The Benefits of Offering Payment Options Through Third-Party Financing

by Rob Morris

Patients today are facing higher out-of-pocket costs from co-pays, coinsurance, and deductibles that may cause them to put off treatment or delay payment to your practice. Billing patients in-house is one way to help them manage rising healthcare costs and get the procedures they need. In fact, in a recent study conducted by Inquire Market Research, 32% of patients stated that without an obvious payment solution, they would ask their healthcare provider to function in the role of a financing company by billing them.1 But when you take on the responsibility of extending credit to patients, you also incur the cost and risk associated as well including late payments, bad debt, and uncollected accounts —which can have a negative impact on your practice’s cash flow and bottom line. A better solution for practices looking to help patients who might otherwise struggle with the self-pay portions — or who would prefer to pay over time for costs not covered by insurance — is to offer a patient financing program through a third-party company. With third-party financing, giving patients a convenient monthly payment option, without assuming the cost and risk of billing, is just one of the benefits your practice will enjoy.

The Real Costs of Accounts Receivable (A/R) Billing or extending credit to patients allows them to move forward with treatment they might otherwise delay and can even be used as a competitive advantage over practices that only accept cash and credit cards for costs not covered by insurance. But whether you use an outside company to handle your A/R or manage it in-house, when you consider the investment of time and resources it takes to process and mail billing statements, track down late payments, and make collections calls — the cost to your practice can be considerable. In fact, if just one employee devotes half of their time to collections, the cost to the practice can add up to over $20,000 a year. While every attempt is made to receive payment, when efforts fail, uncollected fees become bad debt write offs that can constitute as much as 20% of your practices’ revenue.In addition to billing and collection costs, extending credit to patients in-house can be expensive in terms of reduced cash flow for your practice. Unlike lending institutions that charge consumers interest for the opportunity to make payments overtime — your practice makes no interest on any of the money sitting in accounts receivable. In the meantime, overhead costs including payroll, rent, supplies, and equipment continue to add up, while fees wait to be collected. Over time this can create a cash flow crunch, with more money tied up in accounts receivable than there is coming into the practice.

A Better Financial Solution

To help patients manage higher healthcare costs while still maintaining their own financial health, many practices have begun offering third-party patient financing programs with very positive outcomes. In fact, research shows that healthcare providers offering the CareCredit® patient financing program as a payment option were able to decrease their Accounts Receivable aging by 37.7% as well as reduce their billing and collection costs.2 And nine out of ten patients enrolled in this financing program stated that they valued it as a low monthly payment option. Offering financing through a third party company is actually quite common in many healthcare fields including dentistry, ophthalmology, cosmetic surgery and audiology. Using the program is usually pretty simple. Patients complete a short credit application and once approved, can immediately access their credit to pay for treatment over time with convenient monthly payments. Depending upon the financing company chosen, practices receive payment within as little as two business days.

Attractive Payment Options

There are typically two types of financing available through third-party financing companies — “No Interest” payment plans and “Low Interest” payment plans. “No Interest” plans give patients the ability to pay for care over time, without incurring any interest charges as long as the promotional balance is paid off within the specified time period. Similar to department store credit cards, these options are often revolving or “open ended” so patients can use the line of credit again and again for additional care, usually without having to reapply. The second type of payment option is the “Low Interest” plan. More like a car loan, this type of financing is a term loan designed for patients who prefer a longer time to pay and lower monthly payments. It is ideal for patients with larger self-pay portions or higher out-of-pocket costs not covered by insurance. The loan is for a specified period, for example, 24 months or 2 years and features low interest rates.

Even More Benefits

In addition to helping more patients and reducing A/R, offering third-party financing can benefit your practice in other ways. As mentioned earlier, with better third-party financing companies you receive full payment, less a small processing fee, within two business days, improving cash flow by giving you almost immediate access to your revenue. And offering patient financing can help your practice improve compliance because when patients have a convenient payment option, they are more likely to move forward with treatment. You can even use patient financing as a marketing tool to attract patients, promote your practice, and set your practice apart from the competition.

At California Vein Specialists in Newport Beach, CA, Patient Coordinator M. Cohee notes that this type of patient financing program has helped the patients and the practice. “Since we began offering third-party financing through CareCredit, we’ve noticed an increase in treatment acceptance. Patients like having more options -- especially something that’s interest free. Plus they get to use the program for ongoing or additional treatment in our practice.”If you want a convenient way to help patients manage higher out-of-pocket costs while maintaining your practice’s financial health — offering payment plans through an outside patient financing company could be the solution you’ve been looking for.