Healthcare Payments

02. 26. 21

Mike Pelusoby Mike Peluso · CTO, Rectangle Health · February 26, 2021

In the first installation of my Care Now, Pay Later blog series, I introduced Care Now, Pay Later (CNPL) as the right way to do patient financing. While banking and financial services want to push Buy Now, Pay Later (BNPL) offerings into healthcare, what patients really need is access to flexible, compassionate payment plans without adding lines of credit or high-interest rate loans – that’s CNPL. Let’s talk now about what this business model means practically for providers.

The healthcare industry has had the ability to offer payment plans for years, but there hasn’t been widespread adoption. Part of providers’ hesitation stems from the fear of losing upfront payments and straying from the traditional revenue cycle model. The reality is, though, that in many cases the traditional revenue cycle model is breaking down. Providers are dealing with high accounts receivable balances and turning to systems like healthcare credit cards and collection companies, both of which take a percentage of providers’ earnings.

Realizing the financial advantage of CNPL requires broadening the traditional healthcare payment model that centers around lump-sum payment after care. There will always be patients who can and prefer to pay upfront, but CNPL lets providers work more effectively with patients who are either unable to or prefer not to pay a full balance at once. Rather than taking away upfront payments, payment plans are a means of additional, consistent revenue stream across smaller installation payments.

To illustrate, imagine a patient recovering from care and receiving a $2,000 medical bill that they are unable to afford paying at once. They might receive bill after bill, but that $2,000 does not become any easier to pay. Finally, months after care, a collection service becomes involved, coming as a blow to both the patient and the provider. Alternatively, if this patient’s provider had worked with them to break their payment up into $500 installments over 4 months, that provider would have received a $500 payment each month, totaling the full amount in a fraction of the time. Not to mention the priceless benefit of saving staff the energy and effort required to chase down the balance.

When providers establish this practice across their base of high balances, the monthly payments add up. Instead of waiting for lump-sum payments, they receive a steady cashflow of incremental payments. And while on a given day, they might extend a loan to a patient, their bank accounts are bolstered by consistent incoming payment installments from treatments they performed in the months prior.

It’s a big change to the typical practice’s business and financial model. However, we’ve seen industries across the board adapt a “subscription” or monthly installment mindset. Think of the apps you are charged monthly for, it’s a very familiar and friendly way to capture payment, month over month, without doing harm to credit scores or crippling people with debt. Practices can implement the same type of scenario for their patients.

According to a recent consumer study, 63% of consumers express extraordinary interest in payment plan offerings to avoid accruing bad debt. Patients are looking for approachable payment options, and practices need to stabilize cash flow. Care Now, Pay Later solves for both. In this way, providers can offer care to patients, and at the same time, create a recurring revenue stream for the financial well-being of their practice.

Stay tuned for the next post in my Care Now, Pay Later blog series, where we’ll talk about the best way to start implementing CNPL at your practice.

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