A/R Harmful to Health of ASC Business

Many practices turn to outside patient financing to reduce financial risk and improve cash flow

Practicing healthcare is a service, but running an ambulatory surgical center (ASC) is a business. With current reimbursement and self-pay conditions, more patients are overwhelmed with higher out-of-pocket costs than ever before. ASCs that provide financing options make it easier for patients to fit procedure costs into their monthly budget. A recent survey conducted by Inquire Market Research revealed that in the absence of financing options, 32 percent of patients are more likely to ask the healthcare provider to function in the role of a financing company by billing them.¹ But when an ASC offers their patients in-house financing, the cost of billing or providing credit services can significantly impact their bottom line.

Many ASCs across the country have recognized the expense and risk of carrying accounts receivables (A/R) and are turning to an outside patient financing company as a solution. As facility fees range from $400 to $7,000 and an increasing number of procedures being done by ASCs are considered elective, the need for outside patient financing is quickly becoming imperative.

In-house Financing: A Risky Business

When a patient is facing a $1,000 deductible and 10 percent co-pay on a $5,000 procedure, coming up with $1,500 in out-of-pocket costs can be a real challenge. Studies show that the average person only has $300 available credit on their consumer credit cards and can’t write a check for more than $500 out of their monthly cash flow. Billing helps patients meet their financial obligations. However, when the ASC takes on the responsibility of in-house financing, they also incur additional costs and financial risk. When you consider the average total cost of sending a statement to a patient is approximately $8 to $10 per account per month, with an average of 200 statements per month per center, these costs easily add up to over $21,000 per year. And when efforts to receive payment fail, it becomes a bad debt write-off.

Financing Solutions That Work for the Patient and the Provider

Providing quality healthcare should be the ASC’s primary focus, not tracking down late or missing payments. Using a patient financing company allows ASCs to focus on what matters most — treating their patients. “Offering patient financing has reduced our A/R and lessened the amount of time we have to spend on collections,” states Pat Brown, of Upper Cumberland Physician Surgery Center (UCPSC) in Tennessee. “The plans are easy to use and patients are very grateful that we offer financing.”

UCPSC is not the only ASC reducing A/R and collection costs with the help of outside patient financing. In fact, research shows healthcare providers offering patient financing through CareCredit decreased their A/R aging by 37.7 percent.²

When a patient financing company offers a number of different payment options, including no interest or low interest payment plans, it provides the patient the flexibility to choose a plan that fits their budget. “No interest” plans typically give patients the opportunity to make payments over time and incur no interest charges if the balance is paid in full within the specified time period. A “low interest” plan will generally allow the patient to extend their payments over time at a specified interest rate. These plans are ideal for patients with higher out-of-pocket fees who prefer lower monthly payments.

Another factor when considering a patient financing program is the initial cost to patients. Plans with no upfront costs, annual fees or prepayment penalties, are more attractive options to offer. Also good to consider are financing plans that provide patients with an unsecured, revolving line of credit. Unlike a term loan, this type of plan functions much like a credit card — giving patients the flexibility to access their credit at any time, without having to reapply. Patients with this type of payment plan have the added benefit of being able to ask for increases to their account limit and add additional expenses (within their limit).

Meeting the Patient’s Needs in More Ways than One

Here’s how an outside patient financing program generally works. When a patient has an out-of-pocket facility fee they want to finance, all they need to do is complete an application form with that financing company. Once approved, the financial relationship is between the patient and the finance company, and removes the responsibility from the ASC. The ASC should receive their payment directly from the finance company without risk — regardless of whether the patient delays payment or defaults.

ASCs can recommend their patient financing program not only to new accounts but to their existing accounts. By converting in-house billing accounts to your outside financing accounts, the ASC can further reduce their A/R and collection costs.

If you find your center spending too much time and effort sending out statements and tracking down payments that are affecting the health of your financial operations, it is time to consider a patient financing company that enables your facility to run as efficiently as it can. 

References 

1. Inquire Market Research. Study March 2006.

2. ADCPA. An Analysis of the Impact of CareCredit on U.S. Dental Practices. July 2005.

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