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As published on healthcarereview.com, January 2007 Evaluating Patient Financing Programs by Mitch Patridge John Smith was exasperated. The newly hired hospital CFO was preparing to give recommendations regarding several outside companies offering patient financing solutions. They all promised to provide the optimum in reducing bad debt and improving cash flow, but he questioned their ability to treat his patients with respect, dignity and compassion. How would he choose a company that fit the unique needs of both his hospital and community? This fictional CFO underscores the current dilemma faced by many hospitals throughout our country. After years of struggling to manage their revenue cycles internally, many hospitals today are looking outside their institutions to find companies with specialized systems and experience in the funding and management of patient accounts. Partnering with this type of vendor can lower collection costs and maximize revenue, while also enabling hospitals to treat patients with respect, dignity, and compassion. Finding the right fit for a hospital, though, can be challenging. There is much confusion over viable options and strategies that are fair and equitable for both hospital and patient. While there are a number of funding companies supporting the hospital patient financing market, not all of these niche businesses are created equal. How do you evaluate and choose a financing firm that best suits your hospital and provides patients with the services they need and deserve? First things first: prioritize your requirements Understanding how to meet the needs of your hospital community is the first step. Patient financing has provided a tremendous boost to the hospital industry during a time when help is needed more than ever. Affordable financing has enhanced community relations, increased hospital revenue, and allowed hospitals to either cut back or reallocate staff to areas for greater return. As the self-pay population increases and balance-after-insurance obligations continue to climb, this type of financing alternative will be even more critical to hospital operations. During the due diligence process, the focus should not only be on the benefits offered, but also on program limitations. As with all new projects, a little extra time spent up front can save your facility significant time and frustration, as well as insure that the patient population is properly treated and community relations enhanced. Key elements to consider Before partnering with a patient finance company, hospitals should consider criteria such as easy implementation. When it comes to fees and interest charged, many patient financing companies offer similar structures. However, minimum patient approval standards vary widely from company to company, and often rates change based on the patient's credit score. The actual loan process varies greatly, in some cases being very streamlined and in other cases, requiring significant work on behalf of the hospital and/or patients. Be certain the vendor makes the process simple to implement and maintain, and avoid companies requiring applications to be mailed or faxed. Find a vendor that can offer a web-based application, or better yet, no application at all. Onsite training for your staff is invaluable in establishing patient financing and should be offered at no additional charge. Financing programs should not require your facility to buy or implement new software programs. Beware of free software, as the cost of ongoing training can become cumbersome. Insist on references -- it's often the best indicator of a vendor's capabilities and the cheapest insurance policy available. Obtain a list of current, satisfied hospital clients. Ask if these hospitals are similar in size and if they serve a similar demographic base. Equitable, flexible, and compassionate treatment of patients It's critical the finance company is experienced in health care and it approaches patients from a counseling rather than collection mentality. Be certain the company offers your patient community flexible programs so a larger portion of patients qualify for loans. Each patient population is unique and it's critical the vendor offer a suite of products to best service your community. The company should also offer a multitude of options, including low interest rate loans and discounts for prompt pay. It's vital the vendor offer revolving lines of credit and term loans. Vendors often offer term loans because they are easier to manage and don't require sophisticated systems and reporting capabilities. Revolving lines of credit can benefit both the health care provider and its patients. Many hospital patients receive more than one treatment benefit from a revolving line of credit because it allows them to easily add a new charge to their existing balance. With a revolving credit line, the patient receives one monthly consolidated statement with line items rather than numerous bills. Most important, a revolving credit line typically has lower monthly payments than a term loan. The vendor should be able to qualify patients with either large or small balances, as well as patients with impaired credit scores. Most vendors will claim a high acceptance rate, which should be verified by checking references. The best test is to have the vendor provide a sample scoring on the provider's existing patient portfolio. The company should offer flexible programs suitable for large balances that may require extended payment plans, as well as same-as-cash or no-interest options. The typical loan should be relatively easy for the lender to make. Confirm that the vendor can easily qualify and manage unusual balances and credit profiles. The vendor should offer both application and application-free loans. Application-based loans are more common than the newer application-free loan products. While both have a place in the market, the non-application products can be significantly more effective as patients are automatically granted credit without having to complete an application. Make sure your vendor offers this new type of process. Patient approval should be instantaneous and funding should be remitted to the facility upon acceptance of the loan. Health care-specific scoring methods vs. generic credit scores Seek out a vendor that has the ability to provide you with either a health care score, or even better, a customized score so you will be able to prudently reach the widest segment of your patient population. Ask if the vendor has the capability to utilize credit scores beyond the traditional FICO score. There are health care-specific scores available for the hospital industry. These scores can have a significant and positive impact on the program at your facility. Also, seek out a vendor that can do more for your patients and facility than just provide financing packages. Ideally, the vendor will offer other services such as assistance in identifying charity care cases and address verification. Making it easy for patients to pay Look for a vendor that offers a dedicated call center, several different payment options, and personnel trained specifically on patient loans. The patient finance company should incorporate a "back office" and "call center" necessary to process accounts, appropriately manage incoming calls, and make outbound calls needed to keep patients from becoming delinquent borrowers. While an onsite visit is helpful, it can also be time consuming and costly. Much of the same information can be gleaned by reviewing standard reports and speaking with references. Be wary of call centers that handle different types of consumer paper. Patient finance is unique and must be treated as such to maintain a high quality of service and customer care. Be sure to ask about call center hours. Making it easy for your patients to meet their financial obligations is part of any successful program. Patients should be offered a variety of payment options such as pay-by-phone, mail, pay-by-web, payment via credit card or check, and automatic payment plans. Last steps Once you gain a good understanding of the programs offered, it is recommended you ask an unaffiliated third party to confirm the information as well as provide more detail. Be sure to require references and make a point to contact those references with specific questions. In addition, you should provide the vendor with a sample file containing information on the types of borrowers that you will be submitting so that you can get a better feel for the percentage of patients that will benefit from that program. Mitch Patridge is an authority in health care and consumer finance, and CEO and chairman of the San Diego, CA-based CSI Financial Services. |
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