It is interesting to me that I am frequently criticized by a few other consultants for our strict financial arrangement and delinquency control recommendations on high risk patients. However, those same consultants will teach their clients to ignore credit risk and to demand $500 down from all patients, even though 4%-5% of all “A” type patients will never start treatment if a down payment is required. One consultant who seems to be popular right now is not only recommending that required $500 down but is also recommending that their clients use financial “Option Sheets,” a list of two to four financial arrangement options that the responsible party is expected to choose from. This guy will learn, just as many past consultants (remember OFP?) recommending the same thing have learned, that when option sheets are used in place of a quality and structured negotiation with the patient/responsible party, 5% is shaved right off the top of the practice’s case acceptance rate.
Doctors who will not take the 60 seconds or spend the $5 that it takes to identify the risk, or the lack of risk, that a given patient presents to the practice cannot protect the practice from the loss of “A” patient case acceptance caused by fixed or restrictive financial arrangements. Do the math! A typical, non-advertising, non-PPO doctor will attract 70%+ “A” patients and many do much better than that. If this practice sees 40 new exams each month, they see at least 336 “A” patients each year. If this same doctor’s office policy and/or financial payment “option sheet” educates new patients that the practice requires a $500 down payment, he/she will lose a minimum of 9% (and most likely more!) of those 336 “A” patient exams, a 4% loss from the down payment requirement and an additional 5% loss by replacing a negotiated financial arrangement with an option sheet. That’s a loss of at least 30 new case starts and roughly $174,000+ a year in lost production and, mostly, net income. The true loss is much greater because the great majority of new patients referred by existing patients are referred by “A” patients, so if you lose case acceptance among “A” category patients, you lose the referrals you would have gained from those patients along with the much improved case acceptance you have from patients referred by patients.
There is, of course, an alternative point of view that states that the high down payments and short term payment plans required of the high risk patients will damage the case acceptance rates on those patients. In fact, that is not an alternative point of view at all. We completely agree that requiring a huge down payment on patients who have proved to be complete deadbeat/credit criminals (the “B-” and “C” patients) is going to seriously impact case acceptance on that category of patient. Since, without the heavy “equity” in their case that large down payments provide, the majority of these patients will prove to be uncontrollable, financially, clinically, and most often both, we simply do not believe that lower case acceptance among this group is a bad thing at all! Again, do the math. Our same “typical” practice seeing 70%+ “A” patients will have 20% “B+” and “B” patients and 10% “B-” and “C” patients. So with the same 480 new exams a year this practice will see 48 of these high risk patients. Appropriately strict financial requirements will reduce case acceptance to 50% on this patient type, so our typical practice will lose 24 starts from the highest risk category of new patients, patients who would have been uncontrollable had they been started without huge financial equity in their treatment. That is not a bad thing!!
The percentages of “A,” “B,” and “C” patients change drastically in practices doing “retail” type advertising, practices offering discounts with direct mail pieces, practices seeking growth by offering the lowest fees, and practices participating with the various PPO’s. Each of these “business models” attracts a much lower percentage of “A” patients and a much greater percentage of high risk patients. Because of the high patient volume generated by these business models, such practices can generate tremendous gross although what we describe as “quality of life” within these offices is well below what we would want a client of ours to put up with. Our system of practice management was never designed for and is entirely incompatible with such practices.
The bottom line here is that for a traditional, fee for service, non-advertising practice, liberal (including $0 down payment) financial policies for the low risk persons who make up the great majority of patients, and restrictive financial policies on the high risk persons who make up the minority of patients, will always provide a net gain in case acceptance, production, net income, and in the quality of life within the practice!
