Optometric Management Tip # 177   -   Wednesday, June 08, 2005
Dropping Payment Plans

A recent email from a reader prompted me to write this article because it made me aware that many practices still offer installment payment plans to patients. I once offered the option many years ago in my practice, and dropping it was much easier than I thought it would be. If you currently allow patients to leave your office without paying in full for services and products, this is a good time to review your policy.

Why were payment plans started?

I think ODs offer payment plans with the excellent intention of helping their patients, and with an eye toward increasing business. It can be viewed as a marketing tool. In many cases, the payment policy was developed many years earlier, possibly even by a former owner of the practice, and it has become embedded in the office culture. Loyal patients may have grown to expect the payment option and ask for it when they return for ongoing care. Staff members become comfortable with the policy and offer it to new patients whenever price is an issue. It may seem too difficult to change.

Why drop payment plans?

In my opinion, there are far greater business benefits gained by not offering credit than there are in allowing it. The first benefit to your business is cash flow. Itís important to have the cash that your practice has earned as quickly as possible, because your suppliers expect to be paid right away. In addition, there is always some percentage of accounts receivable that will become delinquent. This income must be eventually written off as a loss, and it can add up to a large sum. Finally, donít forget to consider the administrative costs of collection. Sending statements is an expense and if an account is not paid when due, the practice must go through considerable effort to try to collect, using staff time and possibly collection agencies or attorneys. Calling patients for a past-due payment is a very unpleasant job, and in the end, collection efforts invariably result in a breakdown of the doctor-patient relationship and the patient will likely never return to the practice.

Times have changed

Itís now easier than ever to drop payment plans because the public understands the business world better than ever, even if they pretend not to. The acceptance of major credit cards and debit cards has become so universal, that individual credit extended by the small town merchant is no longer necessary. Virtually everyone can have a debit card. Optometric practices can offer a payment plan by simply accepting Visa, MasterCard and Discover. I strongly recommend accepting at least these three as a minimum, and post the supplied logo signs to let people know. Credit cards are a standard way of doing business today. Your practice bank account receives the full deposit immediately, after a small discount, and is relieved of any collection effort and risk of default. Patients still get the flexibility of paying for expensive goods or services over time, if they wish.

If patients canít obtain a credit card due to a poor credit rating or lack of income, or if their card is maxed out and not available, then your practice probably does not want to offer credit to that person either.

What should your payment policy be?

Here is the policy I recommend, and Iíd start it immediately and cold turkey. All services must be paid in full at the time of the visit and all products must be paid in full at the time of dispensing. Products that must be ordered require a 50% deposit before starting the job (although, if staff members simply state the total due, most patients will pay in full at the time of order). If a patient does not have the 50% at the time of order, the job can simply be held until the deposit is received. Pre-approved insurance plans can be accepted as cash, provided benefits have been verified in advance and the proper authorization is obtained. (Medicare is the exception to this, since no authorization is needed.)

If this policy is carried out properly, your accounts receivable will be limited to insurance plans that youíve chosen to participate with; no individual patients will be billed. In reality, there may be a few patients receiving statements in situations where their insurance does not pay as expected and you are permitted to transfer the balance back to the patient.

How to handle the change

No exceptions should be made to the policy and there is no need for staff to go ask the doctor. The doctor does not want to be put into a situation of making a decision about credit, because if the answer is no, the perception is very negative. If the answer is always yes, then why bother to ask? Itís best if doctors do not get involved in billing and collection in front of patients Ė but they should be involved behind the scenes. Policies that have no exceptions are very fair and easy to administer. If the doctor knows of an exception to the policy, then itís up to him or her to notify the staff in advance.

After deciding on the policy, meet with your staff to discuss the need for the change and to train them on what to say to patients. Itís normal for the people who must break the news to long-standing loyal patients to have some fear of possible confrontation. Letís look at how your staff might present the payment policy.

First, all staff should be trained to always tell every patient in advance what the fees will be and when payment is expected. In my practice, we never ask for money without having told the person in advance. That may seem like it would be difficult to achieve, but it really isnít and it makes life in the office very pleasant. My staff simply tells patients over the phone when they schedule an appointment what our exam fee is and if we accept their insurance plan. If we donít accept a plan, we advise the patient that payment is due at the time of the visit. This is received very well and we never have a misunderstanding at the front desk with patients not prepared to pay. Once the patient is in the office, we simply explain the fees and payment policy for anything they wish to purchase or order.

Here is how I would respond to established patients who have been granted a payment plan in the past, and who ask for it again. An assistant should be sympathetic, understanding and even apologetic as she acknowledges that our office policy has changed, and that we no longer can extend any credit. Assure the patient that itís nothing personal, but the business decision had to be made because our costs have gone up and our lab suppliers expect payment right away. Always add that we accept Visa, MasterCard and Discover, and that we will be happy to hold orders until the deposit can be arranged.

You really can run your practice as a business, while presenting a personal and caring touch as you do it.


Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management