On this episode of The Rectangle Health Podcast, Michelle Dowling – EVP of Marketing and Tyler Johnson – CEO of Healthcare Finance Direct share how our patient financing program helps practices increase case acceptance, while meeting the needs of patients who seek responsible, financial alternatives to paying upfront and out of pocket. Learn more about our patient financing solution here.
Gary Tiratsuyan 00:00
Hello, everybody, and welcome back to the Rectangle Health podcast. Very excited for today’s episode, increasing your case acceptance. And to be joined by Tyler Johnson, CEO of Healthcare Finance Direct, and Michelle Dowling, executive vice president of marketing here at Rectangle Health. Tyler, Michelle, thanks for joining us today.
Tyler Johnson 00:18
Hey, thanks for having us.
Michelle Dowling 00:19
Gary Tiratsuyan 00:21
Before we get started here, I’d love to give our audience a chance to learn a little bit about you both. Tyler, can you tell us about your work at Healthcare Finance Direct and sort of the evolution of the organization over the years?
Evolution Over the Years
Tyler Johnson 00:32
Yeah, absolutely. Ironically, HFD was actually built on the back of the Great Recession in 2008, 2009, and it was basically built on the idea that a patient’s credit score shouldn’t determine their propensity to pay. And a very noble idea, especially coming off of the Great Recession. And a lot of people’s credit scores were really hurt. People lost their employment, and so people that were typically a 750 FICO all of a sudden dropped down to 650. And then we’re getting declined. Coupled with just the combination of prime lenders like a care credit, when the economy gets tougher, they tighten up their scorecards. They want to prove less people. All the while in healthcare, demand just constantly rises. The demand for a root canal or industry doesn’t go away when the economy does a downturn.
And so the idea was, how can we create more access to care patients? And for about eight years, the idea was mostly just to approve turndowns for care credit the customers that were typically denied by a prime lender. So that’s what we did. We created a system that allowed a provider to build payment plans for customers and serve every customer that was otherwise walking out their door or weren’t able to get the treatment that they needed. And where we really evolved, I would say during COVID about two years ago, we just recognized that the landscape was changing. Buy now, pay later became a favorable thing. Where were in buy now, pay later before it became popular, we recognized we had kind of figured this out for years and we didn’t really know it.
And so we really evolved as a company to let’s just embrace being a total solution. Let’s be a complete top of funnel finance company that can approve anybody from an 850 FICO score all the way down to someone with a zero FICO score with very little credit history. And if we could be that total solution for providers, we think we could change the market. And that’s really what’s happened over the past couple of years, and it’s allowed our business to take off. And really, it’s been able to serve a lot of primarily our mission is to serve the underserved. So we’re able to double, depending, sometimes triple case acceptance, which has been really exciting.
Gary Tiratsuyan 02:37
Amazing. Tyler, thank you so much. Michelle, can you tell us a little bit about yourself and how Rectangle Health has been shaping what’s possible in the healthcare industry.
Michelle Dowling 02:45
Sure, Gary. I’m Michelle Dowling, and I’m currently the executive Vice President of marketing here at Rectangle Health. I’ve been in the healthcare technology field for about eight years, and what drives me every day at my job is that at Rectangle Health, we enable providers to connect with their patients. And when our company was first launched, we enabled this connection primarily through the patient payment and aimed to get providers paid at the time of treatment, this original technology was a payment terminal. And since then, we’ve built out our own software platform to allow providers to engage with their patients. And this platform is centered around payments, whether it be online, website or mobile device, but also includes integration into the practice management system. With this technology, we’ve seen providers have better relationships with their patients.
So if you fast forward today, we’ve developed out the platform and we keep asking ourselves how we can further engage patients through our technology. And COVID was a significant catalyst for this as were continuing to make a deeper transition to digital. Whether it be digital forms to leave a card on file, send patients a text no one wants touch a clipboard, paper or pen, answer their phone, or even open a physical piece of mail anymore. So our focus has always been to create tools that simplify the practices day to day and make a difference in the patient experience at the practice.
Gary Tiratsuyan 04:08
Thank you both for coming on the podcast. So let’s get into it. And I’ll start with you, Michelle. Can you give us your take on the current state of healthcare payments on the practice side?
Current State of Healthcare Payments
Michelle Dowling 04:18
Of course. Today we know that most practices are facing severe labor shortages, from the front desk to the back office billing staff. We know that increasing costs and inflation is on everyone’s mind. And these are among the most biggest concerns when it comes to the financial health of the healthcare organization. We can’t overlook what’s happening on the patient side as well. As Americans owe hundreds of billions of dollars in medical debt, and there’s one in five that can’t even pay for a medical bill. So many people report that they delay or go without care because of cost, whether it because they can’t afford the out of pocket responsibility, they’re not covered by insurance, they’ve lost their job. And what’s alarming about this is that avoidance of care leads to more and more issues.
