1. Financial Management in the Dental Office
Chapter 63
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2. Chapter 63
Lesson 63.1
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3. Learning Objectives Pronounce, define, and spell the Key Terms.
Demonstrate how to make financial arrangements with a patient.
Describe the function of computerized practice management systems and manual bookkeeping systems.
Describe the importance and management of collections in the dental office.
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4. Introduction
The business assistant has the responsibility of maintaining complete, accurate, and up-to-date:
Financial records for billing and collection procedures
Financial planning
Declarations of money earned to federal and state agencies
What is the foundation for the management of the financial transactions of a dental office? (Business records.)
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5. Financial Management Accounting Bookkeeping
The means or process of recording, classifying, and summarizing a financial transaction
Bookkeeping
The recording of the accounting process
What are two types of bookkeeping systems used in a dental practice? (Accounts receivable and accounts payable systems.)
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6. Gathering and Presenting Financial Information
Registration form
Address, telephone numbers, place of employment, responsible party, insurance
Credit report
Financial profile
Fee presentation
Necessary fees
Financial arrangements
Contract
What is the first step in preventive account management? (Financial policies are established by the dentist and implemented by the business assistant. Fees will be paid in a more timely manner if the practice establishes financial guidelines.)
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7. Accounts Receivable
The accounts-receivable system is used to manage all money owed to the practice for professional services.
The reimbursement process can be streamlined into an effective three-tier process. What are the three stages? (Before the patient arrives, when the patient arrives, after the patient leaves.)
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8. Types of Accounts-Receivable Systems
Pegboard accounting
In this manual bookkeeping system, all entries are completed on the daily journal page, ledger card, and carbonized receipt.
Computerized accounting
Data are entered into a computer program and used to maintain account histories and practice records.
What is the purpose of an accounts-receivable management system? (To record all transactions related to collecting fees for professional services provided.)
What can the dentist obtain on any staff members who handle practice funds? (Bonding insurance.)
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9. Fig. 63-2 Manual pegboard system
Fig Manual pegboard system. (From Finkbeiner B: Practice management for the dental team, St Louis, 2006, Mosby.)  
In the average dental practice, what percentage of outstanding accounts are more than 90 days past due? (According to the Advanced Dental Education Institute, 25% to 30%.)
What is a pegboard accounting system? (A manual bookkeeping system in which all records are completed with a single entry.)
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10. Fig. 63-3 Computerized accounts-receivable management system
Fig Computerized accounts-receivable management system. (Courtesy of Eaglesoft, a division of Patterson Companies, Inc.)
What is a computerized accounts-receivable management system? (Data is entered into the system to maintain account histories and records of the practice.)
Why should an additional set of backup files be created and maintained? (To avoid the loss of data contained in the files in the event of theft, fire, or other disaster.)
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11. Format for Accounts Receivable
Charge slips
Used to transmit financial information between the treatment area and the business office
Daily journal page
Record of all transactions for the patients seen each day, including the name of each patient, charges, payments, and adjustments to the account
Walkout statement
Similar to a receipt but shows the current account balance
How does the use of walkout statements improve cash flow? (It speeds payments and reduces the number of statements that must be prepared and mailed.)
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12. Fig. 63-4 A computerized statement
Fig A computerized statement. A printout of this provides a walk-out statement for the patient. (From Finkbeiner B: Practice management for the dental team, St Louis, 2006, Mosby.)
A duplicate copy of the charge slip can be used as a receipt, a walkout statement, or both.
In addition to maintaining patient accounts, all daily transactions posted to the bookkeeping system are used to generate the daily journal page.
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13. Patient Account Records
Responsible party
The person who agrees to be responsible for payment of the account is known as the guarantor:
Adult
Family
Child
The guarantor does not have to be in the same family as the patient, making divorce situations much easier.
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14. Types of Payment Payment Methods of payment
Payment in full, statements, divided payments, and dental insurance
Methods of payment
Cash
Check
Credit card
Insurance
What is the purpose of a pretreatment estimate form? (It is submitted to the insurance carrier before treatment and provides information on what the insurance company will cover and what charges are the responsibility of the guarantor.)
