How to Incorporate Medical Financing. A Surprisingly Simple Solution to Boost Your Healthcare Business
September 8, 2022
My Healthcare Facility Already Accepts Medical Insurance, So What’s the difference?
In the United States, health insurance’s design to provide relief to patients. It should cover checkups, emergency visits, or long-term medical treatments. Unfortunately, a majority of Americans suffer from crippling medical debt that is nearly impossible to pay off. Even with employer-supplied or privately purchased health insurance.
Furthermore, nearly 50% of Americans choose to decline or significantly delay medical treatment due to out-of-pocket costs. Treatment is important.
Whether elective, preventative, recovery, palliative, or emergency, it all makes a difference in a patient’s quality of life. Oftentimes it is absolutely necessary. Because of this, it is important to be able to offer patients a way to financially cover all their treatment needs.
This is where offering and accepting medical financing will benefit your patients. Additionally, healthcare businesses that offer an in-house lending program do better than their competition. Patient financing allows access to treatment that otherwise would have been out of reach.
Furthermore, in-house financing fulfills your patients’ financial concerns immediately. No need for a patient to take the time to research lenders or look for the right financiers. Patients won’t walk out of the facility with no idea how they will pay for uncovered services.
When a healthcare provider can present financing options in-house, a patient has immediate trust. They already trust you for their health. So, rather than shopping for financing on their own, an option from a trusted source is the best solution.
What is Medical Financing?
Medical financing provides a way to receive treatments or procedures that insurance or savings do not cover. Essentially, a patient would take out a medical loan or apply for a line of credit for upfront medical costs that they could not afford otherwise.
A medical loan is another way of saying a personal loan for medical expenses. Most financiers do not have strict usage boundaries with their loans. Therefore, personal loans and medical loans are interchangeable.
The borrower receives a fixed amount of money and they designate how they utilize their approved financing. They would then repay the loan incrementally over a fixed amount of time and with fixed interest rates.
Comparatively, a line of credit offers a borrower a maximum limit. The borrower can use as little or as much as they like from their credit limit. They can then repay it incrementally, and continue to borrow up to their limit, as much or as little as they need.
How Can My Patients Benefit From Medical Financing?
Medical procedures are rarely 100% covered by insurance. Even in cases when insurance does cover all or the majority of a procedure, the deductible alone can be extremely financially taxing. Because of this, many patients struggle with providing the necessary funds for uncovered, out-of-pocket expenses upfront.
A patient can use their medical loan to pay for a variety of medical expenses that your practice may offer. These may include elective procedures, emergency, palliative, or recovery. Additionally, medical loans can also cover a patient’s day-to-day financial needs while they recover from their medical procedure.
Moreover, patients can benefit from medical loans by consolidating numerous medical bills into one easy payment. This can simplify your patients’ bills. It can even make their monthly payments less if they qualify for a lower APR.
What Procedures Can Medical Financing Cover?
How Would My Patients Get a Medical Loan or Line of Credit?
Patients who need financial aid can apply for healthcare financing at an institution like a physical lender’s office, a bank, or even through an online lender. The benefit of online lenders is that many offer partnerships with healthcare facilities.
If you are wanting more patients to say “yes” to their procedure, integrating in-house medical financing through an online lender is the answer. When you offer a lending program in-house, you can help your patients apply for financial assistance right in their chairs or the front office.
Applying online for a medical loan or line of credit is a quick and easy process. This usually takes a few minutes to complete. Approval is available before the patient has time to leave your facility. Swiftly addressing patients’ number one concern, money, immediately gives them little reason to deny a procedure.
How is Medical Financing More Advantageous than Payment Plans?
Offering payment plans can be a great option for healthcare facilities to get their patients to commit to treatment. Payment plans split large medical expenses into multiple months of payments. They require no collateral, no interest, and no lender involvement.
Unfortunately, payment plans have their downside. With this solution, you will get paid over a period of time, rather than immediately. Because of this, payment plans are risky to providers.
Patients can leave with their treatment complete and default on making their payments. Chasing down patients for unpaid invoices is not the best option when it comes to securing your due compensation.
Alternatively, you can incorporate medical financing with a designated lender. This would still provide your patients the option to split their medical expenses into monthly payments.
