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Legal Services

by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the March 1997 issue of the Journal

Question: I have chronic no-shows in my practice. I recently heard that it might be possible to institute a retainer fee policy that would work like as follows: Each patient making an appointment would be charged a retainer fee. The amount of the fee would be based upon the treatment to be rendered at the appointment. If the patient fails to cancel the appointment, or cancels the appointment less than 24 hours prior to the appointment time, the patient would forfeit the retainer.

I would like to know whether I can legally institute a policy of this nature in my practice, and the minimum effort I need to make in order to notify my patients of this new policy.

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 some further considerations.

There must be no contract with an insurance company or other third party that would preclude such a policy. There must be a clear understanding with the patient that such a policy would be applied. The amount of the cancellation charge should be reasonable and commensurate with the actual loss to the dental office. 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.

In order to establish the cancellation agreement with the patient, it is suggested that a receipt/cancellation agreement be submitted to the patient at the time the retainer fee is paid. The document should acknowledge receipt of the sum and clearly spell out specifically that the fee, or a specified portion of it, 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 dentist or a dental professional corporation may charge interest to compensate for delayed payment of a statement for professional 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.

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 does not technically constitute 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.

The issue of Timely Payment for Dental Services by Insurers was addressed in the "Dentistry and the Law" column published in the February 1996 MDA Journal.

Posted in: Billing Issues

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