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15. Professional Courtesy and Discounts
The dentist extends professional courtesy in the form of a discount to professional colleagues or members of their or their staff’s families.
What discount is generally extended to patients paying in full at the beginning of a planned treatment? (5%.)
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16. Daily Proof of Posting End of each day
Listings on the daily journal page are compared with the appointment book to be certain that all patient visits have been entered.
The total for receipts must match the amount of money received.
What is the significance of the daily proof of posting? (If the numbers do not match, the mistake can be caught early rather than further down the road.)
The total receipts collected should equal the payments in the cash drawer minus the change fund.
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17. Bank Deposits Deposit slip
An itemized listing of the cash and checks taken to the bank to be credited to the practice’s account
The slip must bear the practice name, address, and account number.
The slip must be legible.
Cash is listed together.
Checks are listed together.
How often should deposits be made? (Once daily.)
What is one of the auditor’s critical tests that involves the deposit ticket? (The amount of the receipts should match the amount of the deposits.)
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18. Fig Deposit slip.
What information must be imprinted on the deposit slip? (Practice name, address, and account number.)
Checks are listed separately on the deposit ticket, usually by the last name of the person writing the check.
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19. Collections Accounts-receivable report
This report shows the total balance due on each account, plus an analysis on the age of the account.
Management of collection efforts
All collection efforts must be handled tactfully.
The accounts-receivable report shows how much of the balance is current; the noncurrent portion of the balance is categorized by age.
Why should the business assistant ensure tactful collection procedures? (To solicit cooperation and payment from patients.)
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20. Fair Debt Collection Practice Act
It is illegal to:
Telephone the debtor at inconvenient hours
Threaten violence or use obscene language
Use false pretenses to get information
Contact the debtor’s employer, except to verify employment or residence
Who regulates the Fair Debt Collection Practice Act? (The Federal Trade Commission.)
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21. Collection Follow‑Through
Timetable
30 days: A statement including financial arrangements is sent.
60 days: A second statement is sent, accompanied by kind printed collection message or a telephone call.
75 days: Another telephone call is made and an amiable collection letter is sent.
(Cont’d)
Some statistics show that in-house debt-collection efforts are only 70% effective on invoices more than 90 days past due.
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22. Collection Follow‑Through
(Cont’d)
90 days: A third statement is sent with a stronger collection letter noting that the account will be turned over to a collection agency for action.
105 days: A telephone call is made, stating, “Unless account is paid by a specified date, account will be turned over to a collection agency for action/”
120 days: The account is turned over to a collection agency.
Some companies offer outsourcing services on the collection of current accounts.
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23. Collection Telephone Calls
When placing a collection call:
Speak only to the person responsible for the account.
Never leave a message that could be misunderstood or reveal confidential information or might be considered damaging.
Speak only to the person responsible for the account.
Never leave a message that reveals confidential information.
Do not become argumentative or defensive.
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24. Accounts-Payable Management
Money that is owed by the practice
Expenses
Overhead that is the actual cost of doing business
What determines the cost of doing business in the dental office? (Expenses and disbursements.)
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25. Dental-Office Overhead
Fixed overhead
Business expenses that continue at all times; rent or mortgage, utilities, insurance, and salaries
Variable overhead
Expenses such as dental and business supplies, independent contractor fees, laboratory fees, and equipment-repair fees
Fee schedules must reflect both fixed and variable overhead expenses.
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26. Income Gross income Net income
Total of all professional income received
Net income
Gross income minus all practice-related expenses
Gross income minus practice-related expenses yields the dentist’s net income from the practice.
What is the business assistant’s role with regard to gross and net income? (Usually responsible for management of day-to-day expenses and disbursements and provides records for the accountant.)
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27. Disbursements Packing slip Invoice Statement
Itemized listing of the goods shipped that is enclosed with a delivery
Invoice
Bill to be paid
Statement
A summary of all charges, payments, credits, and debits for the month
What information is not found on a packing slip? (Pricing information.)
When a delivery is received, what should be done with the packing slip? (The contents should be checked against the packing list to identify any discrepancies.)
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28. Payment on Accounts Monthly disbursements Cash on Delivery (C.O.D.)
