This article is written by Rob Morris, Vice President, Marketing and New Business Development at CareCredit, a part of GE Capital.As more employers adopt insurance plans with higher deductibles as a way to better manage and save on employee healthcare cost — patients seeking surgical procedures are facing higher out-of-pocket costs, including increased co-pays and deductibles. Research shows that in the absence of financing options, as much as 32 percent of patients will ask the healthcare provider to act as a financing company by billing them.1 Although billing patients and maintaining accounts receivable has been a widely used and accepted method of helping patients manage fees, it can cost your ambulatory surgical center more than you may realize. By taking a closer look at the costs and risks associated with billing and A/R and the 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 up-front. 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. Couple that with the fact that the average total cost of sending a statement to a patient is approximately $8 to $10 per account per-month (an average of 200 statements per-month per-center comes to a total cost of over $21,000 a year) and it's easy to see how it can all add up.2
When a patient does not respond to your billing requests by mail, 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 over time with convenient monthly payments. Because it's easier to fit the cost of care into their 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 flexibility and meets the needs of today's patient. Programs that provide special financing offers such as 12 months deferred interest — where the patient pays no interest charges as long as the balance is paid off by the end of the promotional period* — are very attractive and popular with patients.
Also consider the initial costs to patients. Plans that feature no upfront costs, annual fees or prepayment penalties will always be more attractive than those that don't. Programs 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 program 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 programs are the same and some can take as long as 14 days to as little as two days to pay the practice so be sure you understand the program's policy. Also consider when the payment will be delivered. Some programs offer direct deposit into an authorized account while others simply mail a check to the practice, increasing the amount of time before payment is credited to your account. Ideally, the less time you have to deal with documentation and paperwork to get compensated, the better.
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 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.
1Inquire Market Research Study 2010
2Deborah L. Walker, Sara M. Larch, Elizabeth W. Woodcock
Physician Billing Process: Avoiding Potholes in the Road to Getting Paid, Medical Group Management Association, 2004
*Subject to credit approval.