While many dental patients have some form of dental insurance, many do not. It’s common for dental practices to offer payment plans to patients who need them. While it’s beneficial to offer patients some flexibility in how they pay, the result may be a collection of past-due invoices. As you know, a lack of incoming payments can cause issues with cash flow.
At Titan Web Agency, we work with dental practices every day to help them achieve their growth objectives and the issue of non-payment often comes up in the course of our discussions. We’ve created this guide to help you understand why overdue dental accounts receivable are a problem and provide some collection pointers.
Dental Collection Statistics
Before we talk about why collecting overdue dental accounts should be a priority, here are some statistics to illustrate the state of dental collections.
- The average dental practice is losing 9% of its revenue to uncollected bills.
- 88% of dentists are concerned about patients’ ability to pay for services.
- The average dental office collection rate is 91%, but experts say it should be closer to 98% for good financial health.
- On average, 18% of dental invoices are 90 or more days past due.
- Dental offices only collect 26.6% of invoices that are a year or more past due.
- Past-due accounts lose 7% of their face value after 90 days.
The issue with some of these statistics is that dentists sometimes think that a 90% or 91% collection rate is sufficient when, in fact, they’re losing money daily.
Why Are Overdue Dental Accounts Receivable a Problem?
Overdue dental accounts receivable (AR) are a problem that every practice faces, but let’s talk about why solving this issue should be a priority.
As we noted above, dentists lose approximately 9% of their revenue to uncollected bills. That might not seem like much, but let’s look at a scenario that might illustrate why you shouldn’t ignore those uncollected bills.
A practice has $1.2 million in annual billing. They’re collecting at the average rate of 91%, which means that they’ve collected $1,092,000 of the total amount billed. If we flip that number around, we can see that this practice has lost $108,000 in revenue as a result of past-due invoices. That number could mean the difference between achieving growth goals and missing out.
Overdue invoices may also impact the valuation of your practice because unpaid invoices are a liability. In other words, overdue AR can impact every aspect of your practice, including your ability to retain staff, market to new patients, and sell your practice.
Ways to Reduce Dental Accounts Receivable
The thought of making collection calls might not be a pleasant one, but the good news is that there are multiple things you can do to minimize overdue accounts receivable before you ever send an invoice.
Perform a Proper Insurance Verification
The first step is taking the time to verify each patient’s insurance. If a patient has any form of dental insurance, you should get their information and verify their coverage before providing treatment.
The benefit of doing so is that your office will have a clear understanding of what is and isn’t covered and can frame your conversations about payment accordingly.
Provide Out-of-Pocket Cost Estimates
You should provide each patient with an estimate of their out-of-pocket expenses based on your insurance verification. You’ll have relevant information, including the patient’s deductible, copays, and covered percentages.
It may be helpful to break down expenses based on coverage. For example, you have a deductible of X, and after that, your insurance will pay X% of the cost.
Put Financial Guidelines in Writing
We strongly recommend putting your financial guidelines in writing to make sure that your staff understands how you expect things to work regarding payments and invoices.
Your financial guidelines should lay out the procedures to send invoices to patients as well as how and when to follow up with them.
Create an In-House Dental Membership Plan
In-house dental membership plans can do a lot to help you avoid past-due invoices because patients make a regular monthly payment that covers some of the most common dental services, such as cleanings and X-rays.
While not every patient will find a membership plan appealing, it may be easier for many to spread out their payments over a year.
Make Sure Patients Understand Their Financial Responsibilities Before Treatment
Part of the reason we recommend providing patients with an out-of-pocket estimate is that it minimizes the risk that they will be blindsided by the amount they owe.
We suggest explaining your financial guidelines to patients and explaining what will happen if their invoice becomes past due, including when they should expect collection calls.
Offer Incentives for Up-Front Payment
You can help to minimize past due accounts by offering your patients incentives for making an up-front payment.
For example, some dentists offer patients a discount on the bill, or they might offer a free service such as tooth whitening to incentivize patients to pay quickly.
How to Increase Your Dental Practice Collection Rate