The previous three articles in this “Cost Savings” series have focused on ways to save money and maximize return in a dermatology practice. For the final installment in the series, we will now take a close look at one of the most integral elements to the overall health of any practice: Banking. When starting a practice, one of the first calls many dermatologists make is to their bank, and rightfully so, since a good relationship with a bank can be the most important lifeline a starting or established dermatologist needs. The pitfalls of choosing the wrong banking partner are significant, including the theoretical possibility of loss of patient receipts, records, or even the dermatologist’s own money.
There are four main ways that the average dermatologist interacts with a bank:
- Loans for the practice and/or building (if property is involved)
- Checking or Savings accounts
- Lock box administration
- Credit cards.
The average dermatology practice may not have need for all of these services at any one time, but during the life of a relationship, all may be used, so it is helpful to check with any potential bank initially to make sure all of these services are available. Additionally, it may be wise to consider these for a practice if you are an administrator or involved in the financial aspects of the practice. Generally, larger practices have considered these issues, but it is important to understand the broad aspects of banking relationships, even if you have a less prominent role in the practice that doesn’t include interactions with the banking partner.
Choosing a bank
The dermatologist may have confronted the question of a banking partner as a student, but the options and opportunities were much fewer than those encountered when starting or administering a practice. While the initial impulse may be to go with a larger institution, we have found that cultivating a relationship with a small- to medium-sized bank is not only possible, but also helpful in many ways. While larger institutions clearly have advantages, the lack of familiarity and a diffused culture lead to less personalized attention.
The size and level of interaction that a bank may exhibit can vary among institutions, so it is best to consider a wide range of banks and shop around before starting practice or, if the situation dictates, after being in practice for a while. Large savings may be realized by the simple act of phoning a bank and asking a few questions, even if your original choice seems adequate. This takes time, but it is ultimately reflected on the bottom line, and savings continues to accrue over time. While loyalty is always admirable, when it comes to banks, there rarely is reciprocity, so it pays to shop around and continue shopping. And, when interviewing potential banks, we recommend that you do this in person and involve yourself, rather than simply having the office manager call for information. Your interaction will often result in better terms.
Checking out the banks
The four main areas are best compared bank by bank, as noted below:
Loans. While many practices rent (and for good reason), there are areas of the country where rentals in large medical buildings may not be available or may not make financial sense. In these cases, it may make sense to consider purchasing a building or “condo space” in a building. Generally, this will necessitate a loan, which is where a good relationship with a bank is critical.
Additionally, capital loans, leases for equipment or cars, or even unexpected tax bills can be paid by a loan or a “credit-line” from your bank. Having this sort of option available is a huge help in unexpected situations and is best worked out at the start of the banking relationship, rather than at the moment disaster strikes. Generally, the loans are for large amounts, ranging upwards of $100,000 with the anticipation of a payoff within a year or less, with interest rates that are quite reasonable when compared to home or commercial property rates. While we have occasionally dipped into credit-lines, we prefer the quicker payoff option in order to avoid long-term issues.
One of the ancillary benefits of comparing loan rates with appropriate banks is the ability to easily determine how different banks value your business and how they are willing to work with you on your concerns. In one recent situation, the rate for a loan varied by one percent between two banks. The new bank that was attempting to gain the practice’s business was quite willing to quote the lower rate with the hope that we might transfer our checking accounts to them. The practice saved a large amount in the long run by turning over well-deserved business to the new bank.
Further, once you have a loan on any property your practice may own, it is incumbent upon you to make sure the rates remain competitive. This can be accomplished by checking rates with competitors every year or so. In the interest environment of any particular moment, rates from even a few years earlier may be much higher than available presently, so if your loans haven’t been renegotiated recently, it is fiscally responsible to check out new banks at any time. Simply questioning your present loan officer isn’t good enough, as they have little or no incentive to reduce your rates and will often offer a poor deal that involves significant costs to lower the rate. Even so, some time spent with your present loan officer may lead to surprising results, as well.
