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6 Common Myths About Patient Financing in an ASC

This article was written by Rob Morris, vice president of marketing and new business development for CareCredit, a part of GE Capital.

Have you considered adding a third-party patient financing program to your ASC's financial policy but hesitated because you felt your patients didn’t need it? Maybe you thought the program would be too hard to use or would take up too much of your ASC's valuable time? Or maybe you decided that all patient financing programs were the same, so you might as well add the cheapest one?

These are just a few of the common myths that may negatively impact healthcare professionals' perception of third-party financing programs. Let's take a closer look at these and other common myths to see if we can shed some light on the factual reality of how patient financing can be used as a tool to reduce A/R and increase cash flow.  

1. Myth: "My patients don’t need financing."

Some ASCs feel that because they are in an affluent area, their patients would not use a patient financing program. In reality, thousands of individuals who apply each month for CareCredit, a leading healthcare credit card backed by GE Capital, make over $100,000 per year. Some of these individuals prefer to take advantage of payment options like "no interest if paid in full" plans* not because they "need" financing — but because the options make good financial sense.

Others use these plans because they provide an easy and convenient way to fit medical expenses into their monthly household budgets. These individuals are financially savvy and like to feel as if they are "getting a deal." Financing allows them to pay over time without incurring interest charges as long as the full amount is paid within
the promotional period**.

2. Myth: "All patient financing companies are the same."

If there is no real difference between patient financing companies, why not go with the one that has the lowest price? It saves money and is more profitable for the ASC. While this myth sounds good in theory, the reality is not quite as attractive. The truth is that patient financing companies that offer lowered fees are able to do so because they approve fewer patients.

These companies approve individuals who have higher FICO scores, thus taking a lower risk. While lower risk means more profit for the patient financing company, it also means fewer patients are being approved. This occurs despite the fact that financial concerns are the number one reason patients don't move forward with scheduled care.1

In addition, some patient financing companies can take weeks to pay your center. Over time this can negatively affect your cash flow. That's why it’s important to know when your center can regularly expect payment. Some financing companies provide payment within two business days, helping to maintain a positive cash flow.

3. Myth: "Having patients apply in the office is too invasive."

Some ASCs may feel that having patients complete the application process while in the office is too personal and even a bit invasive. But most patients actually welcome the opportunity to be instantly approved for a "no interest if paid in full" plan* right in the office and don't mind supplying the few pieces of information needed to complete the simple application. In fact, the vast majority of patients appreciate the added convenience of knowing they've secured affordable financing for their co-pay, deductible, or other out-of-pocket costs.

4. Myth: "Patients can just go to their banks for financing."

Today, patients have come to expect some level of assistance from healthcare providers when it comes to managing the cost of care. In a study conducted by Inquire Market Research, 32 percent of patients stated that without an obvious payment solution, they would ask the provider to function in the role of a financing company by billing them.1 When patients need more extensive treatment, that requires a large deductible and higher out-of-pocket cost, and referring patients to their banks to get a loan may seem like a logical financial solution.

Unfortunately, patients who deal with a bank loan process face long delays and additional fees (application and origination). Plus, banks typically have variable interest rates (risked-based pricing) based on credit worthiness. This can often price a loan out of reach for some patients. Depending on which company you select, patient financing can allow you to offer all of your patients a "no interest if paid in full" plan* or a fixed interest rate that does not fluctuate based on credit worthiness.*  

5. Myth: "I can just extend payment options in-house and not have to pay processing fees to the patient financing company."

When your ASC takes on the responsibility of billing patients, it can have a significant impact on the bottom line. In addition to billing and collection costs — which can add up to tens of thousands a dollars a year — extending credit to patients in house can be expensive to the center in terms of reduced cash flow. While waiting for fees to be collected, overhead costs including payroll, rent, supplies, and equipment can really add up. Over time, a cash flow crunch may be created, with more money tied up in accounts receivable than there is coming into the center. Using a financing company allows you to get out of the banking business. Centers can receive payment in as little as two business days, reducing A/R issues and improving cash flow.

6. Myth: "Finance companies just want practices to finance more."

This is another one of those "all companies are the same" myths. If you take a closer look, you might be surprised by the differences between patient financing companies. While most finance companies offer low interest programs, not all programs or companies are the same. Every finance company's success is directly related to the success of the practices they serve. That's why it's important to seek out a company that provides value-added tools and resources that help to maximize your success.

Adding patient financing to your financial policy is a proven way to help more patients move forward with the procedure that they need. Increased treatment acceptance, reduced A/R, and improved cash flow are all benefits that have made patient financing a positive reality for practices and patients across the nation.

*Subject to credit approval
**Minimum monthly payments required.
1. Inquire Market Research Study March 2006

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