Cash and Senior Discounts: Should you?
This depends on where you are with your practice. A small growing practice might use these techniques to attract patients. We purchased an existing practice six years ago and have a full plate of patients.
So, my wife comes to me and says,
I'm thinking of getting rid of the cash discount (5%) and the senior discount (also 5%), what do you think?
My first thought was,
Well, the overhead for a credit card transaction is roughly (3%), so you are in essence giving the patient 2% to have your money sooner than the credit card merchant can process the transaction and have it in your bank (roughly 10 to 14 days). Is that worth it?
But then it got worse. It turns out that this came up because one of the front desk people noticed that we have a few patients that come in, get work done, pay in cash for the 5% discount and then have us file their insurance and write them a refund check later.
This means that we give the patient 2% up front and then:
- we file the insurance
- we process the payment from the insurance comany when it comes in.
- Then a list of refunds is given to our bookkeeper
- who enters the information into our ledger
- prints out a check
- which gets signed by me or my wife
At this point in our practice having the cash in hand sooner really isn't that big of a deal. Cash flow (the king of business) is good. So, it isn't worth the overhead of having a "special procedure" for either cash or seniors.
But, examining the demographics of our practice we found that we have a lot of seniors and most of them have been in the practice since before we bought it.
Our decision was to terminate the cash discount immediately and re-evaluate our senior discount policy next year.
As with any business decision the keys are:
- Define the issue
- Understand the financial implications
- Examine how will it affect patients
- Is this going to affect all of them, some of them, or none of them
- Is this creating goodwill or illwill?