Dental payment plans: the next big disruption

A note on what this is

This article by Dr Kia Pajouhesh first appeared in Australasian Dental Practice magazine. It is written for dental practice owners rather than patients — an analysis of how payment plans work as business arrangements, and where their costs actually fall.

It is reproduced here in summary because the underlying point matters to patients too: the plan a practice chooses determines what a patient pays, and what happens if they fall behind.

If you are a patient looking for the plans currently offered, those are on Payment Plans, and the practical questions to ask are in the last section of this page.

All figures and percentages in the analysis below are the author's, as at 2017, and are illustrative of how the models work rather than current market rates. Where an independent source is available, it is named.

The problem payment plans solve

People commonly put off, or forego, dental care for financial reasons.

That is not an impression. A submission to the Commonwealth Parliament's inquiry into the value and affordability of private health insurance cites an Australian Institute of Health and Welfare survey finding that nearly a third of people aged 5 or older — 32% — avoided or delayed visiting a dentist due to cost. The figure dates from 2013 and appears in a document arguing for a national dental fee schedule, so it should be read as an indication of scale rather than a current measurement. It is still roughly one patient in three.

The same submission sets out why the author of that inquiry material thought cost was structural rather than incidental: “the absence of a national dental fee schedule may have contributed to the comparatively high cost of dental care in Australia”, and it argues that a recommended, non-mandatory Dental Fee Schedule is needed to address both affordability and rural and regional inequity. It also observes that insurer-owned dental clinics offering no-gap fees, and preferred providers offering smaller gaps, cluster in major cities, so out-of-pocket costs for rural patients are likely to be higher — and it links high fees to the growth of dental tourism. That is an advocacy position rather than a settled finding, and the ADA's own view of a fee schedule differs; it is quoted here because it is the clearest published statement of the affordability problem payment plans are sold to solve.

That is a problem for practice profitability, and a bigger problem for patients — who invariably require more extensive, and more expensive, treatment later. It is the plainest financial argument there is for keeping up with routine check-ups.

Payment plans let patients get treatment when they need it, without large upfront costs, and let dentists start treatment straight away.

The consideration for a practice is not only the short-term dollar cost. The plan you offer affects the practitioner–patient goodwill built over years — because you are the effective advocate of the plan, and your patient's satisfaction with it reflects on you.

One piece of context on fees themselves

For a sense of how dental fees actually move, the Australian Dental Association's Dental Fees Survey 2022 — drawing on 3,535 general practitioners across 122 items, as at 1 July 2022 — found fees charged by general dentists had risen 3.7% over the two years since 1 July 2020, with the smallest increases in preventive services and periodontics (1.6%) and the largest in orthodontics (6.9%). The ADA attributed the modest average to competitive business conditions and the lasting effects of the pandemic.

It also records considerable variation in fees charged within and between states — which is the more useful finding for this discussion. Where fees vary that much for the same item number, a financing arrangement is settling how a patient meets a cost that was never standard in the first place.

Version 1: the high-interest plan

These are personal loans, and they have existed for over three decades.

The author's position is blunt: in his opinion they have benefited nobody except the financiers.

Interest rates run between 12% and 18% per annum, often defaulting into penalty compounding rates after the agreed term.

And the argument that undoes them:

If the patient cannot afford to pay the bill, how are they going to afford double-digit interest on top of their monthly repayments?

Discerning patients have largely scorned these plans, generally preferring to draw against a mortgage, find a more competitive personal loan, or save in advance.

Version 2: the “drip feed” no-interest plan

Prominent from around a decade before writing.

These charge the practitioner the lowest rate on the market — between 3% and 4% of the total treatment fee, less for practitioners with historically low bad debt, such as orthodontists.

The practitioner is paid in equal monthly instalments as the patient pays.

Specialist orthodontists embraced it first, since their protracted treatment times aligned naturally with the plan length, and outsourcing internal payment plans removed a burden from front desk staff.

Its appeal to the patient is that it carries no interest.

The cashflow trap

This is the analysis worth reading, and it is entirely arithmetic.

You wear the upfront cost of providing treatment — including laboratory fees — and receive small instalments over 12 to 24 months.

Take a general practice with a 30% profit margin. If one in ten treatment plans goes through a drip-feed system, then:

• Immediate cashflow drops by 10%
• Overheads remain intact
• Immediate profitability drops from 30% to 20% — a one-third cut in profit

Most dentists cannot afford a 33% pay cut, which is why few actively promote this type of plan, traditionally holding it as a last resort for patients who would otherwise walk away.