However, this solution has zero financial risk on your part. The lender would be assuming all risk with the medical loan. They would be responsible for sending the money, offering the credit, and collecting the repayment.
With finances secured, your payment is instantaneous from the financier. And the patient can have same-day treatment or schedule for the next availability. Without having to worry about how they will afford to cover the expense upfront. Because of this, healthcare practices offering their own lending programs outsmart their competition and boost their profits tremendously.
What Qualifications Would My Patients Need for Medical Financing?
Luckily most personal loans are unsecured. Unsecured loans do not require any collateral such as a home, vehicle, or savings account. This means the patient will not need to sacrifice important areas of their life in the name of their health.
However, approval on unsecured personal loans is typically reserved for borrowers with good credit scores. Better credit scores have better rates offered. More attractive rates incentivize patients to move forward with their medical procedure.
If a borrower has poor personal credit, secured personal loans are also available. Secured loans require collateral for approval. However, they can benefit a borrower with more competitive rates than an unsecured loan.
Ultimately, every lender’s criteria are unique. Below are the general factors that play into the decision-making of a medical loan application acceptance:
- Credit score- The higher a credit score is, the better the loan terms are. Typically, higher credit scores give borrowers lower interest rates. Poor or no credit scores will yield higher interest rates. This in turn makes loans more expensive and thus more difficult to pay off.
- Income- Generally, the more a borrower makes annually or monthly, the higher the loan approval will be. If a borrower does not make enough to cover even the monthly expenses of the loan terms, they may not qualify for medical financing.
- Loan terms- Interest rates vary depending on the amount of money needed or the time frame required for repayment.
Comparing Medical Loans
Annual Percentage Rate (APR)
Examining the annual percentage rate (APR) is important when deciding on the right loan or line of credit. APR is the additional cost of the loan on top of the loan amount. This includes the interest rate as well as any other extra fees the lender charges.
A lower APR is generally offered to applicants that have good or excellent credit scores and low debt-to-income ratios. These types of borrowers pose less risk to the lender. Because of this, the reward is lower loan costs.
Reversely, applicants with poor, little, or no credit history have higher APRs. Lenders charge higher fees to high-risk borrowers to compensate for the potentially hazardous approval.
Ultimately, the higher the APR is, the more expensive the loan is. And the less affordable it becomes to borrow money. Medical loan APRs can range from as little as 2.49% to upwards of 35.99%.
Every borrower is unique. Therefore, approval terms and rates are different based on each borrower’s circumstances. A lender would need to be well established to offer a large loan. However, the amount offered is typically based on an applicant’s income and credit score.
Approval amounts are higher for borrowers with larger incomes and better credit scores. Conversely, approval rates are lower for applicants with poor credit and little income. The lender wants to avoid as much risk as possible. A lender assumes additional responsibility when giving money to a borrower who might not have the best track record or financial means to repay the money.
Loan amounts can range from as little as $1,000 to as much as $100,000 or more. Your patients would need to determine how much they want to apply for based on their procedure cost, follow-ups, and day-to-day financial needs during recovery.
Loan terms are the amount of time the borrower has to repay the loan plus all interest and fees. The length of time tied to a loan will affect a borrower’s monthly payment. It will also affect the overall cost of the loan.
Loan terms can be short-term ranging from a few months up to 12 months. Or long-term can be 13 months, 60 months, or even 300 months, which is 25 years.
The shorter the loan terms are, the higher the monthly payment will be. The longer the loan terms are the shorter the monthly payment will be. Because, a condensed timeframe squeezes higher payments into less months. And a longer time span spreads the payments into smaller monthly increments.
However, the longer a loan takes to pay off, the more interest will accrue. This makes the loan’s total cost more expensive. Conversely, the quicker a borrower can pay off their loan, the less interest they will have to pay.
Let’s take a further look into the different types of loan terms, the benefits, and the disadvantages of each.
Loan Terms for Medical Bills
There are a variety of terms offered to pay off medical loans and lines of credit. A common question you may receive from your patients as they apply for funding is “Which option is better, short-term or long-term?”
