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31 May 2016 | Auxiliary

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When is enough, enough?

By Roger Mendelson

Fraud and bad debts Finance

Healthcare professionals often find themselves in a dilemma when dealing with patients who are not paying their accounts. How do you exert pressure on a patient who sought your help?


The way to remove this dilemma from your life is to define a process, appoint someone to handle the billings and collections function (i.e. a "Credit Officer") and then leave it to that person to do their job.

An underlying assumption needs to be that your practice can do without patients who do not pay promptly. Chasing these patients is time consuming, stressful and a cause of major irritation. There obviously needs to be flexibility to allow for genuine hardship cases, but equally, patients who do not pay for other reasons inhibit your ability to properly service patients who do.

Implementing a billing and collection system

Your defined billings and collection system would provide for a final demand for unpaid accounts to be sent at no later than 60 days. If a patient has not made any attempt to pay within the 60 days and has not entered into a satisfactory installment arrangement, going beyond 60 days is sending the message to him or her that you are not serious. Your invoice will then fall to the bottom of the pile as other, more urgent bills such as telco accounts and credit cards, get paid.

Your appointed Credit Officer will usually be someone from your office, such as your receptionist or a part-time bookkeeper. All account queries should be referred directly to them and they should be completely empowered to make decisions, without reference back to you.

Your business trading terms should incorporate a properly worded clause to provide that in the event of the patient being in default, they will be liable for all debt collection costs and legal costs on the indemnity basis.

With this clause in place, you have a real incentive to outsource the account at 60 days, because you will know that debt collection costs will be added to the account and if the debt collection agency is successful, all collection costs would have been borne by the patient.

Your debt collection agency should work on the basis of NO RECOVERY – NO CHARGE, so that they are fully incentivized to collect the outstanding fees.

Outsourcing debt collection after 60 days

If you outsource the account at 60 days, you are likely to achieve a recovery rate of over 60%.

There will be cases where the patient alleges that "...I am unhappy with the services and therefore will not pay..."

When you get feedback like this, you only have to answer one question to yourself: "Am I confident that I provided a proper professional service and charged a reasonable fee or a fee which the patient had agreed to?"

If the answer to this question is yes, then my advice is to go ahead and sue the patient, provided that there is a legal enforcement path available.

In our experience, devious patients will often make allegations of professional negligence, in the knowledge that the service provider will usually cease action at that stage. If they see that you are serious and that there is no basis to the claim, they will invariably settle the claim.

The most common enforcement path available for dental accounts is garnishee of wages. Accordingly, if the patient has a permanent job (it doesn't have to be full-time), then you will ultimately be able to obtain an Order against their employer, compelling the employer to deduct a specified amount out of each wage payment, until the full debt and all legal costs have been paid.

Most legal actions for dental accounts result in a default judgment being taken out. This means that there is no hearing and no need for you to attend court. Indeed, it is rare for a legal action for a dental account to end up in a court hearing.

By appointing a Credit Officer, defining the role and leaving him or her to get on with the job, your stress levels will decline, your cash flow will improve and your losses from bad debts will significantly reduce.

About the author

Roger Mendelson is CEO of Prushka Fast Debt Recovery Pty Ltd and is principal of Mendelsons National Debt Collection Lawyers Pty Ltd. Prushka acts for in excess of 53,000 small to medium size businesses across Australia and operates on the basis of NO RECOVERY - NO CHARGE. The writer is also author of The Ten Mistakes Businesses Make and How to Avoid Them and Business Survival, both published by New Holland Publishers in 2009.

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