Money due up to two years from now must still be covered until it arrives. Equilibrium arrives eventually — in a couple of years, and only if the dollar value of total plans stays constant. Growth in plan numbers or average value means an ongoing cashflow hole.

Month-to-month fluctuation compounds it. High-revenue months such as November and December — with more patients going on plans — are followed by big bills in January and February, with less cash in the bank than anticipated.

At three in ten treatment plans, this obliterates available profit entirely, forcing a practice to trade on borrowed money, or cease trading until cashflow recovers.

On the bad-debt guarantees these financiers offer: read the exclusions in the fine print. They can be surprisingly broad.

Version 3: the upfront-payment no-interest plan

The money is deposited into the practitioner's account in full on commencement of treatment, less a percentage of the total.

The cashflow benefit is the attraction, and the author's prediction is that these will take the lion's share of the Australian payment plan market.

With no cashflow constraint, practices can afford to market these plans to all prospective patients. The practitioner fee — say up to 10% — may be offset by an overall fee increase, and does little to dent profitability. With more new patients and higher treatment plan conversion in response to “treatment now, pay later”, increased profitability is a realistic outcome.

The author notes the irony: most dentists will offer a 10% discount for upfront payment anyway, precisely because of the cashflow benefit.

The variations to check

Not all version 3 plans are the same.

1. The percentage charged to the dentist varies enormously by plan length and type.

2. Upfront payment may be in full on approval, or in tranches as work is completed. The former makes better cashflow sense; the latter makes payment guarantees a consideration.

3. Subscription and administration fees. Some plans charge a monthly subscription in the order of $200, regardless of usage — like a gym membership. On $10,000 of plans a month, $200 is 2% of additional effective interest on every case — and it still applies while you are on holiday over summer.

4. Patient-side fees. Establishment fees, monthly processing fees and account keeping fees vary greatly. Patients scrutinise these carefully when assessing their bottom-line cost and comparing offers. On a $2,000 case over 12 months, a $40 difference in establishment fee plus $3–$4 monthly account keeping equals 4% of additional effective interest, charged to the patient by stealth.

Combined, points 3 and 4 can add 6% in effective interest to the financier's benefit — which makes the headline percentage somewhat misleading.

The default interest question

When practitioners hear “high interest”, they think of the rate they are charged. With version 3 plans the more significant number is often the patient's default interest rate.

On a “no-interest” plan, someone still pays. Two models:

Non-credit sector plans. Their licences prohibit charging default interest. They tend to offer longer repayment periods, follow up arrears more diligently, and charge the practice a higher upfront rate — necessary because they carry the bad debt exposure themselves.

Credit sector plans. Their licences allow default interest, much like credit cards. They offer repayment periods as short as 3 to 6 months and require minimum monthly payments. They can offer very sharp rates to the practice, because much of their revenue comes from default interest charged to the patient — typically 15% to 20% where a residual balance remains at the end of the term. Sometimes the interest is backdated to the start of the loan. Sometimes it accrues even where the minimum monthly payment was made, because that payment fell short of the agreed full amount.

Why that matters clinically, not just commercially

We are not selling flat-screen televisions or lounge furniture.

The ongoing, intimate nature of the dentist–patient relationship means that high default penalties create “badwill” — with financial repercussions to the practice far greater than the interest saved.

And the sharper point:

Shorter repayment periods of 12 months or less — appealing to the business through lower upfront cost — are akin to irresponsible lending, since most patients taking up dental payment plans need the longer periods to afford the monthly repayments.

A patient who finishes their repayments is a happy one. They will not blame you for introducing them to compounding interest, and they will be better positioned to undertake further treatment, having had the benefit of a genuinely interest-free facility.

And there is a regulatory dimension the article does not reach

Worth adding for any practitioner reading this, because it has changed since 2017 and it is not a matter of commercial judgement.

A payment plan promoted to patients is advertising of a regulated health service, and section 133 of the National Law applies to it. AHPRA's advertising guidelines are explicit that a practitioner must not “offer a gift, discount or other inducement, unless the terms and conditions of the offer are also stated.” An interest-free plan advertised without its establishment fee, account-keeping fees, deposit requirement and default terms is the textbook case.

The exposure has also grown. AHPRA records that in 2022 the National Law was amended to increase the maximum penalty for advertising offences: for an individual, from $5,000 to $60,000 per offence, and for a body corporate from $10,000 to $120,000 per offence — and that as of July 2024 those increased penalties apply in all jurisdictions, including Western Australia. A breach of an advertising requirement is a criminal offence for which a court may impose a monetary penalty, and AHPRA's powers include prosecution.