Despite being in the medical field and not in financial services, it is best to understand the basics. Especially when offering in-house financing to your patients. Knowing how to best help your patients in every aspect will make you more trustworthy to your clients. Producing more treatment conversions.
Loans can range from a few months to 25 years. So why would a borrower choose one option over the other? Let’s take a look further to better understand your patients loan term choices.
Short-Term Loans for Medical Bills
Generally speaking, short-term loans need to be repaid after a few months, up to a year. So when choosing between 6 months to a few years, why would someone go with the short-term option?
Short-term loans are best suited for borrowers who need a small amount of money quickly. These may be patients who can almost afford a procedure, but not in full. They can take out a short-term loan to cover the remaining portion of a treatment that they want to or need to start immediately.
Benefits of Short-Term Loans
Disadvantages of Short-Term Loans
Long-Term Loans for Medical Bills
Benefits of Long-Term Loans
Monthly payments are more affordable when divided over a larger number of months. Because of this, long-term loans can be a great option. Especially when there is a need for a high amount of funding to cover medical expenses.
Interest rates vary for every borrower based on credit history. However, interest for long-term loans is generally lower compared to short-term loans. Although interest rates vary for every borrower based on credit history.
Disadvantages of Long-Term Loans
The longer a loan takes to be repaid, the more interest will accumulate over time. Racked-up interest makes long-term loans generally more expensive in the end. Furthermore, with extended loan repayments, a borrower is stuck in debt for years.
Benefits of Adopting Medical Financing to Your Medical Practice
Adopting medical financing for your patients has many advantages. For both your patients and your practice.
When your patient can benefit financially, they have the confidence to agree to treatment. In turn, this benefits your healthcare business with further profit. Below is a list of all the advantages offering medical finances has.
Acceptance of Medical Treatment
Procedures whether cosmetic, emergency or ongoing are all important. But finances can stand in the way of getting patients the help they need. Medical financing offers a solution for patients to feel confident saying “yes” to treatment.
Higher Profit Margins
As a healthcare provider, your goal is to help your patients receive the treatment they need. Finances play a huge factor in patients’ willingness to accept their treatment plan.
In-house medical financing provides your patients a way to work around their budget. It also provides you instant payment from the financier. More yeses mean more profit for your healthcare business.
Flexible Loan Terms
Many medical procedures cannot wait. However, many healthcare providers are unable to perform a treatment if a patient has no financial means to cover their services.
Medical financing offers almost immediate funds to get a provider the money they need to perform the treatment. Therefore, patient care is not delayed. Funding can be as soon as the same business day, the next, or a week later.
Affordable Alternative to Credit Cards
Medical loans or lines of credit generally have lower interest rates compared to credit cards. If a patient were to pay for their medical bills with their credit card, they may be paying interest of 16%-35%. And they could max out their credit card limit.
This would put them in a financial hurdle for any other day-to-day needs. Many medical loans offer some lower-end interest rates between 2-8%. It would also be separate from the patient’s credit card limit. This would give them more available funds in every aspect of their budget.
Flexible Payment Allocation
One-Stop Shop for Patients
As a healthcare facility, it can be a matter of life or death when it comes to patients accepting treatment or not. Many chronically or terminally ill patients may refuse palliative treatment. They want to avoid causing a financial burden on their loved ones when they pass on.
Alternatively, some patients may suffer from self-esteem issues with their teeth, weight, or hair. Others may have deteriorating joints or painful injuries. These may not be not emergencies. But, the treatments these patients desperately seek may seem out of reach due to financial availability.
When your healthcare facility adopts medical financing, you instantly become the hero in the story. You’ve become a one-stop shop for all medical and financial needs. There is no need for a patient to leave your office to look for ways to pay elsewhere.
You receive treatment acceptance on the spot. All while giving cancer patients more time with their families. Creating radiant smiles. Or providing rehabilitation treatment to patients who struggle to walk or get a good night’s sleep.
Your patients can have success stories. And your business will flourish from helping the lives of others.Imagine the potential your medical practice will have when it begins to offer more financial avenues to pay for medical expenses. Schedule and complete all the treatment plans you’ve designed with no hassle. “Yes” becomes easy and “no” becomes a thing of the past.