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A Closer Look at the Cost of Accounts Receivable

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In today's economic environment patients appreciate and have even 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

Unfortunately, when a facility takes on the responsibility of billing, they also incur the cost and risk associated with it as well — including late payments, bad debt and uncollected accounts. When you take a closer look at the costs and risks associated with billing and A/R and then consider other financing options out there — you may find that there is a better solution for both your patients and your center.

The "Real" Cost of Maintaining Your A/R

Carrying accounts receivable can be your cash flow’s worst enemy. With increasing facility fees, more procedures considered elective and higher deductibles and co-pays, it’s expected that some patients will not have the funds available to pay for a procedure upfront. While extending credit to patients may seem like a simple way to help them get care, it can be very expensive to your ASC in terms of reduced cash flow. Thanks to banks and credit card companies, the concept of paying over time and making monthly payments for large purchases has become a cultural staple of spending. However, unlike those lending institutions that charge interest for giving patients the opportunity to pay over time — your center makes no interest on any of the money sitting in A/R. Overhead costs including rent, payroll, supplies and equipment continue to add up while you attempt to collect fees for completed procedures. Over time, this can result in a cash flow crunch where more money is tied up in A/R than is actually coming in to the center.

As your A/R grows, so does the cost required to maintain it. If one employee dedicates half of his or her time to collections, the cost to the practice can add up to over $20,000 a year. In addition, as employees have to spend more time doing administrative and financial chores, the center’s level of customer service may become less proactive. When a patient does not respond to your billing requests, additional time and effort must be spent to recover the funds you’re owed. Collections calls are unpleasant for most staff members and can even scar your patient relationship. Finally, if you’re unable to collect your fees, you have to deal with the reality of lost revenue and bad debt write-off

A Better Way to Help More Patients

Instead of billing patients and dealing with the risks and expense of accounts receivable, a better way to help patients manage costs is to add a third-party or outside patient financing program to your practice’s financial policy. Third-party patient financing is actually quite common in many healthcare fields including dentistry, ophthalmology, cosmetic surgery, audiology and even veterinary medicine. Using a third-party financing program is usually pretty simple. Patients apply for financing and, if approved, can immediately access their credit to pay for treatment with convenient monthly payments. Because it’s easier to fit the cost of care into a monthly budget, more patients can move forward with care.
Because financial needs differ from patient to patient, you want to select a patient financing program that provides a variety of options and meets the needs of today’s patient. Programs that provide options such as special financing for six or 12 months on purchases of $200 or more* are very attractive and popular with patients. Also consider the initial costs to patients. Options that feature no upfront costs or annual fees will always be more attractive. Companies that offer a simple and quick application process, immediate credit decisions and multiple processing options (internet or phone) make integrating third-party financing into your daily routine even easier.

Another thing to consider when choosing a third-party financing company is when your practice will be paid. One of the biggest benefits of offering financing through a third-party is that you get paid for your services up front, which eliminates the need to bill the patient. But not all companies are the same. Some take as little as two days to pay the practice while others can take much longer, so be sure you understand the company’s policy. Also consider how the payment will be delivered. The most efficent method is a direct deposit into an authorized account. Ideally, the less time you have to deal with documentation and paperwork to get compensated, the better.

When you offer additional payment options through a third-party financing company, you must be able to trust them with your patient relationships. In other words, the finance company must treat your patients as well as you do. Here are a few things to consider when choosing a third-party financing partner:

Experience. Experience does count. Find out how long the company has been in business and the extensiveness of their network of healthcare providers. Also ask how many people have used their patient financing options to pay for care.

Flexibility. Does the company offer a wide range of special financing options? Can patients apply at home or in your office? Can they apply over the
phone or online?

Customer service. Can patients get help 24/7? Does the company provide your team and your patients with high-quality information and service?

Efficiency. Can your patients complete the application in just a few minutes? Can you receive a credit decision within seconds?

Value. Does the company provide marketing and presentation materials for you to use in your office? Do they offer other value-add services to help your practice become more financially healthy?

Adding the Program to Your Financial Policy

To successfully implement your patient financing program, it should be included as part of your financial policy and presented as a payment option along with cash, check, Visa and MasterCard. To ensure your policy is as effective as it can be it should be written and specific, leaving little room for interpretation or misunderstanding. It’s also important that the policy be embraced by your entire team and consistently communicated to all patients.

A written financial policy can increase patient satisfaction by minimizing confusion and miscommunication. Patients often become unhappy when their expectations are not met — both clinically and financially. Without a written, specific financial policy, both your team and patients run the risk of incorrectly interpreting both payment responsibility and options. Most importantly a clear financial policy will help you to increase treatment acceptance by eliminating "fear of cost." Cost can cause a patient to hesitate when it comes to moving forward with procedures or care. A financial policy enables patients to quickly identify the payment option that works best for their situation, addressing the issue of cost before it can become a concern. But keep in mind that financial policy requirements vary by state and that this information is offered for informational use only. You should consult with your individual advisors with respect to any professional advice presented.

While taking on internal billing and accounts receivable can seem like a simple solution from the onset, it can quickly become a costly distraction for your ASC. Adding a third-party financing program to your financial policy can make it possible for more patients to have the surgical procedure they want or need while easily managing self-pay portions and other out-of-pocket costs. Plus, by turning patient financing over to a third-party financing company, your center will have more time to focus on what matters most — providing optimal care for patients.

Rob Morris is vice president of marketing and new business development at CareCredit. Mr. Morris joined CareCredit in 1993 and has more than 35 years experience in healthcare, including executive level marketing and sales positions with such companies as Bristol-Myers, Coopervision Surgical and CR Bard.

1Inquire Market Research Study, 2010, commissioned by CareCredit

*Subject to credit approval. Minimum monthly payments required. See for details.

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