When Patients Can't Pay: The How and Why of Financing Programs

Most patients—especially those with whom your practice has a good rapport—want to pay their bills. Unfortunately, with the rise of high-deductible healthcare plans, patients are now responsible for a larger portion of their healthcare bills (in addition to insurance plan premiums). As a result, many well-intentioned people are simply unable to cover the cost of the care they need.

This problem is exacerbated for specialities like rehab therapy, because patients typically need to attend multiple appointments throughout the course of care, and each appointment often requires a steep copayment or coinsurance. In fact, this is a huge contributing factor to the patient dropout problem plaguing the PT industry. That alone is problematic for patients and practices, but there’s a compounding issue, too: when patients routinely fail to complete their full course of care, it can be difficult for therapists to demonstrate the value they provide, thus making it even more difficult to reach new patients, advocate for pro-PT care pathways, and land higher payment rates.

From a business standpoint, it may seem better to always collect the full balance due at the time of service (especially given that WebPT Integrated Payments makes doing so an operational breeze), but that’s not necessarily the case if it means either:

1. having to turn away patients who can’t afford that upfront cost, or
2. eventually writing off uncollected amounts as bad debt.

Instead, offering financing options—that is, patient payment plan templates—that enable patients to pay off their balance in manageable installments over time may be best for everyone involved. Financing programs not only temper the impact of the financial cost for patients, but also incentivize them to continue attending therapy all the way through discharge. And ultimately, that adds up to more revenue for practice owners and better outcomes (and satisfaction levels) for patients.

Learning the Basics of Financing Programs

While you could offer payment plans on your own terms by creating a contract that outlines what and when you’ll collect from the patient (either by automatically charging a credit card on file or accepting cash or check), you can also opt to work with a lending company that will issue the patient a point-of-service loan to cover the cost of your services—assuming that the patient receives approval.

That way, you get paid, and your patients are responsible for making payments directly to the lending company. According to this e-book, point-of-service loans are a newly popular lending option that can allow patients to receive approval in just a few minutes, instead of a few days. (Although this American Banker article notes that “banks have been offering them indirectly at the likes of furniture stores and orthodontists’ offices for decades.”)

Benefits for Patients

Here’s why patients may prefer this type of financing option over putting a hefty charge on their credit card (adapted from the above-cited e-book):

• Installment loans have fixed payment terms and interest rates, so patients know what they’re responsible for paying at each installment as well as when they can expect to pay the loan in full.
• Loans don’t impact the patient’s credit card limit, which enables patients to leave those open in case they need to make a large payment quickly—say, in the case of an emergency. (The American Banker article also points out that “research conducted by banks and fintechs [financial technology companies] has found that many younger Americans are uncomfortable carrying credit card balances, partly because they saw their parents struggle with debt during the financial crisis and prefer the more certain repayment terms of installment loans.”)
• There are often opportunities for patients to pay off their loans early without penalty—or even pay in full by a certain date to avoid interest charges altogether.
• Approved patients “receive a maximum loan amount that may be more than their estimated cost of treatment,” which “can help you suggest additional services or treatments the patient may have previously felt they could not afford.”

Choosing a Partner

According to the e-book, the costs associated with setting up and implementing a point-of-sale financing program vary depending on which financial provider you choose to partner with. In some cases, there may be enrollment fees, membership fees, and even discounts taken on payouts for loans with higher risk profiles. Approval rates and underwriting criteria also may vary from provider to provider, which means that some providers will be willing to finance a wider range of your patients, while others will limit approval to those with high credit scores and good credit history. As you vet potential providers, keep in  mind that, as the e-book points out, “Higher approval rates mean more patients for your practice!”

And be sure to carefully evaluate any potential financing vendor the same way you would a potential EMR company: by asking a lot of questions and carefully reviewing the answers. You’ll also want to read through all the contracts and signing documents, preferably with your attorney.

The Big Picture

According to the American Banker article, the fact that so many banks and fintechs are upping their consumer lending game comes with a few risks, the biggest being that if “the economy sours,” then consumers may “begin struggling to keep up with their monthly payments.” Furthermore, “Recent declines in personal savings rates, rising consumer debt levels and increasing delinquencies on consumer loans, while nowhere near financial-crisis levels, are all warning signs that some U.S. households may already be stretched thin.”

Still, healthcare costs are obviously necessary, and healthcare loans may be easier to justify given that “many of these loans are short term—generally for less than two years and sometimes for only a few months—and therefore pose much less risk to bank balance sheets than car loans or mortgages.”

How do you feel about providing patients with financing options? Do you currently—or would you consider—partnering with a lending company to issue point-of-service loans? Share your perspective and experience in the comment section below.