Why Credit Checks Are Key To Successful Dental Collections!
In today’s healthcare environment, many dental practices are losing money due to mismanaged internal collection efforts and from patients skipping out on their bills after care has already been provided. It is also common for dental professionals to lease out office space in their building on the side – but many are constantly chasing down delinquent tenants who fail to pay their rent on time, or even pay at all!
Unfortunately, as a result of the sluggish economy in recent years, this problem only seems to be growing. So when it comes to collecting dental or property debt, the key to avoiding delinquencies may be addressing the problem before there is one.
Credit: Check It Out!
Credit checks can be used as a valuable tool to avoid slow-paying patients or potential tenants. Running credit reports on soon-to-be patients and lease applicants is a quick and easy way to gain a better understanding of the financial status and credit risk of a prospective customer – before they become a problem.
One option we offer our clients here at I.C. System is InstiCREDIT, a credit profile service that allows you to obtain instant credit reports on anyone you seek to do business with – whether it be a new patient or a potential lease prospect.
With InstiCREDIT, you can pull credit reports and perform social security searches to:
- Determine credit risk before providing service to your patients
- Locate current address and phone numbers to better reach your patients
- Determine credit risk before renting/leasing to tenants
- Perform credit checks for employment purposes
- Assist with internal collections
When analyzing an individual’s credit history, be sure to always focus on these two areas of the credit report: the credit score itself, and the open tradelines. Tradelines are industry-lingo for credit accounts (or lines of credit) and can be used to gain a better understanding for how the individual has paid their bills in the past. The obvious red flags to keep an eye out for are patterns of late payment, accounts in charge-off status, or other outstanding medical or property-related debts.
What’s The Score?
Credit score is the other crucial indicator to take into consideration when assessing a potential patient or tenant’s credit risk. Credit scores (aka FICO scores) range from 300 to 850, with scores rarely landing on either of the extremes. It is common practice to consider anyone with a score in the low 600s (or below) to be of high credit risk. So don’t be afraid to require a minimum credit score of your patients or tenants, because in debt collection, history tends to repeat itself. People who have failed to pay their bills in the past, or have charged-off debts in their credit report, will likely fall behind on their financial obligations again. Performing a credit check in advance is a great way for dentists and dental office managers to avoid slow-paying customers before they put a strain on your bottom line.
Just remember, in most states you must have written authorization from the patient or potential tenant before you can obtain a credit profile. Failing to have permission may be a violation of the Fair Credit Reporting Act (depending on your state’s laws) and could result in fines or litigation.
But once you have authority to acquire a patient or potential tenant’s credit report, you will be much better equipped to strengthen your internal A/R practices and maintain profitability. By utilizing an online credit check service, such as InstiCREDIT, you can not only screen out potentially risky customers but enhance your internal collection processes as well!
YOUR TURN: Do you already utilize a credit check service to screen potential patients or tenants? Have you found that the small expense up front to perform the credit check is well worth the potential cost of a defaulted account? Let us know in the comment section below!