If you're losing out on potential patients who simply can't afford skyrocketing insurance deductibles, partnering with a third-party healthcare financing service offers a win-win solution: You collect up-front payments immediately without worrying about adding to your accounts receivables, and patients can pay their outstanding balances over several years at low or no interest. Let's review a few patient financing alternatives and explore how they can benefit your facility.

Cards and loans
Patients with large bills, good credit scores and the willingness to think outside the box to fund their surgeries are typically interested in working with a healthcare financing service. Here are a few of the available options.

Healthcare credit cards. Companies offering healthcare credit cards work off of the same basic setup. You enroll your facility in the program, and the financer supplies interested patients with proprietary credit cards that they can use to cover co-pays and deductibles. The companies take an 8% to 10% transaction fee off of each bill they finance, which is about 3 times higher than rates charged by regular credit cards. If a patient chooses to use a healthcare credit card to cover insurance fees, you're paid — minus the transaction fee, of course — within a couple days of the financing company receiving the bill. The financing company takes it from there; you're off the hook for tracking down payments and managing your accounts receivables.

From the patient's perspective, applying for cards online is quick and easy. Patients typically have to provide the estimated cost of the procedure, their net monthly income and some form of identification. The financing company can make a decision about approving patients within hours, but approval is by no means a sure thing since acceptable credit scores are set higher than they are for regular credit cards.

One of the financing companies we spoke to said patients make monthly credit card payments at 0% interest over as much as 2 years, but if the patient doesn't make a payment on time, the interest rate automatically shoots up to 26.99%, and it is charged retroactively, back to the first payment.

To be fair, the financing company gives ample warning on its website about this potential interest hike. It calls the 0% rate a "promotional" offer that's good only if regular payments are met, and presents the 26.99% rate as the real one. But despite all these warnings, many of the surgery center administrators we contacted seemed unfamiliar with the late-payment penalty. They said they had nothing more to do with the bill, and had no idea if any of their patients had been stung by the higher rate. Don't fall into that trap; make sure patients who are interested in charging their surgical fees on a healthcare credit card are fully aware of this on-time payment stipulation.

Danbury (Conn.) Surgical Center, which pushes for payment in advance, puts 10 to 15 patients per month on a third-party financing plan, according to business manager Kaye Wood. "We offer it to them right away, when we're doing their insurance verification," she says.

Loans. Patients also have the option of taking out a low or zero-interest loan from a financing company specializing in funding healthcare procedures in exchange for a higher facility fee from the provider, a patient-friendly option that is gaining in popularity. As with a healthcare credit card program, you're paid co-pays and fees up front, while the financing company handles the collecting of outstanding balances from patients.

Shared risk. Facilities that want to avoid putting patients in debt can share the financial risk by aligning in a "recourse" card arrangement, meaning they'll agree to be held liable if the patient fails to pay back the loan. Because facilities share in the risk of non-collection, these services tend to take on patients with riskier credit history. (Don't fret: One company offering the service says 85% to 95% of loans are paid off on time.)

What can you get out of the recourse arrangement? More cases. Sierra Surgery Hospital in Carson City, Nev., for example, signs up more than 30 to 40 patients a month for the recourse card by lowering the credit-rating bar, according to CFO Sherry Hayden. Her patients pay 4% of outstanding balances up front and pay 12.99% interest on the rest.

Collection experts
Healthcare credit cards can reduce patients' dependence on centers' payment plans, which are getting to be unworkable in this era of high deductibles, says April Sackos, regional vice president of operations for the Brentwood, Tenn.-based surgery center management firm Meridian Surgical Partners. For years, many facilities have let patients make monthly, no-interest payments over 3 months. But as bills creep into the thousands of dollars in some cases, and the economy erodes patients' abilities to pay, 3 months is often no longer enough.

Smithfield Medical Development, a facility management firm based in Rocklin, Calif., reports that one of its surgery centers in Michigan accepts monthly payments at 0% for as long as 2 years. Extending payment deadlines, however, is not a great solution because it does nothing for your bottom line and requires extra administrative work, all at no interest earned. Ms. Sackos explored charging interest for longer loans, but gave up when she learned it involved dealing with extensive federal regulations.

This is where patient payment plans can help. The banks and other financial institutions that run the services are already fluent in managing installment payments and know how to charge interest when necessary. Moreover, they claim better payment compliance than healthcare providers have achieved.

Once your facility has partnered with a service, patients can apply for the card at any time, even after the bill is sent to them, but usually the card is offered when they're notified of the estimated up-front fees a few days before surgery. "We ask, 'How do you want to pay for this?' and if they say, 'I don't know that I can afford it,' we then mention the financing option," says Cindy Blakeney, business office manager at Texas Midwest Surgery Center in Abilene. Patients at her center get approved for the healthcare credit card 2 to 3 times a month. "If they are rejected, we put them on our own payment plan," she says, "but we would much rather hand them over to the financing company."

A helping hand
The most important steps you can take to eliminate bad debt and collect the money you're owed is to make sure patients pay up-front fees before surgery and closely monitor the outstanding balances of patients who don't, says Ms. Sackos. Her centers have kept bad debt at an enviable 2% of patient billings by making sure patients understand their financial obligations and keeping close watch on accounts receivables. Partnering with a patient financing company has helped, too. "At a time when you are not seeing as much case volume," says Ms. Sackos, "you have to be a little more flexible with people who have a hard time paying."