
mike_esposito_dds
Official Townie
Member # 8175

Mike, Your idea sounds very sensible. I might as well do exactly as you suggested however I thought something "official" would get attention. As far as a percentage is concerned, I thought about 18% annual but I'm not looking forward to charging people or making a living out of it. I am afraid if the percentage from my office were substantially lower than most of credit card/dept stores cards patients would still place my envelope at the end of pile . You know, as much as I hate, a late payment fee as most banks charge, it definitely helps banks to collect their money much more efficiently.
smile4u
Official Townie
Member # 8695

You might talk to your accountant about charging interest to your patients. I remember speaking to mine about it a few years ago and he said legally they have to sign a "truth in lending statement" and that there is a whole bunch of paperwork for the good ole IRS that needs to be completed each year. I for one don't charge late fees. We get co-pays at the office and anything remaining that insurance doesn't pay is so negligible from an interest standpoint it wouldn't add up to a couple hundred a year anyway. So in my opinion, it's not really worth it.
garrisonmt
Official Townie
Member # 7965

How about a really goofy idea. Get in touch with Dr. Wahl and his partner Lorraine at www.officemagic.com. He will help to show you how not to have balances and how to use outside companies for your longer-term billing. So don't worry about charging interest because you don't need to. I know, you're saying, "what BS, that can't work but it really can--and I practice in as blue collar, lower to upper middle class area as you can find!
Tim Goodheart
Official Townie
Member # 9242

I agree with Tim. Don't carry balances in the office. Don't send statements but have your "billing company" (outside finance company) do it for you.
bdeason
Official Townie
Member # 8207

Garrison was right, if you charge interest you must also abide by the truth in lending laws for your state, which can be very complex. Pat and Lorraine do have some great suggestions on getting paid, including using outside financing, and the Madow brothers have a great form they designed years ago. Some other people made the comment that a bill from the dental office will go to the bottom of the pile and it's true. An article in Family Circle Magazine a few years ago placed dental/medical bills 47th on a list of 50 debtors to be paid. I hope this helps.
rstutzman
Official Townie
Member # 8193

Thank you guys. As usual, I got great feed back. I don't have major problems with collections. I don't offer "in-house" financing either (my favorite outside is DFP) but I was really ticked by just a few patients that were getting on my nerves. I guess I'll contact Office Magic and get their package.
smile4u
Official Townie
Member # 8695

As a follow up, I just wanted to say that when we converted from our sloppier way of doing things to "cash and carry," we cleaned up all the old balances on the books by extensively using our third-party-non-recourse financing option. And now we use it every single day to set patients up for treatment who otherwise wouldn't be able to pay us for their care immediately, as do you. Rather than space out or postpone treatment, they get to space out their payments to some financier and have treatment NOW. And baby, there ain't no time like NOW when a patient wants or needs something done. But "they gotta pay to play," baby!

If you've already got one of the excellent third-party-non-recourse dental financiers in place, just say something like this to those "few patients who are getting on your nerves" (or better yet have your finest and smoothest front office person do this!!) "Mrs. Von Munchausen, now that your insurance has paid all your benefit, the Doctor asked me to contact you and see how your crowns are looking and feeling...Great! If you do have any trouble, don't ever hesitate to give us a call! Now we're still seeing a balance on your account of $627. We can eliminate that for you today if you'd like to put it on a Visa or other CC, or we can use CareCredit [or whomever you like, I guess you like DFP] to provide a payment plan on your behalf; in fact we're offering 6 months interest free financing right now and I can handle the application by fax!"

But I think the key for me, as the dentist/owner, was (and still IS) to NEVER undermine my office policy of having the patient either pay or get non-recourse-third-party financing for every penny of their estimated after-insurance portion IN ADVANCE of treatment. Even if it's right before they sit down for the treatment (my personal favorite time for treatment under $2000...if over $2000 then pay or have CareCredit/Wells-Fargo/DFP approval at the time they SCHEDULE the appt at our office.) But I never let them even SEE the chair until the paperwork is signed for the approved financing.

I'm of the opinion that hitting these folks' accounts with financing charges through the office doesn't do diddly, based upon my own hard-won experience. Take a gentle hard-line. If they refuse after your FO person gives them the velvet glove and offers them the financing or CC options, let them know that you absolutely WILL NOT BE ABLE to carry the balance, and that you'll have no choice but to refuse any further treatment (not even a prophy) AND that their acct will end up in collection, thus adversely affecting their credit. Hell, most of these third-party lenders will reconsider a rejected application if the applicant can get a co-signor like a parent, sibling, or buddy who is credit worthy to sign. Virtually no excuse for these patients.

Naturally, this works best when done in advance, when the patient WANTS the treatment and will jump through the hoops to get the application done fast and right, and a co-signor if needed, but I've seen it work with the outstanding post-treatment balances as well.

I think you know that non-recourse third party financing is the greatest thing to happen to dental business management since the computer. Let it also be an aid to cleaning up the mess left when an insurer unexpectedly denies coverage, or to clean up the old accounts.
marshall_white_dmd
Official Townie
Member # 7916