Last week I was reading an article by Joan Garbo in which she wrote: “The difficult patients need tending, just like a garden.” Joan was not necessarily writing about delinquent patients but the connection between that statement and our delinquency control recommendations really hit home to me. I have written many times that the problem with delinquency is never the fact that you have not been paid the money that was owed. The problem is the many ways in which delinquent patients damage the well-being of your practice. If I may expand on Joanie’s metaphor a bit, suppose you have a garden of roses, 10% of which have aphids. You have been spraying those aphids regularly yet nothing is improving and you even notice the problem has spread and now 15% or more of your roses are being gobbled by the aphids. Some of your roses are so far gone they must be removed from the garden and replaced with new roses. Would you double down on the spraying, doing the same thing you have always done but more of it, or would you think a bit and realize that the control activity you have been doing is not working and you need to change treatment methods.
Unfortunately, when patient delinquency gets uncomfortable, far too many practices simply ramp up the level of collection activity. Everybody’s heard that the definition of insanity is doing the same thing over and over again but expecting a different result. By that definition there are a lot of insane orthodontic practices out there! The typical new client of Zuelke & Associates (and yes, we still see new clients!) has patient delinquency of 12% to 16% of all open accounts. If a doctor had a 12%-16% rate of bond failures, the doctor would be in panic mode! He would immediately identify the root cause of the problem and get the problem fixed. Why do doctors not think that way regarding delinquency, which typically causes problems far more damaging to practice well-being (failed appointments, poor clinical cooperation, emergencies, an almost total absence of patient referrals, etc.) than excessive bond failures?
In most cases, these practices have had roughly the same delinquency rate for months or years and have grown to believe that because all of their efforts to improve delinquency have failed, that their rate of delinquency is simply part of the price of being an orthodontist. In fact, 100% of the problem is simply that these practices keep on doing more of the same type of collection activity they have always done, instead of realizing that while their current delinquency control procedures may be collecting payments, they are not bringing down the total delinquency. The Financial Coordinators in these offices are typically quite frustrated that no matter how much time and effort they put into delinquency control, when the next month rolls around the practice tends to have the same percentage rate of delinquency – different people perhaps, but the same percent of accounts delinquent. This happens all of the time when the doctor and/or the Financial Coordinator believe that lost revenue, rather than lost relationship, is the problem with delinquency. The practice “garden” has aphids and the garden is not being tended properly!
An orthodontic practice should never have more than 3% of all open accounts past due 30 days or more. So a practice with 400 open accounts, the average of our clients, would have 10-14 accounts that are past due 30 days or more.
Since 1980 when I became a consultant I have taught the exact same delinquency control techniques that I was taught in 1970 as a young “collector” at the bank that gave me my first full time job. Those techniques and procedures are the same used today by virtually all lending institutions, including banks, auto finance, credit unions, and credit card companies. There is a reason all of these organizations conduct delinquency control procedures the same way. They work! They work to collect what’s owed but more important, they work to maintain the customer (patient) in a quality relationship with the business (practice); and that is the primary goal of delinquency control.
To keep delinquency at a perfect 3% of open accounts level you must:
1. Send statements every month to every patient with an account balance.
Besides being the single best embezzlement control technique in the profession, sending monthly statements to all accounts also plays a huge role in maintaining consistent cash flow and cutting delinquency. Have you noticed that you get statements, every month, from your bank, your Visa company, your automobile financing company, etc., even though you may have no payment due? Financial institutions learned some time ago that sending monthly statements to customers with account balances, even when they had no payment due, plays a major role in customer satisfaction and reduced delinquency. The cost of sending statements, about 75 cents each assuming you are using electronic billing through your computer practice management system, is insignificant compared to the value of the reduction in delinquency generated by those statements. The reduced delinquency and the increased cash flow directly resulting from sending statements to all open accounts will generate additional cash flow far in excess of the cost of sending those statements.
2. Allow your patients to choose whatever due date they wish.
Part of the delinquency control process is to allow your patients to choose a due date on their own instead of telling them when their payment is due. That allows them to choose a date that fits their budget but is also a personal statement that that date is when they promise to make their payment.
3. Charge a late fee (currently $20) for any payment that is 10 days past due.
If a practice does not enforce the agreed upon due date, the patient/parent quickly determines that there is no “real” due date and they end up paying whenever they feel like doing so. The result is always increased 30+ day delinquency.
