HME Business Handbook: Financing
How to Tap Into Various Options to Finance HME Purchases
American consumers are buying more HME out of pocket — including more pricey options. How can providers help them finance the bigger purchases?
Retail sales have reinvigorated the HME market and HME businesses’ bottom lines. Moreover, retail has given consumers of home medical equipment and related supplies and services more choice into what they want. Now providers can offer various solutions to a wide spectrum of patient groups — sleep, respiratory, mobility, aging, diabetic, wound care, etc. — knowing that many of those patients will pay for the solution that they want.
However, while Americans have an abundance of choice when it comes to their healthcare services and products, they also have costs. Patients are looking for ways to finance their out-of-pocket healthcare costs and that includes the HME products that they want from their provider.
Moreover, some of those items and services can be expensive and completely non-funded. In the case of home access, for example, patients might need to finance the purchase cost and installation of items such as patient lifts or ramps. Or, in some cases much-needed items such as mobility solutions or respiratory equipment might need to be financed in some way.
Apart from whipping out a standard credit card, one traditional option is personal loans for medical expenses. A variety of consumer banks offer personal loans of various types to cover major healthcare expenses, but what about smaller ticket items such as co-pays or lower-cost HME items? Patients and providers alike need options for both the small and the big retail items.
HEALTHCARE CREDIT CARDS
Healthcare-focused credit cards have grown in popularity over recent years, because they offer way for patients to transact the out-of-pocket costs of healthcare services and purchases that aren’t covered by insurance, and that includes home medical equipment. Moreover, these cards usually offer favorable interest terms. This is an important option for U.S. healthcare patients to have because outside of using a standard credit card, they don’t have many ways to finance lower-cost transactions.
A popular option is CareCredit, which is increasingly being used in the HME industry. CareCredit sprang up at a time when a variety of healthcare and financing companies such as CitiGroup, JPMorgan, Chase, Humana, Capital One, and UnitedHealth Group rolled out healthcare-focused credit cards. CareCredit is the one care that was left standing after many of those other cards retreated from the market. Now that consumer interest in healthcare credit cards has seen a resurgence, it will be interesting to see if other healthcare credit cards spring up again.
The card functions just like any other credit card: CareCredit works with providers to accept and process the card for any of its cardholders. Patients apply for a CareCredit account in the same way they would apply for other credit cards.
What makes these types of cards attract to consumers is that they offer no-interest financing for a pre-determined amount of time. So, for six or 12, 18 or 24 months, for example, the consumer can pay off the cost of a healthcare purchase, without having to pay interest. However, this interest is deferred. What that means is that after that pre-determined period of time, if the borrower is paying back the principle, then he or she will also have to pay interest that has accrued during that time.
So, the key is for providers considering adding this option to its range of supported payment methods is to ensure that they educate prospective borrowers on how the loans work. In the same way the provider’s staff understands its products, it should understand the financing options it will support.
MAJOR HOME ACCESS UPGRADES
Home major accessibility improvements is a whole financing world unto itself. In this scenario, patients might need ramps, remodeling, lifts and other more expensive upgrades and alterations to their home that will come at a higher price than, say, a new grab bar in the bathroom.
In these scenarios, patients need some serious financing and there are options. One is the 203(k) loan. The Federal Housing Administration created the 203(k) loan program specifically to help homebuyers rehabilitate homes they wish to purchase to live in. A 203(k) loan lets a qualified borrower not only finance the purchase price of the home, but also include the price of the necessary repairs to the home, or just the repairs — and in either scenario, this includes home access upgrades.
There are two types of 203(k) loans, and the one that is right for your intended property depends on how much work needs to be done:
- A limited 203(k) loan is intended for a home that requires only nonstructural repairs.
- A standard 203(k) loan is for properties that require structural repairs, such as replacing the roof or a load-bearing wall.
A limited 203(k) provides up to $35,000 that can be added to the loan to cover the improvements, in addition to the purchase price of the home. For a standard 203(k), the homeowner can borrow the purchase price of the home, plus the price of the improvements.
The money for the improvements is actually put into an escrow account that is used to pay for materials and the companies being contracted to do the home access work, such as the provider and its partners. (No DIY is allowed.) Construction must begin within 30 days of the close of the loan and your work must be completed within six months.
Other lending options include Fannie Mae’s HomeReady Mortgage Program is designed specifically for borrowers with low to moderate incomes, and is available to patients living on their own or someone living with a disabled family member to help them purchase an accessible home, or upgrade their existing home for home access.
Another option: nearly every state in the unions has created loan programs to help lower-income borrowers with disabilities tap into lending options that offer very agreeable terms at rates and terms well below traditional home loans.
Additionally, there are special grants and other programs such as the Department of Veterans Affairs (VA), which offers the Home Improvement and Structural Alterations and Special Home Adaptations grants for disabled veterans. Also, Many state Medicaid programs offer home and community-based waivers that can help fund accessibility modifications.
For providers looking to help their clients with major home access purchases, partnering with a loan officer or mortgage broker that specializes in this sort of lending would be an essential business relationship to forge.
POINTS TO REMEMBER:
- Retail sales has reinvigorated providers’ revenues and given options for patients to get exactly what they want, rather than what payers tell them they can have.
- However, outside of cutting a check, patients don’t have many ways to finance the smaller purchases related to HME transactions, whether that’s co-pays or the purchase of lower-cost HME.
- This is also a problem for patients that need to finance higher-priced items, such as home access upgrades and remodels.
- Both providers and patients need options for lowand high-cost HME transactions.
- For less expensive transactions, healthcare credit cards could be just what the doctor ordered.
- There are various loan programs available to finance major home access renovations and remodels, and the 203(k) is chief among them.
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This article originally appeared in the June 2019 issue of HME Business.