Dental Patient Payment Methods Trends

‍Status of the Dental Industry: Patient Payment Methods‍

When it comes to how patients pay their bills, we see current growth trends in digital wallet adoption for the change-resistant dental industry. With this changing tide comes a patient base that increasingly seeks and demands convenience and efficiency in their financial transactions. 

Dental providers are not being let off the hook and are largely playing catch up to modernize their payment processing systems. There is still an daunting number of dental offices that don’t offer modern payment options like ApplePay or online credit card payment. Millions of patients are still receiving paper statements and are paying via check or mailed in credit card information.

While it would be a useful follow up study to look at these practices and their payment method distribution, for this report, we looked at the practices that offer modern payment processing systems.
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Methods, Data Disclosures & Demographic Parameters

We based our research looking at instances of patient communication that resulted in a payment. Each instance is an automated sequence of communication touch points over a determined period, which we call “outreach flows”, with the goal of collecting patient accounts receivable (A/R). These outreach flows can last until payment is received or until it is determined that the patient’s balance requires a collections agency to process.

For each payment request, five methods of payment were offered: credit card, debit card, digital wallet (ApplePay/GooglePay), ACH bank transfer, and prepaid card.

Our conclusions are based on these 5 methods of payment, and our insights were drawn from an internal sample dataset representing 3 months of transactions from practices of all sizes (up to over 100 locations) from over 100,000 patients from 50 states and territories in the US. Patients' ages ranged from 18 to 65+, and practice specialties included general dentistry, orthodontics, periodontics, and endodontics.

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What is the #1 preferred payment method for dental practices?

We’ll cut right to the chase here. Looking across all transactions in this data sample over the course of 3 months, we see that credit cards and debit cards are the clear winners (with credit barely out performing debit by 0.2%). This isn’t surprising, as this is a common method of payment in the US, but what’s surprising is the percentage share of digital wallets, which are used in 1 out of every 5 transactions.

While these key figures are important for understanding the national payment method preferences, they are a generalization of underlying situational trends. From here, we dig a little deeper to understand how certain variables influence these figures.

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A/R CHARACTERISTICS 

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How does the age of the A/R affect the preferred method of payment?

Now that we’re aware of the overall distribution of payment method preferences, let’s determine how the preferences change based on factors such as patient demographics and A/R balance characteristics. This analysis can prove to be much more useful, as certain practice specialties often cater to non-general patient profiles. 

To start, we look at the age of the A/R–a factor that shouldn’t be ignored when determining how a patient will want to pay for treatment.

We broke out the age of the A/R into four discrete buckets: <30 days past due (DPD), 31-60 DPD, 61-90 DPD, and 90+ DPD, which is a conventional mapping of aging A/R. Here’s what we found:

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• What surprised us with this breakdown is how little the aging of the A/R affected the payment methods patients used. The average standard deviation for all methods was 1.46%, which indicates that it’s virtually the same across all 4 aging buckets.
  
  
• While we see an inversion of credit and debit in the <30 and the 90+ DPD buckets, the rest of the methods remain relatively flat across the board.

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How about balance size? Do patients with larger (smaller) balances pay differently?

Turns out, yes (and in a big way). Across the board we see a divergence in the preferred ranking of payment systems. While for some methods the variance is small (e.g. for prepaid cards), we can see drastic differences for other payment methods depending on balance size.

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Key Takeaways:

• As we would expect, ACH is less used for small balances under $100. However, a major outlier for this dataset is the ACH figure for the $900-1000 range. Being roughly 3x higher than the other balance ranges, this is an outlier that shouldn’t be overlooked for this dataset.
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  Our guess is that this might be due to a smaller sample size for the $900-1000 balance range during this period (n= 700) , where a small increase in transactions can translate into large percentage swings. Despite this, it’s expected that ACH is used for larger balances and that assumption holds true and follows this data.
  

• What is also surprising is that digital wallets are used drastically more for balances under $100 than for all other balance ranges, representing 22.26% of the payment methods used. This is more than double the usage than payments for balances >$1000.
  
  
• Another interesting takeaway here is the inverse relationship between debit and credit use, where credit is primarily used for larger balances (over $1000) and debit is used for smaller balances (under $100).
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PATIENT DEMOGRAPHICS

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In this study, we predicted that certain patient demographics, namely age and location, would have an impact on how patients pay their bills. We had determined in a previous study that similar factors have a major effect on dental payment timing (i.e. how long it takes and how much communication is required for payment).

With this in mind, we set out to see if there was a similar relationship with payment method preferences.
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Does where patients live impact the way they pay?

Though the differences between these four US regions aren’t drastic, it’s worth noting some of the differences we see here. Across the board the general distribution of payment methods stays consistent across US regions. Despite this lower variance, there are a handful of interesting patterns from this analysis.

Key takeaways:

• We see a switch of credit and debit card preferences between the West/Northeast regions (credit preference) and the Midwest and South regions (debit preference).
  
  
• Digital wallets are most popular with the South region (23.40% of payments).
  
  
• The Midwest is leading the way with prepaid cards for treatment payment, being used in 16.25% of all transactions there.

Is there a generation gap when it comes to payment methods?

For this analysis, we split our patient ages into 5 groups in 15-year increments and looked at their payment method distribution. The responsible party for payments in this study is the patient guarantor (which isn’t always the patient), so payments are almost always made by patients 18+. Here’s what we discovered:

Key takeaways:

• Unfortunately digital wallets haven’t fully permeated all age brackets. While patients 20-34 have readily used digital pay options like ApplePay and GooglePay (30.51% of payments), patients 65+ are only using this payment method 1/5th of the time (6.42%)
  
  
• 65+ is, however, leading the charge for ACH and credit card use, with the highest percentage of users (3.47% and 55.22%, respectively).

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PRACTICE SUCCESS IMPLICATIONS

More = Better

If there’s anything that you take away from this report, it’s that it doesn’t hurt to offer more payment options. Every patient has their preferences, and whichever method provides the least amount of friction will be the one that they will use.

Moreover, increasing the number of places where patients can pay is another crucial factor for increasing collection rates. While patients can always pay in-office or via mailing services, giving them the option to pay over the phone and through a payment portal on a practice website reduces payment friction even further.

Offer Payment Plans

While it’s always best practice to offer more payment methods, the option to finance larger balances makes large dental bills less onerous for patients. This will allow them to pay off bills in installments to reduce the likelihood of sending those patients to collections once the A/R hits a certain age.

You can offer easy-to-configure, custom payment plans through software solutions like Pearly that integrate directly into your PMS.

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In-Office Best Practices

While payment options help raise the bar for collecting on production, the impact will be limited without one crucial element: well-trained staff on RCM best practices.

Some key elements of a successful RCM process include:

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For a more detailed explanation of these approaches, read our article on 9 Tips to Maximize Dental Practice Collections.

All in all, the best way to achieve optimal collection results for your practice is to use common dental software like Pearly to check all of these boxes and to automate your billing outreach and save on staff time and costs.

Final Thoughts

For any dental practice or group looking to get a better grasp on their financial health and their collection process, the takeaways here are obvious.

Understanding which payment methods resonate with your active patient base can yield dividends when it comes to optimizing your billing process. Not only do you create a better patient experience by offering their preference, but you also increase the likelihood of payment and get paid faster by catering to their go-to payment behaviors.

We hope that this study (and future reports on the subject) provides some useful insight on the industry trends and the best practices for your patient payment offering. To stay up to date on the latest dental industry RCM trends, sign up for our Dentistry Huddle.

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