little off the top and claim that the patient received a greater discount than was actually provided while pocketing the difference. More information on this can be found in the section of this module that discusses Risk Management and Fraud Prevention. The important thing to remember is that, if you decide to extend cash discounts, be careful, be consistent and have the appropriate systems of checks and balances in place in order to be properly protected.
Carefully consider the loss of income that results from extending a courtesy for payments made by debit or charge card since the practice pays a processing fee to a third party.
A good rule of thumb is to limit discounts, also known as accounting reductions. Dentists who offer discounts as an enticement so patients will accept and complete a treatment plan should be certain to outline all of the specific conditions for any discount in their financial policy. That written policy should include a detailed list of agreed upon accounting reductions, which often are limited to situations when the patient pays in full by cash or check on the day treatment starts. Review your accounting reductions as they occur by reviewing the end of day reports; reevaluate your accounting reduction policy regularly, preferably at least quarterly.
Every member of your staff should be aware of the practice’s written financial policy regarding accounting reductions. It’s a good idea to have all employees sign a statement that they’ve read, understand and agree to comply with the policy. Place a copy of that statement in each staff member’s personnel file. While it may seem tedious or unnecessary, this important precaution could protect you in the event that embezzlement occurs in your practice; having a signed document acknowledging awareness of the practice’s financial policy prevents employees from claiming that they “didn’t know” they were acting in a way that was not allowed.
Every member of your staff should be aware of the practice’s written financial policy regarding accounting reductions.
Keep in mind that the patient’s dental benefit plan should be informed of any fee adjustment through a separate paper claim or as an attachment to a reimbursement submission. Failure to notify the plan of any accounting reduction could be considered fraud, even though it may be no more than a simple oversight.
Keep in mind that any “income” realized through a barter transaction should be accounted for as taxable income and make sure the expense associated with the income is recognized.
Some insurance contracts require the dentist to avail their enrollees of the lowest service fees provided in the office. Repeated fee reductions may qualify as such an occurrence and the practice may be required to extend the discount to all members in a particular insurance plan.
Also, remember that different states have different laws regarding discounts. Check with a knowledgeable attorney in your jurisdiction or consult your state dental association for information about laws relating to discounts that might apply to your practice.
Barter
Some dentists opt to participate in formal or informal barter transactions that involve trading their knowledge, expertise and skill for a service or tangible good offered by someone else.
The idea of trading a few hours of your professional expertise for someone else’s talents can be very appealing, especially when you know and trust the patient. But even if that patient is your best friend, it’s important to consider whether to agree to the deal since bartering can involve certain tax and insurance implications. Keep in mind that any “income” realized through a barter transaction should be accounted for as taxable income and make sure the expense associated with the income is recognized.
Participation in bartered transactions is not always a smooth process and it’s possible that the tax implications could wipe out any perceived savings. If you do decide to trade your services for someone else’s, be sure you have a written agreement that details what each party will deliver and any cash costs. Be especially careful about deals in which the patient asks you to discount your fee or charge less than your usual fee for service just so you can match the fee for the service being provided by the patient. That type of equation is rarely a “win-win” scenario.
Participation in bartered transactions is not always a smooth process and it’s possible that the tax implications could wipe out any perceived savings.
For instance: one of your patients, who runs a business that provides small- to mid-sized companies with computer tech support, needs dental treatment valued at $6,000. The two of you agree to trade your services; no money is exchanged and you perform the necessary treatment and the patient agrees to maintain your computer network for a certain period of time.
The transaction should be detailed in your books and records through a notation for “fee income” (sales) of $6,000, less computer expenses of $6,000. It’s possible that there may be no tax implication in the transaction. The accounting records for the patient’s computer company should include a notation for fee income (sales) of $6,000 with no expenses to offset. That means the computer expert has accrued $6,000 in taxable income, which would be addressed by sending the computer company an Internal Revenue Service (IRS) Form 1099 Misc. If the deal is structured through a barter exchange, the barter company is required to file Form 1099-B with the IRS.
If you receive income from bartering, you may be required to make estimated tax payments. The IRS has more information regarding tax considerations and possible implications for bartered transactions; a link to one of those resources, which includes forms and other details, is available below.
Resource:
• Internal Revenue Service Topic 420 – Bartering Income https://www.irs.gov/taxtopics/tc420.html
Collecting Payments
Collecting payment is literally the bottom line of your practice. Developing and implementing a workable financial system is critical to ensuring that patients pay their bills promptly. While this is important for dentists at all stages of their careers, it’s especially important for new dentists who may be personally managing the financial aspects of the business rather than delegating that function to someone outside of the practice, such as an accountant.
Developing and implementing a workable financial system is critical to ensuring that patients pay their bills promptly.
A workable financial system should include a written financial policy, information about the financial payment options available in the practice, details on financial arrangements established in advance of treatment, and a protocol that describes the time and place to have private consultation with patients to discuss private clinical and financial matters.
Having a formal financial program and policy can be a win-win scenario for your practice and for your patients. This information can make it easier for patients to finance and receive the treatment
