Is Patient Financing Right for Your Health Practice?
The advantages and challenges of partnering with an external financing company to facilitate patient treatment.
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In these times of post-pandemic financial uncertainty, additional return on investment for medical providers is more welcome than ever. Patient financing — which for the purposes of this article means partnering with an external lender to provide service and procedure payments — can produce not just steady income for a practice, but help ensure that patients won't have to put off procedures or, worse yet, abandon them altogether. For example, Toronto Plastic Surgeons provides this facility to its patients through Medicard Patient Financing. There are also veterinary financing services for pets available through Medicard Patient Financing. What are some reasons practitioners might have employed in deciding upon this option?
No More Delays
There are, unfortunately, economic disparities when it comes to accessing healthcare services. Too often, the high-income and privileged have more access to healthcare resources than the medium- and low-income populations. Patient financing can help in reducing this imbalance, because the simple and daunting truth is that many medical problems don't come announced, and it's often impossible to plan for their associated expenses. With financing, patients don't need to wait to get their accounts in order before opting for procedures — the result is, ideally, prompt and less stressful treatment.
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Increased Patient Satisfaction
Since clients can often better manage their expenses via patient financing, they tend to be more satisfied on the whole. In part this is because they are not stressed and burdened with sudden financial decisions associated with urgent medical procedures. Better yet, they are more likely to stay loyal to a practice if they don't have to worry as much. Compared to other practices that don't offer this option, they are more likely to choose the former, which can mean increased business through word of mouth.
Reduced Collection Costs
When you partner with a patient financer, you receive payments on time. It also means that your team won't spend needless hours and energy trying to collect payments.
Steady Cash Flow and Less Bad Debt
In setting up a conventional payment plan for a patient, your team is taking the responsibility of keeping tabs on payments and collecting them on time. It's essentially extending a loan to a patient, typically without any interest. However, expenses like bills, payroll and lease/rent go on as usual. This can lead to money tied up in accounts receivable, which will easily and quickly impact a budget. But when you opt for association with a patient financing company, the latter bears the cost of collections, including giving you the option of getting payment upfront.
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Association with a financing company with its own marketing arm can help promote a business — making your clinic stand out in comparison to competitors.
Which to Choose?
When it comes to financing models, three predominate. In the first, Self-Funding, you as the healthcare provider are responsible for receivables. From creating a payment schedule to collecting funds to following up with the patient, your team carries out all the tasks. In the Recourse Lending model, you work with a patient financier/lender, which will approve a patient's loan after the business/practice passes qualifying criteria. If the patient doesn't pay, the lending/financing company will recover the losses from you. Among the drawbacks here is that the practice will have to bear the losses and lender's fees. Lastly, there is the Non-Recourse Lending model. Similar to the second, you work with a lending company. Key differences are that it is the patient who has to pass the underwriting criteria (if the lender doesn't approve the patient, no funding is provided by them), and that losses are borne by the lender. One disadvantage of this method is that the lenders charge interest from patients; when rates are high, patients might not be interested. Also, patients with a weak credit history might be rejected during the underwriting evaluation.