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By Dan Schulte, J.D.
MDA Legal Counsel
From the October 2009 issue of the Journal

Question: The amount of no-shows in my practice has become a problem.  One of my colleagues has the following policy: Each patient making an appointment is charged a retainer fee that must be paid at the time the appointment is made. The amount of the retainer fee is based on the treatment to be rendered at the appointment. The retainer fee is applied to the fee for the service if the patient shows up as scheduled. If the patient fails to cancel the appointment, or cancels the appointment less than 24 hours prior to the appointment time, the patient forfeits the retainer. Is this policy legal?

Answer: There is no statute or case law which specifically authorizes or precludes such a policy. Therefore, a dentist should be able to legally institute such a policy, subject to the following considerations.

First, you must make sure you have no contract with an insurance company or other third party that would either prohibit you from requiring the payment of a retainer or result in other consequences (e.g., termination of the contract or reductions in allowed fees, etc). Second, you must clearly explain this policy to each patient to whom the policy would apply. Third, the amount of the cancellation charge should be reasonable and commensurate with the actual loss to the dental office. Finally, the policy should not be applied on a basis that discriminates against any class of persons, except established no-shows. If it is not applied across the board, it should be limited to patients who have been previous no-shows.

It would be wise to document the patient’s understanding and agreement with your policy in writing via a receipt/cancellation agreement at the time the retainer fee is paid. The document should acknowledge receipt of the retainer and clearly spell out specifically that the retainer, will be forfeited if the patient does not appear for the appointment or does not cancel the appointment at least 24 hours in advance. The patient should be required to sign the document.

Question: Can I institute a policy requiring patients to pay interest on delinquent accounts? If so, what interest can I charge and how can this be implemented?

Answer: A patient may be charged interest to compensate for delayed payment of a fee for services rendered, so long as the interest charge is agreed to by the patient. In order to establish such an agreement, the dental office must provide advance written notification to patients that sets forth the terms. The terms should include the amount of interest and when it commences. Although it is not legally essential that the patient sign a document acknowledging this agreement, it is preferable in order to avoid a dispute. The maximum rate of interest that may be charged may not exceed the statutory legal rate in Michigan of 5 percent, unless the parties agree in writing to an interest rate in excess of 5 percent, in which event it may not exceed 7 percent. Download a sample written acknowledgment.

In addition to interest, a dentist or a dental professional corporation may offer patients a time-price differential arrangement for professional services to be rendered. That is, a dentist may charge one price to patients who pay immediately or within a specified short period of time, and a higher price to patients who wish to pay over a specified longer period of time, as long as the agreement is in writing.

Since this is not technically interest under Michigan law, there are no limitations under the usury statutes. On the other hand, if such a time-price differential practice is used by dentists, it should be reasonable. The fact that there are no laws precluding such practice does not mean an unreasonable arrangement would not be found to be illegal or, at least, unethical, from a professional standpoint.

Posted in: Billing Issues

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