Many practices that charge late charges, including a few of our own clients, tend to waive, forgive, or adjust off late charges far too frequently. They want to be “nice” to their patients. While there surely are situations when a late charge should be waived, that should never happen with more than 5% of the late fees charged. Excessive forgiving or waiving late fees simply teaches the patient that you are not serious about your desire that payments be made when agreed. That belief seriously compromises the success of your future collection activity.
4. Start the delinquency control process no later than 15 days past the due date.
Far too many practices depend on their statements as a collection tool. That is a mistake. In fact, we instruct our clients to include no collection messages on their statements. Once an account has become delinquent 15 days past their due date, the formal delinquency control process should start with either a late notice via mail or a telephone call, depending on the circumstances and past experience with the responsible party.
5. Use the phone first.
If you have large numbers of patients who become 15+ days delinquent, then using a mailed late notice is the most efficient method of initial delinquency control activity. For the great majority of practices though, the first contact regarding a past due payment should be via the telephone.
6. Know when to never use the phone.
A big mistake that many Financial Coordinators make is to continue to use the telephone for collection activity even when there is ample evidence to show that telephone collection activity with a particular patient/responsible party is not productive. There are multiple situations that demonstrate unproductive telephone collection activity. For instance, messages left on answering machines or voice mail that are not returned, speaking with the responsible party resulting in a promise to pay but the promise is not kept, patients who are rude or discourteous or who attack you for having made a collection call. Any of these circumstances indicate a responsible party that must never be called again! Collection letters, which are less personal and should always be the second choice nevertheless always work, eventually, to resolve the delinquency problem.
7. Use appropriate collection letters.
Very few practices use proper collection letters because most doctors and Financial Coordinator’s believe the goal is simply to collect the past due payment so their collection letters simply demand the patient pay what is owed. In too many cases sending such letters is an exercise in futility. Letters such as I am describing never get to the point of describing the penalty that the patient/responsible party will incur if the delinquent party continues with their misbehavior. Proper collection letters have a beginning, a middle, and an end. The same letter is never sent twice. The time between one collection letter and the next is normally 10 days and would never exceed 15 days. The tone/intensity of collection letters increases in a clear manner as the level of delinquency increases and, with serious delinquency, proper collection letters eventually get to the point of warning the responsible party that termination of treatment and dismissal from the practice will be the end result of continued delinquency!
While a particular doctor may choose not to terminate treatment, doing so due to poor clinical cooperation, to delinquency, and due to a host of additional reasons is absolutely legal and ethical. The best evidence of that statement being factual is that there have been no instances of successful lawsuits against dentists or orthodontists who properly dismissed patients from their practice.
8. Use credit reports!
Twenty five years ago this recommendation was quite controversial. Today, with a few thousand orthodontists obtaining credit reports on their patients, there is no longer much of an issue. All three of our national credit bureaus have agreed that credit reports obtained by physicians or dentists will not show up as inquiries on patients’ credit reports and no such inquiries will have any impact at all on patients’ credit scores. This is also true of the Zuelke Automated Credit Coach (ZACC) http://www.getzacc.com.
Although it is tough for many doctors to believe, fully half or more of all delinquency is among patients who pay every creditor they have perfectly, except their doctor. More than half of all delinquent patients have good credit and have one to three credit cards that can easily be used to pay the past due amount! If your Financial Coordinator was conducting collection activity on a delinquent patient, would it not be valuable to know, for certain, that the delinquent person had perfect credit and no significant financial problems? Would it not be just as valuable to know, for certain, that the delinquent patient was terribly delinquent with all of their creditors? The type of collection activity on these two patients would be entirely different from one another and in both cases the advance knowledge of the financial situation of the patient gives the practice a significant advantage in the delinquency control process.
The bottom line with all of this is that delinquent patients are out of relationship with your practice. Patients who are in a negative relationship with your practice act out in inappropriate fashion and in ways that cause great damage to the practice well-being. Such patients fail appointments. They have reduced clinical cooperation. They do not bring siblings or other family members to the practice. Most important, delinquent patients do not refer friends/relatives to your practice.
Proper delinquency control activity is not done to collect past due payments! It is done to resolve delinquency and bring the delinquent patient back into a quality relationship with the practice so that they contribute to you in a manner equal to your contribution to them. Follow the eight steps mentioned above and patient delinquency will never be a significant issue for your practice again – and overall practice performance with thrive!
