Patient Payment Options

Is your case acceptance where you’d like it to be? How healthy is your cash flow? Are you doing all you can to minimize collections? Having a clear financial policy is a key factor in the foundation of a successful and fiscally viable orthodontic practice. Most practices use one of two financial policy styles: negotiated financing (sometimes called “pulling credit”) or a fixed office payment plan, each of which can be augmented with third-party financing. This article defines the promises and pitfalls of all the approaches to help maximize the effectiveness of your current plan or help you switch if the other options make more sense for your practice.

Negotiated Financing

Negotiated financing bases patient financial arrangements on credit ratings. Once the financial coordinator pulls the credit report, each family is assigned a rating. After the rating is assigned, families are presented a payment plan tailored to their creditworthiness, with the amount of the initial payment and the term length adjusted based on the rating.

Although some might view this as a sophisticated approach to financial policy, keep in mind that it sets the stage for the treatment coordinator (TC) to negotiate payment terms with the family. This type of negotiating allows considerable subjectivity, especially when assigning ratings to those on the cusps (ie, almost an “A”). Should a prospect be given a top rating because she is married? Should another potential patient be penalized for being a new home owner or having a new job? Bear in mind that the TC’s personal money situation can also come into play in the negotiation process.

Once you allow the element of negotiation into the process, issues can arise; issues that, if not handled properly, can compromise your practice’s cash flow. Be prepared to ask yourself the following questions:

1. Is the patient being rated properly?
2. How experienced is your TC at negotiating?
3. What’s your backup when the TC is out for a day? A week? Longer?

The TC’s goal in the negotiation process is to maximize cash flow by maximizing case acceptance. Consider the challenge of finding and keeping the correct personnel for this important position. Acting as the gatekeeper to the cash flow in the practice requires a very sophisticated skill set. One obvious requirement is strong negotiation skills. Your team member not only needs to be financially savvy, personable, analytical, and results-oriented, but empathetic as well. This is a mixed skill set that is often tough to find in one employee.

Jackie Shoemaker

While this approach takes the family’s financial history into account, it is more focused on maximizing the effectiveness of your collections strategy and less focused on case acceptance. Many might argue that the latter is the more important goal on which to focus during fee presentation. How would a TC know if an “A” family would prefer to spread payments over 60 months because they have a big vacation coming up? Perhaps a “B” family would rather have lower monthly payments than the office plan that the TC is presenting as the only payment option.

Because the negotiated approach results in better options for some families than others, how does your TC manage the questions from the families that get the less desirable plans? What happens when families start talking on the soccer field about the cost of braces? Or two sisters (both with patients in your practice) compare notes on their differing payment agreements?

While the negotiated financing method can help with your collections goal when implemented correctly, its effect on case acceptance is less clear. It’s difficult for the average practice to know how many families choose to delay or walk away from treatment—or seek treatment elsewhere—because the right financial policy isn’t made available to them.

One way to overcome this pitfall is to offer third-party financing to all families regardless of their rating. No one is likely to choose financing (and pay interest) unless they truly need a lower payment than the office plan provides, so there is no real danger that those who don’t need financing will select it. What third-party financing is really good at is giving families the flexibility to determine which plan best meets their needs. Less business is left on the table when third-party financing is used this way.

While collection issues can be minimized with negotiated financing, there are also pitfalls to be aware of. The office must have a collection system that can deal with patients according to their rating. Determinations need to be made about how to deal with each tier. For example, there should be more frequent and rigorous follow-up for C accounts than A accounts.

Another way to look at pulling credit is to realize that rating families’ credit status could prove far more useful in the collections stage than in the financing stage. That is, delay the assessment of credit until the family becomes delinquent, then rate them to figure out the collections strategy. When used in this way, the decision to pull credit is based on demonstrated behavior patterns, not on demographics. It also costs less and requires less work by your TC because credit reports are only needed for a small portion of your families.

To implement this approach, follow these simple steps:

1. Have the family complete a patient history form.
2. Enroll them in your practice and begin treatment.
3. If an account becomes delinquent, run a credit report.
4. Assign the family a rating:
• A: A majority fall into this low-maintenance category that requires minimal intervention to solicit payment.
• B: Follow up regularly to ensure payment is obtained.
• C: Implement a fast collection process with consistent follow-up and stringent “stop treatment” barriers.

The negotiated financing approach can be effective with the right, highly trained team. Practices should be aware of the challenges involved with maintaining consistency and equitable treatment before implementing this method. Also, partnering with a provider of third-party financing offers your families more choices and empowers them to make their own financial decisions, which will ultimately lead to incremental case acceptance.

