Patient Financing Primer

Financing programs boost business and pay for themselves.

BY RENÉ LUTHE, SENIOR ASSOCIATE EDITOR

According to its proponents, patient financing is the quintessential "win-win" situation: Patients undergo elective procedures, such as refractive surgery, that they may not otherwise be able to afford, and physicians get increased revenue. To keep the situation beneficial for both parties, however, industry experts urge practices to be knowledgeable about financing options and to follow certain criteria for obtaining terms that are as amenable to patients as they are to practices. Here, we will cover what you need to know in order to make patient financing work for you.

Financing: The New Norm

Until recently, there was widespread suspicion among doctors about patient financing. "There's a preconceived notion that if someone even needs financing, there is something wrong with them," says Shareef Mahdavi, chief executive officer of SM2 Consulting, a company that helps create demand for new medical technologies. However, it is a notion that no longer holds water. "Financing is just an integral part of how people acquire goods and services in today's modern age," he explains.

Most patients pay for elective procedures with cash or credit. However, the number of people who can afford to pay by these methods represent only about 25% of the U.S. population, Mahdavi says. He maintains that financing is the perfect way to reach the remaining 75% who do not have sufficient cash or credit reserves.

Tony Seymour, senior vice president of sales for CareCredit, sees patient financing as being relevant to two groups: Those who can afford elective medical procedures and those who cannot. "For those who can't afford it, financing allows the patient to get what they want, when they want it and with a payment plan that suits their particular needs," Seymour says. "We do a lot of focus groups and one thing that's loud and clear, whether it's cosmetic surgery or LASIK surgery, is that consumers will wait from 1 to 3 years to go ahead with an elective procedure. The number one reason they don't do it right away is affordability."

For patients who can afford it, financing is a motivator. Seymour explains that the reality is that refractive surgeons are competing with expensive retail items such as electronic devices, computers and home improvement. "You notice that those retailers use no-interest financing to get the patient to say yes today instead of waiting a long time," Seymour points out. "No-interest financing is a good way to move the financially savvy consumer."

Get Help

While Mahdavi says that he has seen an increasingly more positive attitude toward financing among doctors over the past 10 years, he still sees a great deal of confusion as to how to offer it. Typical problems, he says, are practices picking and choosing to whom they should offer financing, knowing when and how to present the option, allocating staff resources in managing it and feeling awkward talking to patients about fees. The message for practices, Mahdavi says, is "Look, maybe you do offer financing, but you don't do it very well and you're missing a big opportunity."

The ways financing companies help practices do it better include, as Mahdavi puts it, "knowing how to package [the procedure's fee] correctly." Bilateral LASIK, at approximately $4,000, is an intimidatingly high-priced purchase for many consumers. Because health insurance seldom covers the procedure, and with the majority of Americans not having the credit or cash reserves to manage the purchase, many would end the phone call or office consultation without moving forward. Says Pam Girardo, spokesperson for Capital One Healthcare Finance, "Once the patient leaves the office and still has to figure out financing, there's the challenge of getting them to come back and actually schedule the appointment." Offering financing in the office, and packaging it not as a $4,000 procedure, but as one that may be available for only, say, $225 per month at a no-interest for 18 months, makes it much less economically daunting — and much more likely that the patient will schedule immediately. Longer-term loans, available at a low interest rate, bring the monthly price down to an even more digestible level; the interest is built into the payment. "That's the packaging of price," says Mahdavi. "Patient financing is as important a technology as the laser itself."

Most patient-financing companies also provide coaching on who should discuss financing with the patient. The experts interviewed for this article agree that person should never be the doctor. Instead, an administrator or dedicated sales representative is trained on how to present the finance company's options to patients. "We'll work with practices to set up a process that makes sense for them and their patients," Girardo says. "In some cases, the practice will literally have a private room right there where customers can call us or go online to investigate financing options." Decisions are given in minutes. Some financing companies pay the practice immediately.

"The medical practice benefits because financing allows the doctors to spend more time actually caring for patients rather than getting bogged down in paperwork or having an awkward conversation," Girardo explains. "Likewise, they and their staffs are not spending their time tracking down payments and managing billing procedures."

CareCredit also helps clients increase revenue by performing a "telephone improvement plan." "We'll secret shop the practice, record our calls to it, grade it in 12 areas such as how quickly the phone is answered, how knowledgeable the staff member is, does he or she actually set up an appointment," Seymour explains. "Then we grade the practice on a score of 1 to 100 and show the practice our national score (we've done this with more than 250 practices). If they want, we will work with the staff to improve any weak areas and then re-do the test." Practices that opt for this training typically score about 20% higher on the re-test, he reports. CareCredit also offers a team of practice development managers who are experienced in the refractive marketplace, who work with individual doctors to grow the refractive practice.

More than LASIK

While refractive surgery is the primary vision procedure for which financing is offered, companies are also helping patients get the IOL of their choice. Patients who are in the Medicare system but wish to upgrade to a premium IOL have the option of financing their out-of-pocket component. Likewise, patients who are not covered by Medicare or private insurance and must pay out-of-pocket completely are increasingly financing some or all of the procedure, Mahdavi reports.

Girardo says that Capital One also finances cataract surgery. Practices can collapse all of the preoperative and postoperative work into one fee. That includes the extra counseling time physicians must put in for procedures such as multifocal IOLs. "If it's a charge in a physician's office that insurance doesn't cover, we'll finance it," says Seymour.

The Cost Issue

A common misperception practices have about offering patient financing, according to Mahdavi, is that it is costly for them. "To pay 5% to 10% of a procedure fee to a bank seems expensive to them," Mahdavi says. "The more successful practices are happy to pay that 5% to 10% because they get the money now, they get the procedure done. Doctors who complain don't appreciate that the option typically isn't between getting all the money and getting only 90% of the money — it's between getting 90% of the money or getting nothing — the procedure doesn't get done."

Return on investment, these industry representatives claim, is immediate. Neither Capital One nor CareCredit require practices to pay up front in order to offer financing. Capital One, Girardo explains, does not charge an administrative fee until a loan is actually booked. "But the good news is that you don't pay just to have us around as an option for your patients," she says. "Capital One assumes the financial risk, while practices enjoy higher case acceptance."

Mahdavi says that fees deducted from what the doctor is paid the procedure range between 4% to 10%, depending on the kind of financing the patient has chosen.

A recent CareCredit survey shows that the deduction is worthwhile. The company interviewed 7,000 cardholders who had undergone LASIK. "We got 2,062 responses, so we are pretty happy; that's 28% or 29%," Seymour says. "Eighty percent said that CareCredit financing influenced the decision to go forward with LASIK." Additionally, 45% said that if financing had not been available, they would have delayed the procedure. OM