Using Patient Financing to Reduce Debts and Increase Revenue

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How Patient Financing Allowed the University of Kansas to Offer Long-Term Interest-Free Payment Plans to Patients

One of the most common financing challenges for healthcare providers is unpaid balances from patients. Unpaid balances not only reduce a health system’s total revenue, but they also add to a provider’s total liabilities and impair healthy patient-provider relationships. Additionally, debt collection strategies are often frustrating for both providers and patients and can cause a negative breakdown in the patient experience.

Before outlining strategies to cut down on the amount of unpaid balances, it can be helpful to approach solutions from a patient’s perspective. Unpaid balances are overwhelmingly caused by the shift in bill responsibility to the patient with increased co-pays and deductibles.  Patients more often cannot pay their responsibility in full nor can they afford a short-term promise-to-pay plan with high monthly payments. One tool that healthcare providers can leverage in this situation is third-party patient financing solutions.

Non-Recourse and Recourse Patient Financing

Patient financing solutions help reduce workload of health system employees by working directly with patients to arrange for monthly payment plans. It’s important to note that recourse patient financing vendors are not debt collectors, and do not operate as collection services. Rather, they offer patients affordable financing options to help reduce debt loads for health systems.

In the world of third-party patient financing solutions, there’s a major distinction between recourse and non-recourse financing models. In a recourse financing model, the patient financing vendor works with all patients to offer affordable financing options, however all loan balances are still owned by the health system.

This is contrasted with a non-recourse model in which loan balances and liabilities are transferred and held completely by the third-party financer. The idea of offloading unpaid debt liabilities to non-recourse financiers can be attractive to health systems, however, that strategy often falls well short of their patient collection goals.

Because non-recourse financers must take on the full liability of unpaid loans, they are much stricter when choosing which patients to offer financing to. Non-recourse financers conduct credit checks of patients and reject a significant amount of eligible patients. This can harm health systems in two ways. One, when a high number of patients are rejected, the overall debt load for a health system is not sufficiently lowered. Second, patient-provider relationships are likely to suffer from a high number of patient rejections from non-recourse financers. Patients who are unable to find payment plans from a non-recourse financer may be left without options and leave bills unpaid. Unfortunately, the very patients who need a payment plan are those who do not typically qualify for non-recourse financing.

The Benefits of Recourse Financing

Which brings us back to recourse financers. Because healthcare providers ultimately control the patient’s balance, recourse financers can offer much more generous conditions, and most importantly, can provide financing to all eligible patients. Recourse programs can offer zero- or low-interest plans with flexible term limits or can even provide adjustable monthly payments that increase or decrease in conjunction with interest or loan lengths.

That’s why when the University of Kansas Health System needed to expand their payment options, they partnered with a vendor that could provide recourse financing. Marvin Mickelson, the health system’s System Director described their patient collection philosophy as “It’s about doing everything we can to allow the patient to get what services they want to receive and absolutely need to receive.” That means providing affordable financial options that are flexible and patient-centric.

Using recourse financing allowed them to offer generous options with extended payment windows. Rather than the typical shorter term payment plan offered by internal health systems, The University of Kansas Health System provides zero-interest payment plans for extended periods.  For instance, Mickeslon mentioned “If they’ve got a sizable enough balance, they can pay that over a five-year period, interest free”.

And according to Mickelson, adding recourse financing has made “virtually immediate” impacts to their revenue cycle. “We saw immediate cash flow influx” he said when referencing their recourse financing patients. Since the program was started, the health system has lent out more than $24 million to patients with a recourse rate (the percentage of loan balance that is returned to the hospital) of less than 10%. Not only has their recourse financing program helped boost revenue and cut down on unpaid bills, but it’s also improved patient relationships and customer sentiment. The health system’s revenue team often receives thank-you calls and notes from grateful patients who appreciated receiving customized payment plans that allowed them to pay for healthcare bills without undue sacrifice or hardship.

Finding a Patient Financing Partner

Partnering with the right vendor can make a big difference when it comes to offering your patients affordable financial options that encourages repayment and fosters positive experiences. As a full-service financing partner, AccessOne not only offers flexible financing and term limits, but also takes on all patient billing and communications.

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