So the case for stating the terms fully is no longer only about goodwill. The commercial argument and the legal obligation now point the same way, which is a convenient position to be in.

In conclusion

Understanding what patients are looking for helps in choosing a plan. A plan that does not work for your patients sends them to another practice — or causes them to avoid treatment entirely.

Practitioners should be aware of what constitutes responsible lending, and not set patients up on a plan they cannot afford, with serious financial consequences even where minimum payments have been met.

No two dental payment plans are the same — they differ in establishment and subscription fees, timeframe, default interest rates, and when the dentist is paid.

It is incumbent on practitioners to research the available plans carefully, so that what is offered reflects both the practice's ethics and standards, and — equally importantly — the patient's needs.

What this means if you are the patient

The questions this analysis suggests asking about any “interest-free” dental payment plan:

• What is the establishment fee, and what are the monthly account keeping fees?
• Is there default interest, at what rate, and is it backdated?
• Does interest accrue if I make the minimum payment rather than the full one?
• How long is the term, and can I comfortably meet the monthly amount over it?

Two more worth adding, on the strength of the analysis above: ask for the total you will have paid by the end, not the monthly figure; and ask what happens if treatment takes longer than planned and the instalments finish before the treatment does.

And one you are entitled to expect without asking. Under section 133 of the National Law, a practitioner advertising a discount, gift or other inducement must state the terms and conditions of the offer. If a plan is being promoted to you as interest free and the fees are not set out, that is a gap in the advertising, not a detail you have missed. Ask for it in writing.

What a written treatment plan and quote should set out before any of this is covered in understanding your treatment, and the practice's published fees are in the price guide.

A payment plan is not the only way to manage cost. Staging treatment over time, doing what is urgent first and reviewing the rest, choosing the more conservative clinical option, and — where the plan is large — seeking a second opinion are all legitimate, and they cost nothing in finance fees. Say the constraint out loud: a practitioner who knows about it can plan around it, and one who is never told cannot.

Where a treatment is being weighed on cost, these set out what actually drives the figures: What is the cost of braces?, Invisalign cost in Melbourne, How much does a dental crown cost in Melbourne?, How much does wisdom teeth removal cost in Melbourne?, What dental implants cost, the real cost of replacing two front teeth and Sleep dentistry costs. Where the treatment is elective, whether adult Invisalign is worth it is the question to settle before the finance one.

For eligible families, there is a scheme before there is a loan. The Child Dental Benefits Schedule covers basic dental services for eligible children, and Services Australia states the current cap as up to $1,158 for each eligible child over two consecutive calendar years, indexed annually on 1 January. A child must be eligible for at least one day in the calendar year and the family receiving a qualifying payment. Two features are worth knowing because they change how it is used: the full amount can be used in the first calendar year, which leaves nothing for the second; and an unused balance carries into the second year only if the child remains eligible that year. Note that older figures are still in circulation — Services Australia's own worked example refers to a $1,095 limit for an earlier period, so check which period a quoted cap applies to. See the Child Dental Benefits Schedule and how the scheme operates before you assume you are ineligible.

And if the reason you are weighing finance is that the alternative looks cheaper overseas, read Overseas dental work could cost you more in the long term and the risks of dental tourism first. It is worth knowing that the parliamentary submission quoted at the top of this page makes the same connection from the other direction: it treats the growth of dental tourism as a consequence of domestic cost, which is a reason to take the cost problem seriously rather than a recommendation to travel.

Common questions

Why would a practice not offer the cheapest plan available to it?

Because the rate a practice is charged and the rate a patient ends up paying move in opposite directions, and that is the central finding of the analysis above.

The plans that charge a practice least are generally credit-sector plans whose licences permit default interest — and much of their revenue comes from that interest, typically 15% to 20% where a balance remains at the end of the term, sometimes backdated to the start. The plans that charge a practice most are generally non-credit-sector plans that are prohibited from charging default interest and therefore carry the bad-debt risk themselves.

So a practice choosing the cheapest option for itself is, in effect, choosing the option that recovers the difference from patients who fall behind. That is the trade the article is arguing should be made deliberately rather than by default.

What is the single most useful question to ask about a plan?

“What will I have paid in total by the end?” — in dollars, not as a monthly figure or a percentage.

