Stephanie Wasek: Can you summarize briefly what CareCredit offers both practices and patients?
Rob Morris: CareCredit lets patients pay their current bills in full immediately with the use of interest-free and low-interest extended monthly payment plans. ASCs get paid in two business days with no responsibility if the patient delays or defaults.
SW: So when patients want to have truly elective procedures, such as cosmetic surgery or LASIK, these plans can help. How much of a problem is this for patients with commercial insurance carriers?
RM: They’re requiring patients to shoulder more of the load now. When a patient shows up at the front door of an ASC, he might be faced with large deductible, co-pay or self-pay fee that he didn’t realize he was responsible for. Deductibles are going up, too: The patient might have to come up with $2,000, $5,000, even $10,000 and facility fees can, of course, range from a few hundred to thousands, depending on the procedure.
While the office may have tried to get in touch with the patient and let him know he’s got a $1,200 deductible for the facility fee, that can be tough to do. On the day of the procedure, he’s informed he owes $1,200. Or your office reaches the patient and, when he finds out he’s going to have to pay that money, doesn’t show up the day of surgery.
SW: Let’s say he does show up. What does an ASC typically do?
RM: Most ASCs can accept cash, check, Visa, MasterCard — that sort of thing. The problem there is that, statistically, most people are maxed out on their credit cards. The average American has about $300 available credit on consumer cards and can’t comfortably write a check for more than $500 out of their monthly cash flow. So a patient likely can’t write a check for $1,200, either.
SW: Why can’t the ASC just set up a monthly payment plan directly with the patient? That way, you don’t have to send him away, create a hole in the surgery schedule, upset the surgeon.
RM: Well, many do, but what generally ends up happening is that, whether you give the patient 30 days or three months, you don’t get paid, because you already performed the service.
On average, ASCs receive 79 cents on every dollar of A/R, and you lose 1 percent of value on your outstanding cash every month. In these cases it typically takes about 76 days to be paid in full from date of treatment. Beyond 90 days, your chances of recouping your money fall to 20 percent. Beyond 100 days, that money is generally uncollectible.
Then you factor in the time and money you spend to devote staff to following up on the accounts. No one — staff or patients — enjoys being on either end of a collection call. Is that really what you want to have your staff doing anyhow?
The fact is, you’ve already extended service, and on average, people have 42 bills a month to pay. Healthcare is going to come last on that list, so it’s key that you be paid at the time of service, as happens in any other business.
CareCredit gives the patient another payment option, a new line of credit strictly for healthcare that’s low-interest or interest-free. It’s owned by GE, and patients are going to receive a statement just like for a credit card; they’ll pay it because they know it’s going to affect their credit scores.
SW: What are the advantages, then, of partnering with CareCredit for this difficult area of the ASC business?
RM: It reduces risk and costs of carrying accounts receivable, increases cash flow, and eliminates outsourcing and resultant fees to outside billing and collection agencies. We give the ASC its fee in two business days via electronic transfer.
When you consider that, for example, we charge 5 percent to the practice when it offers the 90 days, no-interest option, that’s a lot more money coming in for the ASC. Say you want to offer patients more time — it’s 6.9 percent of what’s charged for six months interest-free. That’s 95 or 93.1 cents on the dollar guaranteed in two days, compared with 79 cents recouped two-and-a-half months out.
The other thing we have found is that ASCs who offer CareCredit decrease A/R by about 38 percent overall. That’s a huge increase in cash flow; the ASC gets its full fee up front, and is charged a merchant fee at the end of the next statement period. (Most accountants like to see the full fee remitted to the ASC for accounting purposes, so that’s how we designed it, rather than taking the fee out up front.)
SW: So when a facility offers CareCredit, how does it work in practice?
RM: Well, the facility enrolls and gets trained in CareCredit, and decides what kinds of plans it’s willing to offer. There are interest-free plans for three, six, 12 and 18 months, and low-interest plans for two to five years.
So when a patient comes in, is responsible for a large fee and decides CareCredit is his best option, he fills out a quick, quarter-page form. One of the facility staff inputs the information and amount requested to CareCredit online and gets a decision in 10 seconds. We typically approve 55 to 57 percent of applicants for some amount of money. Only about 27 percent of applicants are approved for new credit cards. So it’s likely patients will be approved for this line of healthcare credit, and the facility will be able to do the procedure and keep the day running smoothly while ensuring it gets paid and
increases cash flow.
Mr. Morris is the vice president of marketing at CareCredit, a GE Money Company. CareCredit is the nation’s leading patient financing program.