When they forego treatment of milder conditions or routine care, it becomes more serious and ultimately will lead to more costly treatments over time. So we’re aiming to do for the practice. And what we’ve seen over the past few years is that many organizations are adopting automation to improve efficiencies, offer more payment options, and utilize technology to capture more information digitally.
Gary Tiratsuyan 05:28
Thanks so much, Michelle. It’s definitely a snowball effect when you avoid those treatments, and then it just seems to get worse and worse. So combining the power of people and technology is definitely going to help increase case acceptance. Tyler, I want to get your thoughts from a little bit of a different angle. What are you seeing and hearing about patients being able to make payments and receive treatment?
Tyler Johnson 05:51
Yeah, absolutely. So to piggyback off of what Michelle is saying, there is consumers are just demanding a more consumeritized, for lack of better word, experience. They’re used to being able to purchase and check out on their phone, make appointments, schedule things. And historically in healthcare, it’s been rather slow to adopt a more consumer driven experience. And so what I think consumers are demanding is just an easy way to be approved and to be checked out and to just know what their options are, ideally even before they come in office. I think overall, on the payment side, though, what we’re seeing right now, especially in the macro economy with inflation, and people are trying to determine whether or not they pay their car payment or their medical bill, it’s extremely important that people have affordability options, especially the younger generation.
That’s something that’s really changed is this new generation is used to paying everything through a subscription based model. They’re used to paying their Netflix or most of their bills are actually paid monthly. Being able to turn something that used to be a $3,000 procedure into $100 a month just really increases that affordability, that access to care. And we have some offices that do upwards of 50 60% of their volume through financing just because that affordability matters so much. And just some interesting statistics around that 57% of people actually live paycheck to paycheck. And so being able to come out of pocket to pay a two, three, sometimes $5,000 bill and it’s tough to do. And one thing I thought was interesting is over 28% of people that make over $200,000 actually still living paycheck to paycheck.
And that’s something that is we have to be both cautious about and just guarded on, is that we’ve been in an increased economy ever since 2008 2009 expanse. Recessions happen. And one thing that typically happens when there’s a little bit of a downturn is prime customers. People that used to be qualified as a Care Credit customer, those people actually become more volatile in a downturn like this, where historically they may only default on their payments one to 2% of the time, but in a downturn could default five or 6%. And so it doesn’t seem like much, but two to 300% increase in defaults. And when your models are built on that, it makes it somewhat unsustainable for the capital side.
So what you’ll start seeing is people like Care Credit and a lot of big players on the prime lending side again start to tighten their scorecard and approve less people over the past ten years, they may have approved 50% of customers, they may only approve 30% to 40% going forward and sometimes even less. And so that just leaves less options available in the market and makes it even more imperative on the practice to make sure they have a total solution in place so no customer is left behind.
Gary Tiratsuyan 08:35
Yeah, those are definitely some eyebrow raising stats, given this current state. Tyler, can you share a few other roadblocks standing in the way of patients being able to afford and receive that care?
Roadblocks to Approval for Patients
Tyler Johnson 08:49
Yeah, absolutely. So I touched on approvals. Approval rates matter for a lot of different reasons. A lot of times there’s people that just don’t even apply at all because they think they won’t qualify. So you get some self selection, and that leads to some additional self fulfilling prophecy. There you have treatment coordinators that don’t want to offer financing as often because they really just don’t want to decline people. I mean, it’s in their nature to want to serve everybody, and if they know they’re only getting 30, 40, 50% approved, they’re a lot more hesitant to push financing. And the second thing that happens is we call partial approval. So if they need $4,000 worth of treatment, but a bank will only approve them for $500 or $1,000 or $2,000, then it really doesn’t meet the need of the ask.
So even though we’re saying 50% approval, some of those approvals might not actually be good enough to cover the actual treatment that’s needed. So I think the big theme around that is just how can you make it so that this is built for the treatment coordinators? How can you make it so that the treatment coordinators have everything they need to be able to serve every customer? And that’s really what the market has been demanding before. Ten years ago, five years ago, the market wasn’t there yet, both on the consumer side and the provider side. But it’s absolutely clear now that the providers and the patients are demanding a total solution.
Gary Tiratsuyan 10:09
That’s really insightful, Tyler, and I think that’s actually a perfect segue into the recent partnership between Rectangle Health and Healthcare Finance Direct. Michelle, I want to ask you if you could give us some background into the patient financing program.
