5 Keys to the Perfect Patient Financing Plan


In an increasingly crowded market of healthcare lending companies, here's how to pick the one that's best for you and your patients.

It sounds almost too good to be true: a credit card without interest for medical expenses. But if you're losing out on potential patients who can't afford skyrocketing insurance deductibles, it's no longer a question of should you offer some type of patient-specific financing plan. If the only thing you say to patients about their payment options is, "You owe $2,000 for your deductible and co-pay. We accept cash, check or credit card," there's a very real chance your cancel rates are going to spike as patients seek out care from a facility that offers patient-financing options via deferred-interest healthcare credit cards — usually a same-day approved card that lets patients pay off a balance without interest as long as they do so within a set number of months — and loans, a more-traditional fixed-interest payment spread out over several years.

How healthcare credit generally works: 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 (or private-pay surgery). 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.

When a patient uses a healthcare credit card to cover insurance fees, you're paid up-front — minus the transaction fee — within a couple days of the financing company receiving the bill. You don't have to worry about collecting from patients before their surgery — and trying to collect from them after their surgery. That's right: no billing statements or collection calls.

The financing company takes it from there. Things are fine so long as patients pay their outstanding balances on time at low or no interest over months or years. But if the patient misses a payment, the interest rate can shoot up to a ridiculous number, and it is charged retroactively, back to the first payment.

Here are 5 key considerations when evaluating patient-financing options for your facility:

BY THE BOOK The patient financing company you select should provide your staff with a word-for-word script on the best ways to introduce a financing option to patients.

1. Approval rate. You want to approve as many patients as possible. But approval varies widely depending on patient population, so you need to do your homework here. For cataract surgery patients, a group that tends to be older and have more established credit, the approval rate ranges from 60%-80%, says Katy Thomas, the vice president of marketing for Alphaeon Credit, a nationwide patient financing provider. But for plastic surgery patients, who tend to be younger and have thinner credit files, you may be looking at approval rates as low at 30%-40%, says Ms. Thomas.

Approval is also key from the facility perspective — especially if a high percentage of your patients use a financing option. Just ask Barbara Getlan, RN, BSN, the nurse administrator at Dulaney Eye Institute in Towson, Md. "We do around 6,000 procedures (mostly cataracts) per year," Ms. Getlan says. "And 25%-30% of our patients use the healthcare credit card provider we've partnered with." It's a good idea to get a general idea of what your own patient approval rate is likely to be. Be specific. For example, if you're an orthopedic center, ask: "What's the average approval rate for orthopedic procedures?" says Ms. Thomas.

Perhaps Tyler Crawford, the CEO of BHG Patient Lending, a financial company located in Syracuse, N.Y., that offers fixed-interest, long-term loans (5 years) for patients with all types of credit, sums up the importance of high patient approval best when he says: "If your lender is only set up to approve a certain portion of your patients, you're cutting off an entire population. And chances are, they're your most credit-needy patients."

2. Credit limit. You should be able to offer patients at least a $3,000 credit line with whatever patient financing company you choose; that's a standard starting point. "If you need to go above this amount, some lenders will struggle," says Ms. Thomas, "because it's not their sweet spot." You're going to want your average procedure fee to correspond to the credit limit you can offer via patient financing. So if your procedure fees are well above this $3,000 benchmark, you may have to look at a more niche type of vendor. For example, there are vendors that only target patients with flawless credit and offer credit lines of $40,000 and above. Again, when it comes to a vendor, you want to ask questions that will get you the type of information you need — such as, What is the average credit limit for patients at [insert the specialty at your facility]?

3. Fees. Arguably the most difficult part of selecting a patient financing option centers on fees. "It's a balancing act," says Ms. Thomas. "You want to offer the best possible deal for the patient and the practice, and it's tough finding that middle ground." What makes this even more challenging is the variability. Facilities can pay anywhere from a 1.9% fee on the low end to as much as 14.9% on the high end, depending on the type of plan (duration of promotion or loan) and the medical specialty.

The transaction fee rises along with the length of the loan. Generally, the longer the payment term, the higher the transaction fee with which you'll be charged. It's tempting to want to offer your patients as many choices as possible (12-, 18- and 24-month deferred-interest promotions), but beware: The more options you offer, the more likely it is one of these options will carry unfavorable fees for you.

"I could offer a 24-month deferred interest promotion for a credit card with a $2,000 credit line that charges an 8.5% facility fee, but why would I do that if I can offer the same credit line for an 18-month promotion and only pay a 6% fee?" asks Ms. Getlan.

4. Reputation. With the number of patient financing options growing each day (we came across dozens while researching this story), the identity of your financing company is critical.

"When you're evaluating potential vendors, you have to look at reputation," says Beto Casellas, CEO of CareCredit, a healthcare lending company headquartered in Costa Mesa, Calif. With more than 100 years of experience (nearly 30 years for CareCredit and 80 for its parent company, Synchrony), CareCredit is generally the most well-known and relied upon name in the patient financing space.

Of course, facilities have plenty of options — and not looking closely at these many options could come back to haunt you.

"I think sometimes facilities aren't doing enough research and looking at all the offerings that are available to them in the market," says BHG's Mr. Crawford. "Maybe there's a tendency to just go with the status quo and say, 'Oh, I've heard of that, it must be something I should offer.'"

Still, you want some assurances from a financing company because, as Ms. Thomas puts it, "you don't want to put your neck on the line and recommend a lender that's still working through their growing pains and keeps changing up their program every couple of months." A good benchmark to use is 5 years; you want a partner that's been in the industry for at least 5 years, so you know they're not going anywhere, adds Ms. Thomas.

5. Technology and service. Whether it's an easy-to-navigate website or a frictionless iPhone or Android app, consumers now demand these things, so your financing company must be able to provide them, says Mr. Casellas. Seamless technology is also what will ultimately allow you to keep a potential patient who's shocked to find he's responsible for $1,000 or more because of his high-deductible health plan from canceling a surgery. You want the technology to make it as easy as possible for the patient to get instant approval at the desk of the hospital or ASC, says Mr. Crawford, who's tech interface provides facilities with a tablet to hand over to prospective patients and fill out some very basic info (3 webpages) before getting approved for a loan within minutes.

"If your lender is only set up to approve a certain portion of your patients, you're cutting off an entire population. And chances are, they're your most credit-needy patients."

Of course, technology isn't worth much when there's an issue and you can't get ahold of somebody to work you through an issue. So you want to make sure the financing company has dedicated customer service reps readily available. Your financing company should also be able to provide you with scripting on precisely how to present the financing option to prospective patients ("A lot of our patients choose to take advantage of this convenient 12-month ").

An ongoing process

One final thought to keep in mind: Selecting a patient financing company isn't permanent. "Evaluate your lender every year," says Ms. Thomas. "You're not locked into a contract, so if the lender isn't approving enough patients, if the credit limit has dropped, if they aren't easy to get ahold of, maybe it's time to look elsewhere." OSM

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