Be Your Own Bank

Paul D. Zuelke

For more than 27 years, I have written about the value of using solid credit/risk evaluation technique (including well-designed patient-history documentation and credit reports) to identify the maturity, stability, and integrity of your prospective patients. The purpose of such an evaluation is to get the best possible case acceptance by having a generous and highly flexible financial policy. Such a policy features low, even $0, down payments and long-term contracts for the low-risk patients and simultaneously avoids delinquency and serious clinical problems by having large down payments and short contract lengths for the small percentage of your patients who are identified as high risk. Our history with 1,000+ consulting clients throughout this country, Canada, and Australia has proven the worth of our system, with the great majority of our single-doctor practices producing and collecting well over $100,000 per month and a fair number exceeding $200,000 per month. More importantly, they are delinquency-free and enjoy a tremendous quality of life within the practice.

So, now that I have tooted my own horn a bit, you might ask, “What (besides the obvious) is the point?”

High Tech, Higher Prices

Starting some years ago with self-ligating brackets, and then continuing a bit later with Invisalign, OrthoClear, the reappearance of lingual appliances, and more recently with SureSmile and Insignia, many orthodontists decided that because there are substantial laboratory fees associated with these “new” products, they needed a large initial payment on each of their case starts of this type to cover their increased overhead. Most orthodontists raised their fees to cover the additional costs of this type of treatment as well. This combination of increased fees, a required down payment, and generally shorter treatment times (which meant very large monthly payments) has had the inevitable result: drastically reduced rates of case acceptance.

In an effort to improve this weakened case acceptance, many of these same practices increased their presentation of third-party financing, apparently in the hope that patients would be so sold on the value of the “new” treatment that they would be willing to stop buying groceries so they could afford to pay 15% to 20% interest (sometimes less, sometimes more) to get it. What has happened? Most of these orthodontists have seen an even greater reduction in their rate of case acceptance. Because so many orthodontists have no idea what their true case acceptance is, do not understand the connection between their financial policies and their rate of case acceptance, or feel powerless to fix a problem with case acceptance, they seek to recover their lost productivity by improving the number of new-patient exams. Unfortunately for most of these orthodontists, and in spite of their marketing efforts, the number of new-patient exams they have seen each month has declined as well.

Acceptance and Collection

Think about it for just a minute. If you do 360 new-patient exams per year, and if you start 216 new, first-time, cases (“new” in this case means all Partial, Limited, Phase I, and Full case starts, but does not include Phase II cases that are not “new” starts), including those that came from recall, each year you have a case-acceptance rate of 60%. That means that 40% of all the new patients you see never start treatment in your office. You are putting 40% of all your potential new patients back into your community having chosen not to start treatment—or at least not in your office!

It will not take long before a very large percentage of the potential patients in your market area, along with those patients’ relatives, friends, and coworkers, are immune to your marketing. How many times, for instance, does a general dentist who referred a patient to you have to hear that his patient chose a different orthodontist or chose not to have orthodontic care at all because you were too inflexible, or too expensive, or for some other unnamed reason, before that dentist decides to refer his patients elsewhere or decides to give out three business cards instead of only one?

My point is simple: If an orthodontic practice has a healthy accounts receivable and healthy financial policies, that practice will collect 100% of its net production (after discounts) each and every year, without regard to whether or not any individual patient makes a down payment. In other words, if you produce $100,000 per month net after discounts, you are going to collect $100,000 per month, month in and month out—even if some patients have no down payment; even if some patients have long-term contracts.

If you always collect the same as you produce, what difference then does it make if an individual SureSmile patient makes a down payment or not? There are plenty of other patients in the accounts receivable with larger monthly payments (because they had no down payment) to make up for any individual patient starting into treatment today who cannot afford a down payment.

I have always believed that it is arrogant of an orthodontist to believe that every new patient he sees is either so wealthy, so impressed with the orthodontist’s brilliant treatment planing and diagnostic skills, or so personally committed to orthodontic care that they will sacrifice elsewhere in their budget to be able to come up with a down payment and/or a large monthly payment, or that they will be willing to let you send their case to third-party financiers. That’s simply not how it works in the real world.

If you have a policy that allows certain patients to have low or $0 down and a policy that allows financing over the treatment time (or sometimes even longer), you are going to get better case acceptance, better practice growth, improved patient relationships, and better numbers of new patients referred from existing patients.

The key to this, of course, is that you not offer low or zero down payments to the type of patient who is not credit-worthy, the type of patient who does not or who cannot keep promises about money. Further, you must have a system of delinquency control that collects the money you are owed and rehabilitates your delinquent patient—without losing that patient. That means you must have a comprehensive system of credit management and accounts-receivable control.

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Over the past 27 years of direct experience with more than 1000 client practices, I have learned what virtually all orthodontists and treatment coordinators have learned—that more than 75% of all patients/parents reject third-party financing. When many of those same patients cannot afford—or choose not to pay—large down payments and large monthly payments, and especially when you would like to provide the type of shorter-term treatment plans that I mentioned earlier, you should consider the time-tested system of internal credit granting that has served the orthodontic profession as well as the lending community for such a very long time. Your accountant and your financial planner will be impressed with your results.

Paul D. Zuelke is the owner of Zuelke & Associates Inc, an orthodontic consulting firm in Portland, Ore. He can be reached at (503) 723-0200 or