Spring 2001 Newsletter

Control Your Delinquency.....Now! • Profit Source? • Financial Responsibility of Step & Non-Custodial Parents

Are you a Delta Participant? • Bad Idea Good Idea • Your Practice Vision • ALL STARS!

Control Your Delinquency…...Now!

Is your delinquency under control?  Are you certain?  Do you know how to get an accurate count of your delinquency?  Are you certain?  Are you and your team fully aware of the true cost of delinquency in the practice, for certain?

 Only rarely can most doctors answer these questions with a solid, “Yes.”  For instance, if you measure your delinquency by counting the total dollars delinquent or by counting your aged receivables, then you do not have a true picture of your delinquency or the impact the delinquency is having on your practice.  Consider the following:

Practice “A” has 50 patients who are past due an average of $200 each for total delinquency of $10,000.  Practice “B” has 100 patients who are past due an average of $100 each for total delinquency of $10,000.  Do both of these practices have the same delinquency?  They do if you count the dollars delinquent!  In fact, Practice “B” has double the delinquency of “A”. 

Which practice has the most failed appointments?  Which practice has the most emergencies?  Which practice has the most instances of poor clinical cooperation.  Which practice has fewer patient referrals?  

Consumer debt and consumer bankruptcies are at historic highs.  Mortgage delinquency, historically at 2½% (of total accounts!) is up almost 50% to 4.8%.  Credit card debt during the most recent quarter shot up so significantly that many economists believe consumers are now using their credit cards for day to day basic living expenses, power bills for instance, and that is a very sure sign of some real problems to come in the near term future.  We expect to see “across the board” increases in delinquency, even among “A” patients.  Although we expect those increases to be small and easily manageable among our client practices, any increase at all in delinquency, especially if the number of patients delinquent exceeds 4% of total accounts, causes measurable problems in the practice related to the issues I mentioned in the previous paragraph.  

Strategies?  First - Pay a bit closer attention to the details contained in your patients’ credit reports than perhaps you have in the past.  Patients with multiple credit card balances that are at or over their credit limits are red flags.  Patients with multiple years of excellent credit but who, during the most recent four to six months, are starting to have repeated instances of 30-day delinquency are also potential problems.  These patients can be well handled by minor (one to two grade) reductions in the credit rating assigned.  For instance, a straight “A” patient with some new 30-day delinquency and a balance or two at or above a credit limit, might be reduced to an “A-” or even a “B+.”  This will get you a slightly larger down payment and a slightly shorter contract length, both of which will serve to make it easier to keep the patient under control should he become delinquent. 

Second strategy – Tighten up a bit on your delinquency control activity.  Be certain your late charges are being assessed at 10 days delinquency and are no less than $10.  Be certain to start the delinquency control process, by letter or telephone, before the account becomes 20 days past due. 

Third strategy – Sell your risk!  Third party finance companies, those that specialize in orthodontic and dental financing, are hungry to buy your accounts.  I would never sell them any of the three “A” category patients (unless they cannot pay within the “A” parameters), but selling them your higher risk new start contracts, the “B” and “C” category patients, can go a long way toward reducing your risk.  These companies will buy most of the “B” patients and I continue to be amazed at the number of “C” patients they buy. 

Fourth strategy – If you are not a Zuelke & Associates client, consider giving us a call.  There are few more satisfying feelings than knowing, for certain, that you have an efficient and effective system of patient management and accounts receivable control in place in the practice.  Knowing that system will not change every time you or a staff member comes back from the most recent seminar or read the most recent article gives a great deal of comfort.  Knowing that your system of credit management will also remove barriers to practice growth and create a truly impeccable quality of life within the practice is the best comfort of all!

Profit Source? 

About 18 months ago, I started to take a closer look at the adjustments, discounts, credits and “courtesies” our clients were offering.  I had noticed that while most of our clients had total net adjustments at or close to the amount we consider appropriate (4%-5% of production for ortho and 2% for all others), an unhealthy number of clients had adjustments that were chronically above these goal levels. 

Since most of the computer systems used by doctors will itemize past adjustments, individually and by category, I asked for and received copies of these reports for some selected clients.  By studying these “adjustment” reports, I was able to see obvious areas where a simple change in policy would make a huge difference in practice net income. 

