Should you offer financing of your medical services to your patients? Keep in mind that medical bills are reportedly the number one reason for personal bankruptcies in the United States.
Keith Borglum, CHBC
Many more patients are now uninsured due to the recession, layoffs, and working part-time jobs without health insurance. Others are underinsured or have high-deductible plans such as Health Saving Accounts.
The Affordable Care Act (ACA) is suffering delays, and even when ready, many people and companies are expected to opt out and pay the minor penalties instead. The ACA plans may have deductibles in the thousands of dollars, an amount well beyond the means of many people.
Providing financing through your office is one way of enabling your patients to move forward in getting the medical care they need. More patients can afford small monthly payments, than can afford a single large payment. Providing financing lets the patient get medical care, and lets the providers get paid; a win-win, at least as far as getting and delivering care is concerned. What you don’t want to create are patient debts for which you won’t ever get paid.
There are two major ways to provide financing for patients. The first is to be a conduit for a finance company, and the second is to offer your own financing, direct to patients, out of your own pocket.
Finance companies are eager to install lending programs in your practice. These operate similar to financing through purveyors of appliances, furniture, automobiles, etc. The finance companies provide loans to patients, just like a credit card, but limited to medical care. These loans can often be obtained by patients whose credit cards are maxed-out or patients who are less credit-worthy, but often at the price of much higher interest rates than regular credit cards. The patient can be qualified for the loan on the spot in your office, and you get paid right away.
Within these financing company plans, two flavors exist: recourse and non-recourse. In recourse loans, the patient pays lower interest, but if they don’t pay, you will be required to repay the money the finance company paid you. In non-recourse loans, the interest is higher, but if the patient doesn’t pay, you don’t need to pay the money back. Research popular finance companies, which may include some of the world’s biggest banks, but be aware that many won’t finance primary care. They will provide you glossy posters and brochures and forms for your reception area, and make it easy for you. You can check with your current bank and medical association first to see what they offer.
The second approach is to finance payment plans for patients on your own. This involves more work, including setting up the protocols, creating financing forms, processing the payments, collecting past-due payments, and training staff. You also need to comply with federal and state Truth in Lending requirements. Some patients might not be as responsible with payments when paying you directly, rather than to a finance company.
The advantage to offering financing yourself is that it can be more profitable than using the finance companies, because you earn the higher interest (sometimes 9% or more). I know of a cosmetic practice that earns almost as much by bundling and selling its consumer loans on the banking secondary-market as it earns through surgeries.
Another option is using companies such as DocPay.com, which will set up monthly payment plans for patients and deduct payments from patient accounts. Rather than charging interest to the patient, DocPay charges you or the patient a small per-payment fee.
While no one type of financing plan is perfect, every practice can find a plan that fits its needs. Before implementing a plan, check with your accountant or attorney about state and federal compliance requirements in your location.
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