Payment is sent to suppliers/
Cash on Delivery (C.O.D.)
Payment is due at the time of delivery/
Petty cash
This is for small expenses/
What is the dentist’s responsibility after a check is written but before its being sent to the payee? (To review and approve the bill.)
Besides the dentist, who is authorized to sign checks? (Only an office manager who has been given limited power of attorney by the dentist on the basis of the appropriate papers on file at the bank.)
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29. Chapter 63
Lesson 63.2
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30. Learning Objectives Describe check writing.
Explain the purpose of business summaries.
Identify common payroll withholding taxes and discuss the financial responsibility of the employer.
(Cont’d)
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31. Learning Objectives Discuss the purpose of dental insurance.
(Cont’d)
Discuss the purpose of dental insurance.
Identify the parties involved with dental insurance.
Identify the types of prepaid dental insurance.
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32. Writing Checks Check terminology
Check: a draft, or an order, on a specific bank account for payment
Payee: the person named on the check as the intended recipient
Maker: the one from whose account the amount of the check will be withdrawn
Check register: a record of all checks issued and deposits made to the account
What are the advantages of computerized check writing? (Savings in time, reduced possibility of error, ease of storage and retrieval of information.)
What is the difference between a blanket endorsement and a restrictive endorsement? (Anyone can cash a check with a blanket endorsement; a check with a restrictive endorsement can only be deposited to the account of the payee.)
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33. Nonsufficient Funds
A check will be returned to the payee marked NSF if there is not enough money in an account to cover the check.
Who is charged a fee for a returned item? (The fee is charged to the account from which the check was written.)
Contacting the patient by telephone often resolves the issue, and the check may then be redeposited.
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34. Payroll
Complete and accurate employee records must be kept at all times.
A separate payroll sheet should be maintained for each employee.
This sheet must have the employee’s full name, Social Security number, address, and number of exemptions claimed.
Where can the business assistant find the federal requirements regarding payroll? (Circular E booklet issued by the IRS.)
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35. Payroll Deductions Income-tax withholding
State and federal
Federal Insurance Contributions Act, or FICA
Commonly known as Social Security
Health- or life-insurance coverage
Personal savings plan
Pretax retirement plan
Is the FICA withholding based on the number of exemptions that have been claimed on the W-4 form? (No, FICA is a fixed amount regardless of the number of exemptions.)
The employer is required to match the employee’s FICA contribution.
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36. Monthly Payroll Calculations
Gross Income
– Deductions
Net Pay
Gross income = pretax wages.
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37. Dental Insurance
A plan that assists a patient financially with the cost of dental care.
A person can obtain dental insurance in two ways:
From the patient’s employer or from the spouse’s employer as a benefit through a group plan.
As an individual plan.
The surgeon general estimates that more than 108 million children and adults do not have dental insurance.
Subscriber: the person who carries the dental insurance plan.
Group: the organization that has negotiated the dental insurance as part of its benefits package.
Carrier: the party that pays the claims and collects the premiums.
Provider: the dentist who renders treatment to the patient.
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38. Parties Involved in Dental Insurance
Patient/subscriber
The person receiving the treatment
Group
The union or employment organization that has negotiated dental insurance as part of its benefits package
Carrier
The insurance company that pays the claims and collects the premiums
Provider
The dentist who renders treatment to the patient
Dental benefits are one of the most sought-after employee benefits.
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39. Types of Prepaid Dental Programs
Usual, customary, and reasonable
Usual: the fee that the dentist charges for a given service
Customary: Fee within the range of the fees charged for the same service by dentists with similar training and experience within the same geographic area
Reasonable: Fee justified by special circumstances necessitating extensive or complex treatment
(Cont’d)
These are the three most commonly used methods of calculating fee-for-service benefits.
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40. Types of Prepaid Dental Programs
(Cont’d)
Schedule of benefits
This is a list of fixed specified amounts that the carrier will pay toward the cost of covered services.
The patient is responsible for the difference between what the carrier will pay and what the dentist actually charges.
The schedule of benefits is not related to the dentist’s actual fee schedule. Generally the patient is responsible for paying the difference between the amount paid by the carrier under the schedule of benefits and the amount charged for the service on the basis of the dentist’s actual fee schedule.
