Dental offices, particularly those that handle high-dollar orthodontics, often face difficulties with their accounts receivable (AR) management. AR is the portion of bills to patients and insurance companies that are outstanding. However, these challenges can be met with strong, enforceable policies and consistent collection procedures.
A good rule of thumb for dental offices is to keep AR from exceeding the practice’s average monthly income. That means if you generate $40,000 on average each month, you should keep your outstanding receivables below that amount.
Additionally, none of your receivables should be older than 30 days. The longer AR sits, the less recoverable it becomes. Getting a handle on your office’s AR improves its cash flow and makes sure it gets paid fairly for the services it renders.
The Best Medicine is Preventative
Putting policies and procedures in place to prevent accounts from becoming delinquent is the best way to manage a practice’s AR.
The process starts when a patient joins the practice. It’s critical that all of their information is entered correctly, and that services are properly coded when procedures are performed. Correct information avoids improper insurance company denials, which can present a roadblock to payment.
Submitting claims quickly, with all required documentation, is equally important. The longer it takes to start the process, the longer it will take to get paid. A significant portion of a practice’s AR comes from insurance company nonpayment. Anything you can do to reduce this amount will help your AR proportionally.
It’s also a good practice to overestimate when you pre-estimate patient insurance. It’s easier to send a refund than to demand payment the patient wasn’t expecting.
Have a Written Payment Policy and Payment Plans in Place
Nothing should be left to chance. You should have your patients read and sign a payment policy that details what they might owe, lets them know they’re legally obligated to pay any amounts not covered by insurance, and describes non-payment penalties.
Having established payment plans gives patients options that you already know your practice can manage. The alternative, working out payments on an individual basis, is difficult to manage and confusing for patients.
That said, it’s always better to collect up front when you can. Office managers are often surprised how often people will pay what they owe at the time of service simply because they’re asked. They may assume they’ll be billed, and when they learn upfront payment is an option, they may take it.
How to Collect Existing Accounts Receivable
Unlike other businesses, healthy dental practices should be able to collect the lion’s share of their outstanding receivables. Some industry estimates say between 95 and 99% of a practice’s total production measured over a year, should be collectible. Let’s look at how you can accomplish this.
Tackle the Oldest and Largest Receivables First
This accomplishes two things. It removes the oldest AR on your books, getting you above the prescribed 30-day rule noted at the beginning of this article. It also chips away at the accounts that will have the most substantial impact on your total AR.
Insurance oversights, mistakes, and misunderstandings often account for a sizeable portion of large AR balances. These take effort, but they can generally be resolved with diligence. If the patient is required to pay, help them understand what they owe, and work with them to create a payment plan.
As we mentioned earlier, the older AR gets, the harder it is to collect. It’s essential to handle unpaid insurance claims if they’re older than 90 days because there are often rules against collecting after a certain period.
For the oldest receivables, you may consider forwarding the accounts to a collection agency or writing the amount off. If payment is unlikely, getting them off your books may be your best option.
Manage Claims Denials Quickly
Denied claims can dramatically slow insurance payments. When a denial happens, contact the insurance company immediately to determine the cause. Look for any documentation or coding errors that may have contributed.
Insurance companies are happy to delay payment as long as possible. By keeping them accountable, you can limit impediments to collecting.
Keep Collections Calls Friendly
It’s best to give patients the benefit of the doubt when calling to collect outstanding bills. The healthcare system can be confusing. The patient may have assumed their insurance company would be covering their bill. Financial difficulties may also be to blame.
Try to understand the patient’s position first. It may be that a simple explanation is all it takes to procure payment. Approaching collection calls with sympathy and compassion is much more helpful than using aggressive or combative language which puts people on the defensive.
Remember that healthy dental practices regularly collect nearly everything that’s owed them. The right methods make it possible.