Buy Now, Pay Later
The sputtering economy combined with a continued demand for elective procedures have led many practitioners to embrace new and adaptive patient financing options. Third-party financing companies allow practices to collect payment for services rendered in a timely fashion while patients are afforded the opportunity to spread out payments over time.
The process is similar to obtaining a department store credit card in that the patient can apply for financing and find out if she’s approved on the spot. Patients who are hesitant to put additional charges on their high-interest credit cards and those who might not have the funds available to make a lump sum payment often appreciate these alternative payment options. As a result of these mutually beneficial properties, patient financing has the potential to both increase a practice’s bottom line and improve patient satisfaction. The key is finding a financing company that fits the practice’s culture and ensuring that staff members are thoroughly trained.
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Understanding the Options
CareCredit (www.carecredit.com) and Chase HealthAdvance (www.chasehealthadvance.com) are the two largest players in the field of financing cosmetic procedures. They offer what is known as standard financing options that are structured to pay the healthcare provider up front for services rendered. In most cases, the provider is charged a fee when the finance company purchases the transaction.
There are also a handful of companies—including Healthcare Finance Direct (www.healthcarefinancedirect.com)—that will manage in-house patient financing programs. When Healthcare Finance Direct approves a transaction, the provider receives a down payment from the patient. The amount of the down payment—determined by Healthcare Finance Direct—is based on credit risk and the cost of the procedure. One hundred percent of the required down payment is retained by the provider. This differs from standard financing in that the provider is paid the remaining balance via monthly payments made through Healthcare Finance Direct, rather than receiving the entire balance up front. The provider is charged 7% on payments collected to cover administrative costs.
There are other distinctions between in-house and standard programs, says Nancy Coy, executive vice president and co-founder of Healthcare Finance Direct. When investigating a company that administers a standard program, be sure to examine the merchant fees and approval ratios before signing up. When working with an in-house financing company, look at delinquency ratios in addition to approval ratios and fees. And make sure to ask if the company is in compliance with state and federal regulations and if it will indemnify the provider.
In order to mitigate the provider’s risk, Healthcare Finance Direct looks at the cost associated with a procedure and obtains a down payment to cover the hard cost (i.e., the products needed to perform the procedure). “We manage and service the entire portfolio for the provider so they can do what they do best: treat patients,” says Coy.
Risk management programs and credit matrix put in place by patient financing companies help curb delinquencies. In the case of a delinquency—typically defined as 120 days past due—the patient’s information is sent to a collection agency. With a standard financing option, the third-party financing company handles collections as the practice has already been paid up front. In the case of an in-house financing program managed by a third-party, the practice has two options: Send the patient to the practice’s own collection agency or have the financing company handle the collection. In this case, Healthcare Finance Direct, for instance, receives a small fee while the practice receives the bulk of collected revenue.
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The Evolution of Patient Financing
CareCredit was introduced in 1987 to help patients pay for new dental implant technologies. Now it is commonly used for cosmetic treatments and surgeries. The company provides a healthcare credit card that can be used to pay for certain expenses not covered by insurance or to bridge a payment when desired care exceeds insurance coverage.
“There have been a lot of changes—most notable are the advances in technology and procedures that have created many new options for care—and a widening gap in insurance coverage,” says Mindy Karro, vice president of marketing for CareCredit. “Financing now takes a more prominent role, whether it is in the form of provider payment plans, bankcards or healthcare-specific financing options.”
CareCredit offers patients two basic payment plans: deferred interest and extended payment plans. With a deferred interest plan, the accountholder pays no interest if she makes all of the required minimum monthly payments and pays the balance in full within a predetermined promotional period—typically 6, 12 or 18 months. Extended payment plans are available for 24, 36, 48 or 60 month time spans. These plans include an interest rate on purchases that is competitive with most bankcards. “Many providers tell us that the program has had a positive impact on their practices and patient satisfaction because it gives their patients a simple way to consolidate and manage certain healthcare expenses whether they are surgical procedures or minimally invasive treatments,” says Karro.
Why Offer Financing?
Offering patient financing programs can alleviate procrastination while increasing patient satisfaction levels. Tara McLaughlin, surgical coordinator at JUVA Skin & Laser Center (www.juvaskin.com)—a New York City-based medspa and laser center—that has been offering patient financing programs since 2008, says that patients have expressed gratitude for having alternative payment options available. “Most patients really want to get procedures done, but with this economy they are afraid to spend the money,” she says. “Since we have an interest-free option, it’s a much easier decision for them.”
Coy points out that patient finance programs help practitioners capitalize on their marketing efforts. “Many providers market their services, bring patients into their practices and the patients walk out the door because they can’t afford the services offered,” she says. Thus, offering patient financing programs can be a huge competitive advantage.
JUVA offers financing to everyone who comes in for a consult, and it walks patients through the application process. “We have staff members available to help them apply online when they are in the office so they can take advantage of the interest-free financing while they’re here,” McLaughlin explains. “We also help them with credit line increases.”
Since financing is attractive to prospective patients, don’t hesitate to tout these services in your practice and in your marketing. Include information about patient financing on your website, in new patient welcome kits, and in direct mail pieces and enewsletters. Update the practice’s financial policy and patient payment agreement form to include financing as an option along with cash and credit cards. Patient financing information also can be displayed in practice areas used to discuss treatments and fees. Coy recommends offering finance options to all patients, “at least make them aware that options exist,” she says. “Providers that offer financing will close more business.”
Finding the Right Fit
Katie Ziemba, surgical patient coordinator for the office of Steven H. Dayan, MD in Chicago (www.drdayan.com), says it’s important for practitioners to work with a company that doesn’t charge providers or patients large fees or high interest rates. And she cautions, “Ask about hidden fees.”
McLaughlin concurs. “You really have to be selective with the fees associated with interest-free plans, the customer service level and also the approval process. The company we use (CareCredit) makes it easy for us and especially the customer.”
When looking for a patient financing company to partner with, it’s important to ask if the company provides onsite training for your staff at no additional charge; how long the training period will last; and what information is offered. Training components should include: how to present plan details, terms and disclosures; patient privacy; and fraud prevention. Key personnel should be able to inform patients about how the financing program works, including the credit terms to which they are agreeing, and their payment responsibilities.
The ideal financing company will offer a variety of loans, including low interest rate loans and discounts for prompt payment. Every program is structured differently, so it’s important to learn about each company’s features before committing. Ask for specifics on the cost to patients and the cost to your practice. Determine if the credit arrangement is revolving or term—once a revolving line of credit has been partially or completely repaid, the patient can use the available line for additional transactions. Term programs are for specific procedures.
Convenience and ease of use are part of any successful program. It’s important to find out how much time it takes for the patient to apply and how long it takes to be approved or denied. Addiitonally, patients should be offered a variety of payment options including pay-by-web, pay-by-phone, credit card, check and automatic payment plans.
Don’t hesitate to ask for references. Obtain a list of clients who provide similar services and inquire about their experience with the finance company. Be sure to ask about acceptance rates. The vendor should be able to qualify patients with large or small balances, as well as patients with less than perfect credit scores.
Chelan David is a Kansas City-based freelance writer. Contact him at chdavid10@hotmail.com.