Adding Patient Financing to Your Financial Toolkit
By Rob Morris
In 2013, patient out-of-pocket health care expenditures are projected to increase 3.4% over the previous year. Experts attribute the gain to increased consumption of medical care driven by faster growth in disposable personal income.1 While this projected growth could be another indication of our slow, but steady, economic recovery, patients may still hesitate to move forward with a recommended chiropractic treatment plan because of concerns about cost. That's why now more than ever practices should consider adding patient financing to ensure that they have a comprehensive range of payment options in place to help patients get the chiropractic care they need — when they need it.
Some practices try to help by billing patients in-house, but when you take on the responsibility of extending credit to patients, you also incur the cost and risk associated with it as well — including late payments, bad debt and uncollected accounts. What many practices are discovering is that choosing a third-party patient financing program is a better solution that allows them to help more patients get the treatment they need while maintaining a financially healthy practice.
The "Real Cost" of In-House Financing
Patients truly appreciate and have even come to expect some level of assistance from the practice when it comes to managing the cost of care. In a study conducted by Inquire Market Research, 32% of patients stated that without an obvious payment solution, they would ask their health care provider to function in the role of a financing company by billing them.2
While nearly every health care provider has some degree of accounts receivable — when you take on the responsibility of billing patients, it can have a significant impact on your bottom line. In fact, when you consider the investment in time and resources to process payments, track down late payments and make collection calls — the cost that a practice incurs to provide this value-added service in-house can be considerable.
In addition, research shows that once an account goes uncollected beyond 90 days, the chances of it being paid are significantly lowered. While every attempt should be made to receive payment, even if that means handing the patient over to a collection agency, when efforts fail, uncollected fees become a bad debt write-off that can further impact your practice financially.
A Better Solution to Manage Out-of-Pocket Costs
Instead of dealing with the risks and expense of billing patients, a better way to help manage costs is to add a third-party or outside patient financing program to your practice's financial policy. Third-party patient financing is actually quite common in many health care fields including dentistry, ophthalmology, cosmetic surgery, audiology and even veterinary medicine. Using a third-party financing program is usually pretty simple. For a small processing fee to practices, patients apply for financing and once approved, can immediately access their credit to pay for treatment over time with convenient monthly payments. Because it's easier to fit the cost of care into their monthly budget, more patients can move forward with recommended treatment.
The benefits of offering a third-party patient financing program include increased treatment acceptance and retention, as well as reduced accounts receivable and increased cash flow. When you bill patients your practice makes no interest on the money sitting on your books while lending institutions charge consumers interest for the opportunity to make payments over time. There are other downsides too: While waiting for fees to be collected your overhead costs will continue mounting, including payroll, rent, supplies and equipment. With more money tied up in accounts receivable than is coming into the practice, a cash crunch is highly likely.
On the other hand, if your practice steps out of the financial relationship and uses finance professionals your staff will have more time to focus on practice building activities like delivering superior customer service.
You want to select a patient financing program that provides flexibility and meets the needs of today's patient. Programs that provide special financing offers such as 12 months deferred interest — where the patient pays no interest charges as long as the balance is paid off by the end of the promotional period — are very attractive and popular with patients. Programs that feature a revolving line of credit can help you to increase patient retention by providing an ongoing financial resource that patients can use whenever they need additional care*.
When selecting a plan consider the initial costs to patients. Plans that feature no up front costs, annual fees or prepayment penalties will always be more attractive than those that don't. Programs that offer a simple and quick application process, immediate credit decisions and multiple processing options (online or by phone) make integrating third-party financing into your daily routine even easier.
Another thing to consider when selecting a program is when your practice will be paid. One of the biggest benefits of offering financing through a third-party is that you get paid for your services up front. But not all programs are the same and some can take as long as 14 days to pay the practice, while others take as little as two days, so be sure you understand the program's policy. Also consider when the payment will be delivered. Some programs offer direct deposit into an authorized account while others simply mail a check to the practice, increasing the amount of time before payment is credited to your account. Ideally, the less time you have to deal with documentation and paperwork to get compensated, the better.
Getting the Most From Your Program
After adding a patient financing program to your financial policy, it is critical to review it with your team so that everyone understands it and its options. Try a little role playing with team members as practice. Here is an example of how you can easily incorporate payment options into a discussion about your financial policy:
"Mr. Jones, the cost for the treatment we've discussed is going to be $2,350. As you'll notice here on our financial policy, we require payment prior to treatment. We anticipate your insurance benefits will cover $1,500, leaving you with an out-of-pocket expense of $850. We have several convenient payment options to help you get the care you need ... let me go over them with you. Of course, we accept cash and checks. We also accept Visa, MasterCard and American Express. We also offer special financing, which many of our patients really appreciate. Let's take a look and see what your monthly payments would be with one of our special financing options."
Another advantage to third-party financing that is often overlooked is the fact that it can also be used as a marketing tool for your practice. Most patient financing companies provide free marketing materials including patient brochures and counter displays. Be sure to take advantage of these materials and display in them in your waiting area and consultation rooms. You can also promote the benefit of financing in your new patient materials and marketing and advertising activities.
If patients know that you provide special financing options, they are probably more likely to seek care at your practice than at another practice that does not.
Rob Morris has more than 30 years of experience in health care, including executive-level marketing and sales positions with Bristol-Myers, CooperVision Surgical and C.R. Bard. He is currently vice president of marketing and new business development at CareCredit (www.carecredit.com).