Michelle Dowling 10:23
Sure, Gary. It was back in early 2021 when Rectangle Health introduced patient financing as a healthcare specific response to retail’s megapayment trend buy now, pay later. And as a consumer, buy Now, Pay Later is now part of our everyday journey. You see it on websites as you check out the option to break a payment into smaller chunks over time. Now when you’re buying a TV or checking out your Amazon cart, paying off tangible items and goods are part of the norm. And back to Tyler’s point about car payments. We don’t buy cars in cash, right? We go into the dealership, we figure out a finance plan based on amount per month on what we can afford with a predetermined end date. While at Rectangle Health, we created patient financing. Because what I just described doesn’t translate to health care.
Frankly, for us in the healthcare industry, it’s always centered around care and we focus solely on health care and it’s our mission to help practitioners provide care and allow patients to pay for their care. So what’s so interesting about the concept of buy now, pay later actually always existed in healthcare. We can compare that to an orthodontist for anyone who’s put braces on their child’s teeth knows that you don’t pay for braces up front, you pay a specific amount over a specified amount of time. So this is not something new. However, what’s different now is everything that Tyler described as those barriers to care and that installment payments over time is pervasive in retail sectors.
It often looks like a viable option for healthcare providers, but we need to be wary of leading patients to financing that actually creates debt and pushes them deeper into extensions of credit. So patient financing is a compassionate way to provide options to patients and make care more accessible. Because we know that patients want to pay for care, they want to get care, and patients have a relationship and often establish care plans with their providers and need to continue seeing them. So working with them to establish a plan to afford care is important in this continual effective relationship and is what led us to our partnership with Healthcare Finance Direct.
Gary Tiratsuyan 12:34
Really amazing. Michelle, this program really gives patients and practices the ability to say yes to care. Tyler, I want to shift to you patient financing versus buy now, pay later. What’s the difference?
Buy Now, Pay Later Vs. Financing
Tyler Johnson 12:47
Yeah, good question. So buy now, pay later, as Michelle mentioned, is basically buy the goods or service. And historically it’s been offered as a way to split up payments into what oftentimes is three, four, five payments, oftentimes over a couple of weeks. And so the actual extension of credit is nice and it helps with affordability. Usually it’s again, maybe a three to four month extension of credit. Historically it’s been focused on smaller dollar amounts, three, four or $500. I believe the average ticket size for a typical buy now, pay later company is around $300, which again is good for something you’re buying on Amazon or you’re buying a new TV, something that would fall into that price point. And it does make things a little easier to pay, but it doesn’t solve the full need for what’s needed for health care.
Number one, what’s needed for health care is for everybody to be approved. Just because we believe in the democratization and health equity of making sure that accessibility and supply is able to be given to every patient that wants care. Our mission was how do we say yes, how do we make it affordable for them to do so? And I’m not going to lie. It’s a challenge. And the reason why a lot of people haven’t done it is because one example that Michelle mentioned was traditional orthodontists, which have done something similar, but orthodontists do have an advantage in that they have a patient coming in every month to get the metal, what they call metal prison, right? You got the metal on their teeth, you got to come in and adjust it.
It just leads to more engagement where there’s less risk in a customer not paying you. But for most things in healthcare, you provide that service, and the customers have been treated and they’re gone. And so it’s considered, what’s, an unsecuritized loan? You can’t go repossess a car or a house or a good that has tangible value. So it’s viewed as riskier. And so that’s why, historically, the big banks, big capital markets haven’t want to approve the bottom half of Americans. I mean, it’s 150,000,000 people that basically have been deemed as being unworthy of being financed for medical treatment. And again, because we spent ten years serving this demographic, understanding them, understanding how they pay and their payment performance, we just disagree with the assessment. We actually think they pay a lot better than people think, a lot better than what most institutions would think.
And good enough. As long as you create a good customer experience, make it easy for them to pay, that’s the big key, then it’s worth it for the practice to say yes to every patient multiple levels, for actual loyalty, giving that person that treatment. But if you can serve that customer that was otherwise walking out your door, then more times than not, you have a customer for life on that. So the patient financing program is designed to serve everyone. And so that’s something as big as a three, four, $5,000 case. And again, traditional buy now, pay later has been historically reserved for smaller dollar amounts, as well as, again, prime customers.
So even if you’re financing a Peloton, typically through somebody like a firm, which is a buy now, pay later leader, only about 30% of people are approved for a Peloton financing. And again, it’s the top people. That’s the big cliche about banks, right, is banks give money to the people that don’t need it. And really, that’s what we’re trying to turn on its head. Instead of figuring out a way to decline people, we’re figuring out a way to say yes.