Standard Office Payment Plan

The second option, which the majority of practices choose, is to have one standard in-house plan (meaning that every family is offered the same options) and also offer third-party financing. This removes the burden and cost of performing credit checks. These plans typically offer three ways for a patient to meet his or her financial obligation:

1. Third-party financing;
2. payment in full at the outset of care, often with a bookkeeping courtesy; or
3. the office plan, with a percentage of the treatment fee down and the remainder due in monthly payments.

Let’s talk a bit about the presentation itself. Most offices realize the importance of having a printed sheet with the payment options written out for patients based on their individual case. Also, the order in which the three options are presented is important. It is often recommended that third-party financing is listed first because it will always show the lowest monthly payment option. Once a family sees the lowest option—regardless of whether they choose it or not—it gets them immediately comfortable with affordability, which allows them to listen to the important information you are communicating during the presentation.

In terms of the options themselves, offering a bookkeeping courtesy for payment in full is commonplace for many practices. If you want greater cash flow, it’s a useful tool. If you have no preference for upfront payment over the residual income that comes from your office plan, you can save money by not offering a bookkeeping courtesy.

The office plan is the same for everyone and designed around common truths about orthodontic payment, so collection issues are minimized. The fixed initial payment is usually about 25% to 33% of the total procedure cost. Monthly payments are typically designed to extend over 75% to 80% of treatment time. The combination of these two factors—when they are implemented consistently—help ensure that those who choose the office plan can afford it and that you have leverage if payment becomes an issue, since the patient is still in treatment

The office plan, no matter how well designed, has limitations. As technology advances and treatment times decrease, families experience a larger monthly burden. Also, with more advanced treatment methods, costs are rising and affordability is becoming more of an issue, particularly in a soft economy. And perhaps most importantly, some families will not be able to afford the initial payment and/or the monthly payments and may walk away from treatment.

To prevent this, making third-party financing a standard option alongside your in-house plan is the other key component to the success of this popular method. The incremental case acceptance that can be gained through third-party financing is well worth the nominal cost. Only one of these incremental cases per week (with an average case fee of $5,000) translates into a quarter of a million dollars for your practice in both production and cash flow.

Other benefits of third-party financing include accelerated cash flow and decreased collections. Cash flow increases because the practice receives payment in full prior to treatment. Collections decrease because patients choose the monthly payment they can afford upfront instead of falling behind on the office plan. Plus, collections disappear since these issues are handled outside the practice. Keep in mind that patient financing is never going to “steal” patients from your no-cost office plan because patients will always choose the office plan (and avoid paying interest) if they can afford it.

There are many options for patient financing, but one company that’s worth considering is Springstone. Although a new name, the Springstone team has been around since the old OFP days, so they’re knowledgeable about the industry and know the ins and outs of financing. They understand the intricacies of case acceptance and offer a lot of tools to help your practice grow in this regard. They also have a Shared Savings program that helps a practice reduce financing costs 20% or more—another way to increase cash flow.

Staff skill requirements for the standard office payment plan method, while certainly important, focus on selecting a TC who is caring and compassionate, and has great presentation and sales skills. The tougher negotiation skills are not necessary, since negotiation is less involved in this model. Tools such as a standard written payment plan and scripting help maximize the likelihood of case acceptance and ensure that your TC is prepared and comfortable with virtually any situation that she is likely to encounter.

Find the right third-party finance company for you in our online Buyer’s Guide.

Your TC doesn’t need to read the family’s data to figure out what works or doesn’t work for each individual case. The patients choose the best option for their needs. Everyone is treated the same—no need to worry about how to handle that call from the soccer field.

While staff transition, vacation coverage, and turnover are always considerations that a practice faces, the reliance on a TC with a highly specific skill set that’s not readily replaceable is not as big a concern with the standard office payment plan model.

Consider your staff’s skills when selecting a financing arrangement method. If you have a TC who is highly trained in the complex skill set required for the negotiation method and have a backup plan in place, this approach may work well for you. For most practices, the simplicity and consistency of the standard office payment plan is more effective.

Jackie Shoemaker used her accounting degree from Miami University of Ohio with a Fortune 500 company before entering the orthodontic field 25 years ago. Her accounting/management experience, staff-friendly training skills, and service-oriented approach result in lasting benefits to each practice she works with in the areas of patient accounting, accounts receivable control, case acceptance, and patient relations. She can be reached at /i>