The reason is in the arithmetic above. An establishment fee plus a few dollars a month in account keeping can amount to around 4% of additional effective interest on a $2,000 case over twelve months without any interest rate being quoted anywhere. A plan described as interest free can carry real cost in fees, and the total is the only number that captures it.

The second most useful: “is there default interest, at what rate, and is it backdated?”

Is a shorter term better or worse for me?

Generally worse, and the article is unusually direct about it. Shorter terms appeal to a practice because they cost it less upfront, but they raise the monthly amount — and the author's view is that terms of 12 months or less are “akin to irresponsible lending, since most patients taking up dental payment plans need the longer periods to afford the monthly repayments.”

The risk is specific rather than general: on some credit-sector plans, interest can accrue even where the minimum monthly payment was made, because the minimum fell short of what was needed to clear the balance in time. A short term makes that outcome more likely.

Choose the term you can meet comfortably, not the shortest one offered.

Am I entitled to see the fees before I commit?

Yes, and it is a legal requirement on the practice rather than a courtesy. Section 133 of the National Law governs advertising of a regulated health service, and AHPRA's guidelines state that a practitioner must not “offer a gift, discount or other inducement, unless the terms and conditions of the offer are also stated.”

The penalties were raised in 2022 and, as of July 2024, apply in all jurisdictions: up to $60,000 per offence for an individual and $120,000 for a body corporate. A breach is a criminal offence a court may penalise.

So if a plan is being promoted as interest free without its establishment fee, account fees, deposit and default terms stated, ask for them in writing. You are asking for something that should already have been provided.

Is there any help before I borrow anything?

For families, yes. The Child Dental Benefits Schedule covers basic dental services for eligible children, and Services Australia puts the cap at up to $1,158 per eligible child over two consecutive calendar years, indexed on 1 January each year.

Two practical features: the whole amount can be spent in the first year, leaving nothing for the second; and an unused balance only carries forward if the child is still eligible in that second year. Older caps are still quoted in places — Services Australia's own example uses $1,095 for an earlier period — so confirm which period applies.

Beyond that, the alternatives that cost nothing in finance fees are staging treatment, doing the urgent work first and reviewing the rest, choosing the more conservative clinical option, and spanning a plan across two health-fund benefit years to use two annual limits.

Is this article the practice's current offer?

No. It is commentary written for the dental profession in 2017, and every rate and percentage in it is the author's illustration of how the three models work. It is not financial advice, not a description of any current product, and not an offer of credit.

The plans actually available here are set out at Payment Plans, with their current terms. Terms and fees change; check them directly before entering any arrangement.

Related reading

Other pieces written for the profession rather than the patient: Is a bigger dental practice better? Part 1 · Part 2 · What I love about running a large dental practice · Keeping 60 clinicians happy under one roof · Everything under one roof · What makes Smile Solutions an innovative business? · The Great Resignation in the private health sector · How important is communication in dentistry? · What makes a truly great dentist?

Practical details

Written by Dr Kia Pajouhesh; first published in Australasian Dental Practice magazine and summarised here.

Smile Solutions, Level 1, 220 Collins Street, Manchester Unity Building, Melbourne VIC 3000. Phone 13 13 96, or theteam@smilesolutions.com.au. Monday–Friday 8.00am–6.00pm, Saturday 8.30am–1.30pm, Sunday by appointment. Full details on Contact Us.

Published 24 August 2017. This is commentary on the payment plan market as at that date, written for the dental profession — not financial advice, and not a description of the plans currently offered by any practice. Terms and fees change; check the current terms of any plan before entering it. Independently sourced material has been added since: the AIHW cost-barrier figure as cited in a submission to the Commonwealth Parliament, the Australian Dental Association Dental Fees Survey 2022, AHPRA's advertising guidelines and the section 133 penalties as amended in 2022, and the Services Australia Child Dental Benefits Schedule cap.

General information only. It is not financial, credit, legal or clinical advice, and it does not replace advice from a licensed credit provider, a financial adviser or your treating practitioner. All interest rates, fees and percentages quoted from the original article are illustrative examples as at 2017 and are not current market figures or an offer of credit. Any credit arrangement should be assessed against its own written terms — in particular establishment fees, ongoing account fees, the repayment term, and whether default interest applies and is backdated. Figures attributed to named bodies carry the dates and denominators given alongside them; the parliamentary submission quoted is an advocacy document and its view on a national fee schedule is not shared by all parties. The plans currently available at this practice are set out at Payment Plans.

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