A Federal Reserve Report from 2019 shows that more than one-fifth of adults had unplanned medical expenses ranging between $1,000 and $1,999. With an average deductible of over $1500, it’s not surprising that healthcare providers are turning to patient financing to aid their collection efforts.
But are healthcare providers ready to become lenders to their patients?
What is Patient Financing?
Patient financing is when healthcare providers become lenders for the amount owed by their patients. Although there are multiple variants to financing medical services, essentially all of them result in the providers holding the balances until their patients pay the amounts in full.
Is Patient Financing a New Concept?
The answer is no. Healthcare organizations have almost always sought lending solutions for their cash flow concerns. Patient financing has been in the market since the nineties and is the strongest and most mature offering for elective procedures such as cosmetic surgery.
What About Patient Financing for Those Requiring Non-Elective Procedures?
Non-elective procedures are the ones that are medically necessary for patients. Unfortunately, the market for such procedures is fraught with multiple challenges. Nonetheless, non-elective procedures garner ample attention because they are the largest part of the $3.5 trillion healthcare economy.
What Are The Different Models for Non-Elective Patient Financing?
- Self-funding – It occurs when the provider carries the amount due as receivable and then tries to collect it directly from the patients.
- The recourse lending model – It occurs when the providers work with the lenders, although first, they must pass the lenders’ underwriting criteria. Once the patients agree to join the program, their receivable is then funded to the providers by the lenders. The funding is sent to the providers in exchange for a one-time discount fee and ongoing service fees. The lenders recover their losses from the providers if the patients fail to pay.
- The non-recourse lending model – It also occurs when the providers work with lenders, but in this case, it’s the patients who must pass the underwriting criteria while the providers agree to the lenders’ terms and fees. The lenders bear any losses without recourse to the providers. It is up to the lenders to accept or deny patients based on their underwriting. The providers are not funded by the lenders if the patients get denied.
What Are The Drawbacks of Financing for Non-Elective Procedures?
Recourse models usually have high recourse rates for patients with weak credit scores or those who can’t pay. Hence, providers don’t receive much value in exchange for the fees charged by the lenders.
Non-recourse lending may result in very high-interest rates and fees for the patients, the only solution for the lenders to offset any losses. Besides, lenders can probably deny patients with weak credit or those who are more likely to need lending.
Lendee makes sure that you receive a loan at a fair rate, making microloans one of the best bets for you in times like these.
Download the Lendee app today or visit www.lendee.com if you have any questions.