Doctors approach me wanting to know what to do in this situation often. We had a discussion the other day on one of the FB forums and I thought I would share my response for the benefit of all:
Having an office that’s out of control is a big deal and will take a lot of work on your part and alignment with your team to make progress towards getting things back under control.
First, do a chart audit. Look at every single one and divide those that are financially current from those who are behind. Next you need to separate the insurance/Medicaid past due from the patient past due and get someone on top of bringing your insurance/Medicaid AR current. Now. Insurance/Medicaid AR takes more paperwork and follow through but it’s easier to collect and will get your cash flow going sooner. Next, you need to set policy for how you handle active patients who are behind when they show up for an appointment and when they don’t. You need someone to track and report on patients who are behind daily at your morning meeting as described in part I and part II of how to have a great morning meeting. The best offense is a good defense so make sure you don’t let anyone else get behind while you are cleaning up your AR.
The key is to getting everyone who starts on autodraft and making sure no one else gets behind while you work on cleaning up the existing past due. You have to commit to this so if someone’s payment or autodraft (you will have both while converting everyone to autodraft) doesn’t go through, you need an employee to call them that day. It’s your responsibility to make sure people pay not the other way around. Sucks but that’s how it is so stay on top of it. Making sure the new and current patients are attended to shouldn’t take very long at all but it is vital to stop the creation of problems before addressing the problem itself.
Next you need to set basic rules for collecting past due accounts. For example, anyone with a balance of less than X or who has been out of braces longer than X is not worth collecting on and we will write them off. Get those folks off the books and see what’s left – hopefully it’s a more manageable number of delinquent accounts. You also need to address any credits that are on patient accounts. Hopefully you took that into consideration when you were evaluating the practice so that it’s the seller’s responsibility, but if not and if you did a stock purchase, you’re now liable for the credits. Try to offer replacement retainers or whitening trays or whatever instead of doing refunds if at all possible but sort them out one way or the other.
Next you need to write a letter to ALL PATIENTS, not just delinquent ones, saying that you love your patients but you and some of your patients have allowed payments to get out of control and that is interfering with your ability to deliver quality care and because of this you are moving everyone to autodraft. Tell them that from this point forward you will focus only on great care and you are happy to work with those who will work with you on past due accounts, but you are following up on delinquent accounts in the future with the help of a third party. Be humble and explain that you’re just a doctor who is trying to help people and that you’re good at creating great smiles but not this stuff and that is the reason you are where you are. Whether or not you use a collection agency is irrelevant but you don’t want to be the bad guy so talk about a third party – your team member is also a third party.
Next you need to follow the letter up with a call to each delinquent account to work out payments and a timeline. Be specific and document what was promised and then follow up exactly as you said you would if they don’t do the same. Anyone who doesn’t pay and anyone who won’t engage needs to either come in and get the braces off so you can part ways or go to collections as appropriate.
Look, if people are behind on payments you can still be nice to them. If they are nice as well and willing to work it out, put them on autodraft and take the months they are behind and add them to the end of their contract to bring the patient current. Do this once and once only. The next time they get behind you should take the braces off or turn them over to collections.
On the topic of collections, I don’t understand the “conventional wisdom” among orthodontists that says you shouldn’t enforce a signed contract and collect what you’re owed because it will give you a “bad reputation”. That’s just plain stupid but it’s widely believed by orthodontists. Try not paying any other service provided or a hospital and see what happens… It’s your money. You did the work so go get it. You don’t have to be mean, you just need to do what you agreed to. And so do patients.
I can answer questions for more detail but this is a good start. Good luck!