Dec. 16, 2014 Health insurance coverage alone is not indicative of patients’ ability to pay their medical bills. As consumers increasingly gravitate toward high-deductible health plans (HDHPs) because of the low premiums, many still cannot afford the high deductibles, thus creating greater amounts of bad debt.
Providers are revisiting collection efforts, hoping to engage patients and alleviate bad debt. We spoke with leaders from Novant Health to discuss a tactic they’ve taken—partnering with interest-free loan providers to help patients with their financial obligations.
The nuts and bolts of interest-free loan programs
Interest-free loan programs are often structured differently with some being more flexible than others—common program characteristics include zero interest, zero annual or late fees, and should be structured as a revolving line of credit, enabling patients to add additional services if needed.
Providers offering interest-free loans typically pay a servicing fee and/or the interest buy-down expense. However, the trade-off is being able to reduce or eliminate collection agency contingency fees, interchange fees, lockbox fees, and collections staff. Ideally, the interest-free loan programs conveniently integrate into accounting systems, and should result in higher net collections.
Affordability equates to engagement
The days of providers collecting interest rates on loans are over. With patients increasingly tightening their fiscal belts, the primary lure of interest-free loan programs is their ability to make more health care affordable. Interest-free loan providers alleviate patients’ financial concerns through interest-free, non-punitive, low monthly payment programs.
This is great news to Novant Health, a health system in North Carolina, which reported an increasing number of patients with HDHPs defaulting on their financial obligations. “Managing the influx of patients unable to pay the out-of-pocket portions of their HDHPs became a recent challenge for Novant Health,” said Craig Pergrem, the Senior Director of Novant Health’s Customer Service Care Center.
Overall, patients are less stressed and more engaged in paying off medical bills if their monthly payments are affordable—no one benefits from forcing patients into debt. Also, patients who are treated respectfully about paying their health care bill are likely to tell friends and family about the great experience.
A customized, “white glove” experience for patients
Interest-free loan providers excel in providing patients with payment terms that best fit their respective financial needs. When Novant Health managed patient payment plans internally, it absorbed the cost of managing the plans and the default rate was upwards of 33%.
By eliminating their payment plans and engaging ClearBalance®, an interest-free loan provider based in San Diego, to offer customized payment terms, Novant Health’s payment plan default rate dropped over 60% and now hovers around 9%. The loans are customized, and non-punitive, meaning that patients are not penalized for delinquency (no interest, late fees or other costs), which allows consumers to quickly catch-up on repayment if they do fall behind.
Interest-free loan providers understand how important the final step in the revenue cycle is in terms of patient satisfaction. “The last impression a patient will have of a hospital is the bills,” said Mitch Patridge, President and CEO of ClearBalance. “ClearBalance wants the financing portion of health care to be a positive experience for patients.”
To engage patients, ClearBalance first provides them with a welcome package discussing their interest-free loan programs, which many patients perceive as an exclusive invitation. They also provide patients with a customer service call center number to answer any account-related questions.
Providers no longer have to act as banks
In addition to patient care, many providers are dedicating time and manpower to debt collection. Organizations often spend significant time and resources on continued patient collections.
Novant Health ultimately partnered with ClearBalance to increase patient satisfaction and net collections. The health system’s Senior Director of Patient Financial Services, April York said that it’s about comparative advantage, “Novant Health is not in the financing business. Our staff and resources needed to be dedicated toward patient care, so we allowed organizations that are great at collections to do what they’re good at.”
- Meeting with the People: ClearBalance and Novant Health Partner for the Greater Charlotte Health & Fitness Expo