Checking and Savings Accounts. Most medical practices have large amounts of cash moving in and out, when compared to the average business. These cash amounts can lead to an advantage for banks considering handling a dermatologist’s account as compared to many other businesses. For this reason, many banks offer specialized, ‘private banking’ services to doctors or other premium accounts, which may include events, incentives, or preferred rates. Additionally, a commercial account may include guarantees for account balances that are above and beyond what the FDIC (Federal Deposit Insurance Corporation) will cover.
Most importantly, the costs of a checking or savings account are typically waived or significantly reduced for excellent clients such as dermatologists. If you are paying service fees, it is likely you can save on these by asking for a review of the charges or comparison-shopping with a new bank. Additionally, there are many other fees, such as ATM fees, stop payment or insufficient funds check fees, electronic check fees, and overdraft fees that are optional for banks and can be reversed or waived for good clients. It always pays to ask. These costs are substantial for many practices so they represent a very important opportunity to consider.
Whenever we have a patient check that is returned, we simply call our bank and ask that the fee be waived. After a few requests, you may find that the bank waives the fee automatically. We have used the same approach with fees for deposit slips and checks, which were common charges to us.
It is important to point out that many of the fees we discovered were being assessed were only found because we asked another bank for a quote on their services. Their officer looked at our statements and made observations of areas that seemed to be costly or unnecessary services. This should have been an automatic benefit offered by our bank, but that is usually not the case.
For practices that still receive a large number of checks, Remote Deposit Capture is a service that many banks offer for scanning checks directly to the bank and thereby withdrawing funds immediately from an account. This service costs money, and we did not find it to be worthwhile for our practice given the small amount of checks we receive on a daily basis, but it might make sense for some practices.
Lock Box Administration. Our practice uses a system called a ‘lock box’ in which all checks for outstanding bills are sent to the bank, which processes them and deposits Them automatically into our checking account. This applies to the checks from patients as well as insurance companies. The beauty of this system is that it eliminates one way in which embezzlement may occur, since no significant money is coming into the practice. The bank is able to send the remittance notices and detailed EOBs with a daily tally. It is sent electronically, which means it is never lost in the mail (as had happened once or twice in our experience when it was sent by hard copy).
The lock box service is usually provided by larger banks, but we have many mid-sized banks in our area that offer it, as well. It is yet one other service to consider when choosing a bank and to compare cost wise as it can vary greatly.
Credit and Debit Cards. While we have no debit cards for our practice, we do have several credit cards that we use for incidentals, which often carry a large balance. We use our ‘airline’ or ‘cash back’ cards a majority of the time, but it is helpful to have a bank card on occasion. Our bank offers one for no fees, and we use it as a ‘rainy day’ credit card if one of our ‘Frequent Flier’ credit cards is over the limit.
Since our practice accepts credit cards, we must have a ‘processor’ for these. Our bank has competed against other processors for our business and often has come close to the level we currently have established. This is another area that generally requires a yearly analysis and multiple bids in order to determine which deal is best. Anecdotally, it is one of the most confusing areas we deal with financially, and invariably requires quite a bit of patience and due-diligence to compare apples to apples and determine the best plan.
Ensure the Continued Health of Your Practice
As you can see, there are many ways to save money when choosing or staying with a bank. This article is intended to spur the process of evaluation and reevaluation for banking and financial services. The financial health of your practice may be significantly improved by doing so!
Joel Schlessinger, MD is Founder and Course Director of Cosmetic Surgery Forum. He practices in Omaha, NE. The 2013 Cosmetic Surgery Forum will be held from December 5-7 at the ARIA Resort & Casino in Las Vegas, NV. For more information and to register, visit www.CosmeticSurgeryForum. com. Feel free to address questions to him at JS@CosmeticSurgeryForum.com.
Nancy Schlessinger, MS is Vice President of Lovelyskin.com.