Like it or not, high deductible health plans have resulted in patients shortchanging their healthcare.
According to the Federal Reserve Board’s latest Report on the Economic Well-Being of U.S. Households, 23% of adults did not expect to be able to pay all of their current month’s bills in full; 25% reported skipping medical treatments due to cost in the prior year; and, if faced with an unexpected $400 emergency expense, 44% of adults either could not pay the expense or would borrow or sell something to do so.
With such findings, there are sleep patients out there who need diagnosis, treatment, or management, but cannot afford to immediately pay their entire balance in full. But with thin profitability margins, sleep medicine practices may similarly not be able to provide courtesy payment extensions to patients. So some have found that outsourcing patient financing to companies that specialize in it allows for a happy medium: The practice is paid in full immediately, and the patient has a workable amount of time to pay their high deductible.
Valley Sleep Center in Arizona has been offering CareCredit to its patients for about 4 years, and it added Parasail as an offering about 2 years ago. (CareCredit is a healthcare credit card issued to patients upon credit approval; Parasail is a search engine for medical loan options.) Lauri Leadley, RPSGT, president and clinical sleep educator at Valley Sleep Center, says patient financing has helped her operate a more sustainable business model.
“Something as simple as a clinic visit for a sleep consultation, a sleep study, a follow-up, or even equipment for a CPAP all goes to your deductible,” Leadley says. “We already know it’s going to get applied to the deductible so we choose not to wait for the insurance to say it’s applied to the deductible. We just plan ahead and work with the patient with options like Parasail and CareCredit so they can pay us up front.”
Prior to outsourcing financing options about 4 years ago, Valley Sleep Center offered financing of its own. But the sleep center was losing money to patients who were defaulting on payments, Leadley says. “We’d provide a service, and if we let them do a payment plan and they defaulted, it would take extra time and money on the company’s part to get the money from patients,” she says. But by outsourcing patient financing, “we get the money up front and then it’s up to [the patient financing company] to get it.”
Because patient financing companies typically specialize in certain types of medical procedures, accept patients with different credit scores, and offer varying interest rates, some practices opt for multiple options. And, relevant to obstructive sleep apnea patients who are referred to dentists for treatment, there are also some patient financing firms that specialize in dental practices, such as LendingClub. “We work with a number of dental sleep medicine practitioners who recognize the benefits for offering third-party financing to patients to support paying for the comprehensive treatment they need,” says Mike Gilroy, senior vice president at LendingClub. Gilroy says the financial technology start-up facilitates treatment financing for more than 18,000 healthcare providers nationwide and has funded more than 350,000 loans.
“Dental insurance and health savings accounts may cover only a portion of cost, so when a dental emergency arises, many turn to credit cards, personal loans, their retirement plan, or their home’s equity—all of which can carry high interest rates and fees and can have a lasting impact on their finances,” Gilroy says.
In LendingClub’s view, there are three main benefits for providers offering outsourced patient financing: more cases started, more comprehensive treatment for more patients, and less administrative hassle due to limited accounts receivable and fewer collection problems.
Parasail Health’s CEO Adam Tibbs agrees there are clear benefits. He says taking out a medical loan via a Parasail search is typically a better deal than using a personal credit card. “The loan is usually a better APR [annual percentage rate] than what [the patient would] qualify for from a new credit card, and since it’s simple interest instead of compound interest, it won’t balloon into a massive debt. Every payment is exactly the same and the APR never changes,” he says.
Although Parasail is confident in its application process—which Tibbs says takes “less than 2 minutes to complete”—the company admits that “it is still not as easy as swiping a credit card” and that the amount won’t earn the user airline points or other attractive perks that some credit cards boast. Still, “we think it’s worth it because the patient will end up with a better deal typically,” Tibbs says.
Parasail is also experimenting with issuing loans with its own underwriting model, which would allow for “even better interest rates and more flexible payment terms,” Tibbs says.
In fact, Leadley with Valley Sleep Center has been on a task force for Parasail, which was seeking to answer the question: What difficulties are your patients seeing? A change Parasail recently made is experimenting with offering a lower threshold for loans. The company previously only accepted applications for financing of $1,000 or more, Tibbs says, but “as we’ve spoken with our providers, they’ve indicated that there is a strong need for financing solutions for bills below $1,000, so we’re now testing financing bills from $500.”
CareCredit, the other financing option offered at Valley Sleep Center, is utilized by a network of more than 200,000 providers from sleep labs to veterinary offices and at select retail locations such as Rite Aid stores, according to David Salzman, CareCredit VP of communications. Its health, wellness, and personal care credit card is used an average of 52,000 times per weekday by patients.
“Patients can get the care they want and need without delay,” Salzman says, adding, “Practices have a solution for out-of-pocket costs, deductibles, and copays that enables patients to pay over time, while the practices receive payments within two business days.”
A sleep apnea patient who CareCredit refers to as “Susan T.” provided a testimonial to the company: “My spouse no longer wanted to sleep with me because of my snoring,” she wrote. “I went to my dentist and she recommended a mouthpiece that they would custom fit for me. I couldn’t afford a $500+ mouthpiece, but because I had CareCredit, I was able to order it, have it custom fitted, and now I don’t snore so much, or loud.”
Salzman points out financing plans help the providers too. CareCredit (and its competitors) takes care of billing and collecting, “so the provider and their staff can focus on their patients’ needs and on other valuable tasks,” he says.
Valley Sleep Center’s Leadley can attest to the relief it experiences via financing options. She says, “It’s a lot easier for the front desk to work with a patient and provide options versus [telling them] you need to pay this right now.”
Stephanie Forshee is a New York-based journalist. She writes for a variety of business-to-business magazines.