Sometimes I asked clients to change sibling discounts.  Sometimes I asked for a cut in the amount of the discount offered to employees of other professionals.  Sometimes I asked for a cut in the discount offered to clergy.  Other times I simply implemented additional “rules” regarding who received a discount.  For instance, orthodontic offices commonly offer a 50% discount to the employees and immediate families of their referring doctors.  I recommended a policy change to offer that 50% discount only to the employee, with a 25% discount going to husbands and children of the employee.  We also added a rule that required that the employee be employed no less than one full year before becoming eligible for the discount, and an additional rule that the discount is honored only so long as the employee remains employed by the referring doctor. 

The average client in this small study was producing $94,000 a month and was successful in cutting discounts by a little over 2% per year.  That 2% went directly to the practice bottom line so these practices had increases in net income that exceeded $22,000 a year. 

My point?  If your current rate of adjustments is excessive, a simple 15-minute review of the type and quantity of your adjustments/discounts/credits can result in policy changes that will generate dramatically more net income for the practice without damaging your ability to properly acknowledge “special” patients.  Our clients can call us if they’d like some help with this review.

Financial Responsibility of Step & Non-Custodial Parents  

From time to time we have mentioned the importance of eliminating split contracts and never allowing non-custodial parents to be listed as financially responsible parties.  Additionally, we have recommended that step-parents not be considered as responsible parties unless the step-parent has personally been in the practice, agreed to be financially responsible, and signed a Financial Agreement document. 

These both are aggressive policies that, taken alone, could reduce the rate of case acceptance in a practice, especially in a few locations in the country where 70% or more of new patients/responsible parties are single or re-married parents.  However, a review of delinquency in virtually every one of our 800+ client practices has shown that splitting contracts between custodial and non-custodial parents, or making financial arrangements dependent on step-parents, but without the step-parents express and specific acknowledgment, have created far more than their share of delinquency, not to mention the negative impact these cases have on quality of life issues such as failed appointments, emergencies, poor clinical cooperation, etc. 

With excellent presentation and verbal skills, most such patients can be started into treatment, even though you are not willing to split a contract or to accept a non-custodial parent as the responsible party.  Some custodial parents, of course, will not accept your terms and will choose not to start treatment.  Those few case starts will be “lost,” but that is a small price to pay to avoid the conflict and upset that comes when non-custodial parents fail to keep their financial agreement and, because they are non-custodial, the practice has virtually no leverage. 

Although our clients have, by and large, eliminated delinquency from this source in their practices, most of those reading this newsletter are not Zuelke & Associates clients – hence a review of our recommendations. 

First - Understand that there is no Federal law, and no law in any State, that requires a doctor/practice to make a financial arrangement with a non-custodial parent. 

Second – Never split a financial arrangement (contract) between any parties, responsible or not, not for any reason.  Remember that any split contract is releasing both parties of total responsibility for your entire case fee. 

Third – Never allow a non-custodial parent to be listed as a responsible party in your accounting/computer system. 

Fourth – Remember that a non-custodial parent or a step-parent cannot give you the authority or “permission” to do an exam on a minor child.  That authority can only be granted by a custodial parent. 

Fifth – Step-parents can be listed and used as financially responsible parties, but you must have their direct agreement to be responsible (without that you cannot obtain a credit report on a step-parent!). 

Sixth – While we are prudent and careful regarding whom we allow to be formally financially responsible, we are not foolish.  Therefore, you should always be happy to accept payments from any source, even from non-custodial parents, grandparents, etc., but such people will not be allowed to be listed in your computer or listed in any way as responsible parties.

Are you a Delta participant? 

Since 1981, we have consistently recommended to our clients and to the dental/orthodontic profession, that there be no participation, in any form, with Managed Care or with reimbursement plans that require any reduction of a doctor’s full case/treatment fee. 

Our belief in the value of this recommendation is so strong that we do not accept a practice/doctor for a consultation unless that practice is free of any Managed Care patients.  We do make routine exceptions, but only for doctors accepting Managed Care who have recognized the damage Managed Care has done to their practice and who have chosen to hire us to help them get back to 100% “fee for service.”  We are proud to say that we have assisted many practices in total elimination of any form of Managed Care! 

