Best Practices for Reducing Write-off Risk

Every successful practice will still likely have write-offs–it’s a realistic part of the experience. Especially during times of economic turbulence, patients can be reluctant to pay their bills without proper incentives, accommodating timing, and convenient payment methods.

Fortunately, there are proven methods for reducing the frequency of these situations.

In this Dentistry Huddle post, we look at what causes write-off risk balances to pile up, and provide actionable strategies to mitigate any bad debt at the end of the fiscal year.

Key Takeaways

• Audit then implement. Before changing policies or integrating new billing technology, identify the cause and scope of write-off problems and analyze A/R collection patterns that perpetuate them.
• Dynamic billing language paired with RCM automation is the new way to address increasing write-off risk balances.
• For long-term billing success, select the best billing metrics to consistently track and measure against baselines.

Understanding Your Write-Off Problem

The first step to solving a problem is to understand it. In this case, determining the scope and severity of your patient-portion write-off risks should be priority one.

Why does this problem commonly occur? Well, some common causes that we see when we audit a practice’s billing process include: a lack of clear financial policies, ineffective communication about costs, inadequate payment options, delayed billing, and inefficient follow-up. 

Yes, we understand that these are a lot of factors.

The truth is that it’s often a combination of several of these issues that create the “big problem” of write-offs.

Benefits of Reducing Write-off Risk

The good news is that when you implement a system to identify and address write-off risks before they become an issue, your practice can look forward to improved and normalized cash flow, better patient financial relationships, reduced collection costs, and overall improved use of your staff’s time.

How to Analyze Write-Off Patterns

After identifying the root cause of the problem, it’s time to trace the mechanism that makes it pervasive. In the case of write-off risk, finding the patterns that correlate with the cause and lead to increased carried A/R (accounts receivable) is best practice:

• Track collection performance by procedure type, provider, or patient demographics. From here, you can further explore your balance cohorts to see which balances are most commonly delinquent.
• Set reduction goals with measurable metrics. This can be done by segmenting your efforts into A/R management campaigns
• Use data insights to adjust policies and financial procedures

On the Insurance A/R side

The scope of this article is to address tactics to reduce write-offs on the patient-portion side. That said, on the insurance side of collection there are precautions that your practice should consider to eliminate the possibility of insurance A/R aging, as well.

These include:

• Pre-appointment insurance verification to understand coverage details and streamline treatment operations. This includes confirming patient eligibility and benefits days in advance.
• Calculate accurate patient responsibility estimates before treatment.
• Document all verification details in patient records for reference.

Implement Clear Financial Policies

Once you’ve identified the problem, the cause, and the patterns that perpetuate it, it’s time to look at your patient-facing financial policies:

• Clearly outline payment expectations, timelines, and consequences. Setting the financial standards for your practice is the most important element here. Inconsistent commitment to these is a major contributor to aging A/R.
• Develop written financial policies that patients sign during onboarding
• Train staff to consistently communicate these policies to patients. Consider using visual aids to explain complex fee structures
• Review and update policies annually to adapt to changing insurance landscapes

Collecting at Time of Service

With financial expectations set, an approach that more practices are using is collecting estimated patient portions at time of service. If you choose to adopt this policy, be sure to:

• Document patient acknowledgment of cost estimates.
• Have a well-established reimbursement and final balance collection systems to cover any miscalculations.
• Consider implementing pre-authorization for credit card payments. Best practice is to have consent to have this information on file for future appointments.

Dynamic Billing Communication

If a patient-portion still remains after insurance (and potential pre-payment), the next step is to communicate this balance to the patient. This is arguably the most important element in write-off risk reduction, as the manner and timing that bills are presented directly impact the decision to pay. Here is what we’ve learned from the practices that we work with:

• Make the language that you use dynamic. This means that the message that you use for one patient 30 days after a bill is due will have a different style and tone from a message sent 30 days later. We conducted a study about dynamic vs. static billing language and saw a 7.5% lift from practices that used dynamic language. We also saw a dramatic decrease in days to pay from dynamic billing.
• Use clear, simple language in billing statements
• Implement multiple communication channels (text, email, physical statements, and online patient portal)
• Create educational materials explaining common billing terms
• Personalize communication based on patient preferences

Expand Payment Options

Some patients just need the right set of conditions to make a payment. Others need carrots (incentives) and sticks (delinquency penalties) to take action. Your practice needs to expand its financial policies and instruments to cover the wide-ranging preferences of your patient base:

• Implement flexible payment plans for larger treatments
• Partner with third-party financing companies (CareCredit or Sunbit)
• Offer prepayment discounts for larger procedures
• Consider subscription-based preventive care plans like Membership Programs
• Offer both digital wallet and paper statement options for payment. We have seen that having an omni-channel billing approach improves collection rate by 9% more than digital methods alone.

Leveraging Billing Technology Solutions

While it’s entirely possible to use well-trained staff to collect on aging balances, software solutions exist that are specifically designed to work A/R. Implement these tools to:

• Establish an automated dunning workflow system that sends scheduled payment reminders with quick access to a secure pay portal. Implementing this system will give you an effective follow-up protocol, which will reduce your staff time spent tracking down patient balances.
  
• Document all collection attempts thoroughly in the patient account.
  
• Utilize RCM software features for tracking unpaid balances and running reports to segment A/R cohorts. This approach creates tiered and triaged accounts based on balance age and amount
  
• Use blocking or filtering software to identify and segment out patients with unqualified balances. Who not to bill is more important than billing indiscriminately.

Staff Training and Accountability

Dialed in-protocols and fancy technology is effectively useless without properly trained staff. Continuous training and industry education are necessary to prevent collection issues.

• Provide regular training on financial conversations. Developing scripts is useful here for discussing payments.
• Keep staff informed about industry developments via CE opportunities
• Consider creating incentive programs tied to collection performance
• Hold regular team huddles to discuss challenges facing the practice.

Identify the Key Metrics to Track

Establishing your policies and training your staff is only half the battle. Monitoring and maintenance of your carried A/R balaces is the ongoing focus. We always say that what gets measured gets managed, so to that end, these are some of the key metrics your practice should consider:

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The Next Step: Determine Your Implementation Strategy & Goals

Congratulations! Now that you’re armed with some key strategies and tactics for reducing your write-off risk balances, it’s time to integrate your plan.

Before you proceed with completing action items, you need to spend some time setting goals for your collection campaigns. For instance, you need to establish realistic targets for write-off reduction so you can measure its effectiveness.

It’s also important to take a high-resolution snapshot of your carried patient A/R before you implement course correcting measures to set your baseline.

Remember that this process will likely not yield results overnight, so setting monitoring periods and tracking the KPIs you’ve selected will be most of your day-to-day input.

Finally, once you set your policies, integrate your strategy, and set up measuring systems, don’t forget to refine elements that don’t quite fit your practice or patient base. Iterating and adjusting strategies based on outcomes and feedback is the most robust and long-term way to eliminate write-off risk for your practice once and for all.

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