“Hello Paul.  I spoke with the team this morning and we are all in agreement that our experiment did not work.  It’s been just over two years since we went “off the Zuelke wagon” and started ignoring the credit rules on our “B” and “C” patients.  Our case acceptance rate improved initially when we started being more liberal with that group of patients, but only by 3 percentage points (much less than we expected), and delinquency has gone through the roof.  Failed/no show appointments, and emergency appointments have increased and I am just now starting to notice more patients over treatment time than I have had in 15 years.  Our new patient flow has remained steady (I had hoped for an increase) but the percentage of new exams referred by patients has declined and our case acceptance rate is now down from what it was when we started our “experiment.”  I just want to get back to the system we had a couple of years ago where we had much better numbers and a lot more fun.”

“Paul, I wanted you to know that we have recommitted to following the system you taught us so many years ago.  I have been bombarded by other consultants and doctors telling me to grant more liberal credit and to stop getting credit ratings on patients and their arguments seemed to make sense at the time.  They do not make sense anymore!”

“We will stay with the program we have, offering flexibility for our “A” patients while maintaining our policies that prevent our weaker patients from entering into financial agreements with us that they cannot keep, thereby keeping my patients in agreement and in a quality relationship with my practice and team.  I enjoy the change in the practice culture with this system.  I believe we have better rapport with our referring doctors when we don’t have patients out of relationship with the practice over money, resulting in long stretches of time without appointments when they are delinquent.  We work really hard at getting patients in for their appointments but when they are not paying, they cancel and no show at a really high rate.”

These three messages are excerpts taken from emails and letters we have received from past clients during 2014.  They serve as great examples of the theme of similar messages we receive every year.  In virtually every case, the doctors involved had abandoned our system of risk-based credit granting in the hope of growing/building their practices.

We know the grass is always greener somewhere else and it is easy and more comfortable to believe in and follow the newest consultant or lecturer who is preaching a message you want to hear, instead of the one whose message you really do not want to hear because it is not nearly as comfortable.  There are lots of false prophets out there!  We also know that it is terribly uncomfortable for a doctor to watch a prospective patient, even a higher risk patient, leave the practice, perhaps to start treatment elsewhere, when they would have started with you if you had only lowered that required down payment by $500.

Everybody knows that we teach our clients to grant credit appropriate to the risk of the patient/parent.  However I am always surprised and disappointed at how many doctors believe that risk identification and granting credit appropriate to the identified risk is done primarily for delinquency control purposes.

It is certainly true that granting credit at a restrictive level to patients/parents known to be high credit risk (along with conducting proper collection activity) will keep delinquency under perfect control.  However, the primary reason for having risk-based credit granting policies in place in a practice is not for delinquency control purposes!  The primary reason for establishing risk-based credit granting is to eliminate the financial barriers to your good patients (the “A” type patients who make up the great majority – typically 75% – of your new patient exams), starting treatment now.

There are consultants, accountants, study clubs, and appliance manufacturers out there, I’ve mentioned them in the past, that are continuing to promote a standardized policy of requiring a $500 down payment on all patients, without regard to risk, and then to finance the balance over a fixed period of time.  They do that because they simply don’t know anything more productive to help their clients to grow!  Our extensive, multi-year study of this fixed down payment, one size fits all, policy has proven to us that such a policy causes a reduction in case acceptance among your best “A” type patients of 4%-6%.  Why?  Just because a patient/parent is mature, in a stable work/home environment, and pays his/her bills (an “A” patient), does not mean he is wealthy or that he happens to have sufficient cash to make the down payment, even a token $500 down payment.  If you have such a down payment policy and notice a lot of your patients leaving the new patient exam without having committed to treatment, and telling staff they have to “think about it,” “check their flex plan,” “discuss with spouse,” or any of the dozens of other excuses patients offer in order to get out of the consult room without making a commitment – and notice that many of those patients never  come back to get started – you might want to take another look at your financial policy!

For a typical sized practice averaging 40 new exams a month, even the lower 4% decline in case acceptance means a reduction in new starts of 19+ cases per year.  With a typical fee structure, that 4% decline in case acceptance will cost more than $100,000 a year in lost production and about an $80,000 dollar a year loss in net income!

The real problem is much more serious than the loss of net income.  That loss of case acceptance comes from the group of people who make up your very best patients!  These are the patients who keep their appointments, follow your clinical instructions, and refer people just like themselves to your office.

Because a $500 or any other low down payment policy generates an increase in case acceptance among the higher risk “B” and “C” patients, and because most doctors only look at production and income and pay little attention to which of the new exams are starting and which are not starting, the problem of lost “A” patient case starts and increased “B” and “C” patient case starts almost always goes unnoticed – until a year or so later when patient referrals have declined, patient delinquency is up, and incidents of poor clinical cooperation, missed appointments, etc., are up.

So, to those who remain resistant to identifying risk and to granting credit on new case starts that is proportional to the risk, remember that doctors who identify risk and have liberal and flexible financial policies for the vast majority of their patients who present little to no financial risk while controlling the relatively small percentage of new patients falling into the high risk category, will always have better case acceptance and higher grossing, more profitable practices, than those who do not.  They’ll have a lot more fun in their practice as well!