In the orthodontic profession there has always been, until very recently, an unusual quirk in Managed Care, almost exclusively with Delta Dental, that many orthodontists have taken advantage of.  Many of the Delta Dental Managed Care plans, while significantly restricting the fees for general dentists, and most specialists, have kept their hands off the orthodontic fee structure, allowing orthodontists to charge more or less what they wished.  Delta controlled costs not by limiting fees but by limiting the lifetime maximum orthodontic benefit.  In that situation, and assuming the total percentage of Delta insured patients was very low, there was little negative impact on an orthodontic practice from participating in this particular Managed Care plan.  Unfortunately, that has changed! 

In recent months, I have seen most of our orthodontic clients who accept Delta come up against a fee restriction on their full fee treatment plans.  That this day would come was inevitable and it is time for our clients, and other doctors who believe in our system of credit management, to begin to wean their practices from participation with the Delta plan.  Our history has been that choosing to withdraw from participation with Delta will cost the practice 15% to 20% of the Delta patients.  The rest of the Delta patients will continue to come to the practice because it is not their insurance plan that made them choose your particular practice in the first place.  In most client offices, losing 15% to 20% of your Delta new patient exams means less than a 3% decline in case starts so this should be a relatively painless decision. 

Do not fall into the trap of saying or thinking, “I only have to adjust off $200 of a $4,800 fee.  That is such a small amount that I can afford to continue to accept Delta.”  Remember, this is just the beginning!  Over the next few years you will see the Delta fee cap either remain constant (while inflation eats you alive!) or you will see only minuscule increases (while inflation continues to eat you alive!).  If you are among the few who believe it is appropriate to raise your fees to the fee for service patients, in order to subsidize the reduced fees paid by Delta patients, then a morality/integrity check is in order!  If you are currently participating in the Delta plan, there will never be a better time than now to make the decision to withdraw.

Bad Idea: 

Having an on-hold message advertising that you offer third party financing.  It gives the impression that you are inflexible and not interested in helping your patients be able to afford your fee. 

Good Idea:

Your Practice Vision

One of our clients called Betty recently to ask her opinion of he and his staff attending a seminar, focused on marketing, that he had seen advertised.  The doctor was excited about the advertising he had read, telling Betty “they specialize in dental and orthodontic marketing” and “the tuition is almost nothing” etc., etc. 

Neither Betty nor I had heard of the company but a simple review of their web site showed them to be into heavy promotion of Yellow Page and other forms of retail advertising, a form of marketing that has long proved to attract a horrible clientele with even worse case acceptance.  Betty politely suggested to this client that he could spend his Friday in a much more productive fashion doing almost anything other than going to such a seminar. 

As clients sometimes do, this doctor listened to his consultant’s advice and then promptly ignored it, taking his staff to the seminar.  The Monday following the seminar, he called Betty again, all excited because for “only” $3,000 up front and for only $600 a month, this seminar company will design and place a Yellow Page ad for him and he will get tons of patients and produce tons of money and life will be so wonderful….! 

No wonder the seminar tuition was so cheap!  It actually took a fair amount of time to talk him out of this new adventure.  

Moral – Pay attention to your consultant who you have paid to give you quality advice, to keep you on track, and to keep you true to your real practice vision, a productive and profitable practice that will not compromise quality of patient or quality of life.

Richard J. Dragon, DMD

Jesse B. Ehrlich, DDS

Robert F. Girgis, DDS

Geoffrey Hall, BDS

Drs. Jayasekera, Sokel, & Seto

Drs. Kreul & Ostertag

Drs. Lohse & Corbridge

Russell A. McCallion, DDS

Drs. Greg & Nicole Nalchajian

Drs. Parkey & Davis

Candide J. Petrol, DDS

Scott E. Prose, DDS, MS

Drs. Schramm & Bateman

Venice, FL

Woodridge, IL

S. Caulfield, Australia

Bendigo, Australia

Stevens Point, WI

Reno, NV

Salinas, CA

Fresno, CA

Jonesboro, AR

Murrieta, CA

St. Charles, IL

Charlotte, NC