Gary Tiratsuyan 16:06
Yeah, thank you. Totally. And that speaks volumes and really is backed up by the HSD’s long history of serving the underserved, and then combine that with rectangle, health’s long and rich history of supporting the business side of healthcare, enabling practices to see and help more patients. It’s a really powerful program. So, Michelle, I want to turn to you and ask, as this program rolls out and practices begin to adopt it, patients become aware of it, how do you see the current landscape we discussed earlier, evolving for patients?
Michelle Dowling 16:41
Sure, Gary. It makes it easier, and if our mission is to say yes. And I believe the most important part of how this will evolve for patients and the practices is the flexibility. We have practitioners who are motivated to deliver care and treatment, and while they control the care they give, they don’t have control over so many variables, such as the end cost of care or even insurance coverage. So as we try to make care more accessible, patient financing gives them a way to offer care in a way that does give them that control to determine what works for them and most importantly, what works for the patient. So providing options and flexibility solves the disconnect between patients who need care, providers who want to give the care, but the patient may not be able to afford it or qualify for it.
So, just like text messaging, we know that this is how people want to interact and engage with their healthcare providers. Bringing these flexible and convenient options for them is something that they are used to in their daily lives and then opens up so many more avenues to accessibility of care.
Gary Tiratsuyan 17:48
Thank you so much, Michelle. This program really gives hope to those patients turning down care due to cost. It’s really incredible. Tyler, for practices specifically, how do you see conversations evolving between treatment coordinators and practice managers and their patients?
Tyler Johnson 18:03
Yeah, great question. So I would say this program is designed specifically for treatment coordinators. So again, historically, a lot of the big institutions, big banks that have offered financing in this space focus on the economics. They don’t necessarily focus on the actual experience for the treatment coordinators. They sell those economics to somebody higher up in the organization, a CEO or CFO. That like the idea on paper almost every time. Variance. There is a pretty big disconnect between the C suite and the treatment coordinators. The people actually engage in those transactions with the patient. And for years we focused historically on that C suite member.
And what we’ve really tried to focus on investing in the past couple of years, and this only increases dramatically with our partnership with Rectangle Health is building something that the treatment coordinators can be proud of, that they can own. That every pain point they’ve historically had, whether it was not approving everybody partially declining people, just the administrative burden of different forms and communications all of that is streamlined into just one arsenal that they can call their own and meet the need for every patient. And so I think the conversations lead to where there’s just more enthusiasm from the treatment coordinator level because you can’t make something affordable or you can’t get that financing offer out there if the treatment coordinator is not willing to champion it. And so it’s something that they can buy into.
And so we’ve seen naturally just increase in lifts overall in terms of approvals just for prime customers, let alone the customers that are otherwise walking out their door. And as far as the conversation, which is practice managers, some of the fear that exists is it sounds great to serve the underserved. We all want to do it, but it seems like, hey, how can you make the math work? Is it worth it for me to say yes to that customer? Part of that is just education in the market, and I think it’s really compelling when they know that our data shows that the customer that was walking out their door previously is actually worth seven times more to their bottom line than the customer they’re already serving.
So it’s sort of a complicated way to say it, but if you’re not serving that customer, the people coming in paying cash are paying for your overhead, the electricity, the staff, all your operations. But the customer that you’re not serving actually is costing you a lot of profitability, just increasing the amount of people that are able to get in and get the treatment that they need. Obviously, it helps the patient make a treatment affordable. It helps build loyalty with that patient. But on the practice level, it actually will drive more revenue and profitability to the customer that you previously weren’t able to reach. And so it’s just a win all around. Win for the patient, win for the practice, and then win for the marketplace in general. We want more people to have access to care, especially in healthcare.
Gary Tiratsuyan 20:43
Really amazing. Tyler this partnership between Healthcare Finance Direct and Rectangle Health stands to be a real game changer in the healthcare industry for our listeners tuning in today. If you’d like to learn more about patient financing, you could do so by visiting the link in the description below or by visiting Rectanglehealth.com and scheduling a time to speak with a practice solutions consultant. Michelle, Tyler, I want to thank you so much for joining us today.
Michelle Dowling 21:08
Thanks, Gary. Thanks, Tyler.
Tyler Johnson 21:10
Thanks for having me.
Gary Tiratsuyan 21:11
Just a reminder, you can always tune into the Rectangle Health Podcast on Spotify SoundCloud, Google Play, Apple podcasts, or online at rectanglehealth.com podcasts. Till next time, everybody.