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41. Types of Prepaid Dental Programs
(Cont’d)
Fixed fee
This is an established fixed fee for any treatment received by the patient.
The dentist must accept the amount paid by the carrier as payment in full and may not bill the patient for the difference.
The costs of dental health care account for approximately 30% of out-of-pocket expenditures for children’s health care (Surgeon General Report).
According to the American Dental Hygienists’ Association, about 75% of Americans have some form of periodontal disease.
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42. Alternative Payment Plans
Capitation programs
Direct-reimbursement plans
Individual practice associations
Preferred-provider organizations
Managed care
In a capitation program, payment to the dentist is not based on services rendered; instead, the dentist receives a fixed rate per covered member.
Under a direct-reimbursement plan, there is no insurance carrier involved—it is a self-funded program.
An individual practice association is formed by a group of dentists for the purpose of collectively entering into a contract to provide dental services to an enrolled population.
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43. Chapter 63
Lesson 63.3
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44. Learning Objectives Define managed care.
Discuss and define basic dental terminology.
Explain dual coverage.
Identify dental procedures and coding.
(Cont’d)
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45. Learning Objectives Detail claims-form processing.
(Cont’d)
Detail claims-form processing.
Describe the procedure and purpose of claim-forms follow-up.
Identify insurance fraud.
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46. Determining Benefits Benefits booklet Limitations Dual coverage
Least expensive alternative treatment
Dual coverage
Primary and secondary coverage
Birthday rule
Coordination of benefits
Nonduplication of benefits
For employees who receive coverage as a benefit from their employer, the two major factors that determine the amount to be paid by the carrier and the patient are the method of payment and the limitations within the plan.
Under the nonduplication of benefits clause, if a patient is covered under two programs, the patient may be reimbursed on the basis of the higher of two allowed amounts but not for 100 percent of the fee.
Tooth decay is the most common chronic childhood disease. It is five times more common than asthma (Oral Health in America: A Report of the Surgeon General, May 2000).
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47. Fig. 63-11 American Dental Association standard claim form
Fig American Dental Association standard claim form. (Courtesy of the American Dental Association.)
Three primary areas of information are required on the claim form: patient and subscriber identification, dentist identification, and details about the services provided.
What percentage of children ages 2-17 have had a dental visit in the past year? (74.3%.)
What percentage of adults ages have had a dental visit in the past year? (62.8%.)
What percentage of adults ages 65 and older have had a dental visit in the past year? (55.4%.)
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48. Electronic Claim
Software data are downloaded to generate and submit claims from the practice's computer to the carrier’s computer.
Advantages
Speed of claim submission and payment
Reduction in paperwork
Fewer errors
Electronic claims lower the cost of processing claims.
Electronic claim submission speeds the process and the payment and reduces paperwork and errors.
HIPAA specifies transaction standards to promote standardization of electronic claims submissions.
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49. Claim-Form Processing
It may be necessary to file a predetermination for planned treatment.
All charges are entered into the patient's account history or ledger.
A claim for payment is submitted to the insurance company.
Financial arrangements made with the patient for payment of his or her portion of the fee.
Accurate information on a claim form helps speed the payment of claims.
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50. Tracking Claims in Process
Claims that have been submitted for predetermination but have not yet been returned.
Claims that have been submitted for payment but have not yet been paid.
Charges for claims that have been generated but have not yet been submitted.
Claims that have been returned for any reason and have not yet been resubmitted.
Insurance claims are a form of accounts receivable.
Developing a system to track claims in process will ensure that revenue is not lost.
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51. Handling Overpayments
Credit the check from the carrier to the patient’s account.
Write a check from the practice to the patient to refund the amount of the overpayment.
Make an entry on the account ledger.
Refunds should be issued to the patient for the amount of an overpayment.
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52. Insurance Fraud Billing for services not provided
Changing fees on a claim form
Disregarding the copayment or deductible
Insurance companies are expanding their fraud-investigation divisions to curb insurance fraud.
According to the Coalition Against Insurance Fraud, insurance companies lose approximately $26 billion a year as a result of fraud.
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