The “2-Threshold” Rule for Extending Credit to Patients

Dentists should not make it a habit to be in the financing business. As I have pointed out many times, most businesses—hotels, restaurants, car mechanics—expect payment at the time of service, and as a result, their clients are trained to expect to pay up front, no questions asked. It’s also an undeniable fact that once you enter into long term financing arrangements with a patient you are introducing an element into the relationship that has the potential to blow things up. If things go badly with the payment process, you end up losing not just some money, but probably the patient as well. But of course, your practice is not exactly like a hotel or restaurant, or most other commercial enterprises. You are a health care professional in the business of providing the best care possible to the most people possible, and sometimes that means coming up against patients who desperately need and want the care you are proposing but are simply not in a position (reduced income, tapped-out credit) to make it happen. So I can understand why dentists will often find themselves in a position where they want to make financial accommodations in the best interests of the patient. As with most things that involve financial matters, clarity is the key—for you, the patient, and your team. It starts with deciding who is eligible to carry a balance with the practice. It can’t just be indiscriminate; team members and patients must understand the guidelines. I suggest a “two-threshold” rule:

• There should be a minimum value, below which it is understood that the patient is responsible for payment at the time of treatment. If you start offering in-house financing options for cases that are relatively routine, you are introducing an unnecessary level of complexity.
• There should also be a maximum value that can be considered for in-house financing. Anything above this threshold should be referred to third-party lenders, who are better positioned to handle the risk. You already put a lot on the line, in terms of time and resources, to deliver a high-quality, high-value case. You don’t want to be on the hook for further losses if things go south with the patient’s ability to pay.

For most practices, the “sweet spot” for offering in-house financing options will be in the $2000 to $5000 range. And again, clarity is the key--clarity for the team in determining who to extend these offers to, and clarity for the patients in understanding the policies and terms of payment. I have recently posted a video lesson that goes into this much deeper—you’ll even find sample policy statements there that you can tailor to your own needs, as well as answers to some commonly asked questions about mastering the “payment problem.” It’s something I think every dental team should watch together to better understand how to combine the best treatment options with the best business practices.