2020 HME Business Handbook: Credit
How to Integrate Consumer Credit Options into Your HME Business's Retail Sales
Consumer financing is becoming commonplace in post acute care, and that includes the HME industry. What do providers need to know in order to support healthcare credit cards — and reap the benefits?
A common aspect of retail sales outside of HME, has lately been catching on in the HME marketplace: credit. While financing is a familiar element of other retail transactions, consumer financing hasn’t been common in the HME industry until recently.
The industry has taken stabs at credit over the years. Most of them were through manufacturer-driven credit programs, where an HME maker would partner with a financing company to offer credit programs to providers’ customers, but managing multiple credit programs per vendor is unwieldy to say the list.
Make no mistake; patients want credit options. Some HME offerings can be expensive and completely non-funded. In the case of home access items, 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 or respiratory devices might only be partly funded, and the remaining cost needs to be financed in some way.
The main option has been to use a standard consumer credit card, or opt for traditional loans for medical expenses. A variety of consumer banks offer personal loans of various types to cover major healthcare expenses, but does the provider really want the patient to go to a bank for a piece of DME? Also, what about smaller ticket items such as co-pays or lower-cost HME items?
Patients and providers alike need options for both small and big retail transactions. Fortunately, they now have healthcare credit cards.
“We want providers to view it as a smart business tool that would allow their patients to move forward with the product they would like to have or need to have,” says Randy Baldwin, Vice President of Specialty Industries Marketing for healthcare credit card business CareCredit.
ENTER HEALTHCARE CREDIT CARDS
Healthcare-focused credit cards have taken off in the HME industry, because they offer a way for patients to transact the out-of-pocket costs big and small. Clients can use them to cover healthcare services and purchases that aren’t covered by insurance, and that includes HME. Moreover, these cards usually offer favorable interest terms.
Probably the most popular option in the HME industry is CareCredit. CareCredit sprang up at a time when various financing companies such as CitiGroup, JPMorgan, Chase, Humana, Capital One, and UnitedHealth Group rolled out healthcare credit cards. However, CareCredit is the one card that was left standing after many of those other options retreated from the market.
Part of Synchrony Financial, CareCredit has migrated to more than 240,000 practices in various healthcare sectors, as well as businesses that do health-related retail transactions. And, of course, it’s in the HME industry, as well.
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 attractive 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 of $200 or more without having to pay interest. Also, this interest is deferred. What that means is that after that pre-determined period of time, if the borrower is paying back the principal, then he or she will also have to pay interest that has accrued during that time.
CareCredit also offers longer terms of 24, 36, 48 or 60 months for purchases of $1,000 or more, with a reduced annual percentage rate (APR) and fixed monthly payments required until paid in full. The amount of the APR depends on the number of months.
There’s a merchant fee for CareCredit, just like Visa or MasterCard, but CareCredit is non-recourse, Baldwin notes.
“So if the patient defaults on payment, the merchant doesn’t have to worry about it,” he explains. “It’s between the patient and us; not the merchant. As long as the provider has a return policy and they follow those policies for accepting the card, and have the right ID, then we won’t require the money back from the merchant if the consumer fails to pay.”
On the backend of the business, some of the HME management systems out there have integrated support for CareCredit, such as Computers Unlimited’s TIMS. Also, if a provider does e-commerce, CareCredit can be incorporated into the shopping cart as a tender type, in the same way as Visa or MasterCard.
OTHER BENEFITS OF CREDIT CARDS
Another important consideration when it comes to using consumer financing is that providers are no longer carrying those larger co-pays or purchases on their A/R. CareCredit obviously charges merchant fees, but that is likely far likely than what the provider would have to shell out in order to collect A/R on a monthly basis. No, credit isn’t a replacement for A/R,
“Just like you are going to take care of your patients, we are going to take care of our cardholders, we don’t want any cardholders to default, we don’t want them to be overburdened,” Baldwin says. “So we work with all of our cardholders when hard times happen so that they are able to continue to use their card and also satisfied their obligations with CareCredit.”
Of course, providers aren’t always conducting business in their brick-and-mortar location. That days, field staff aren’t just delivering; they’re carrying extra inventory in their trucks and closing business with patients at their location. To that end, services such as CareCredit offer mobile support.
“Let’s say you are a provider that has brick and mortar, right? You get a merchant ID that’s attached to that brick and mortar location,” Baldwin says. “We have tools that let you do that on an iPad. ... So, when you’re out and about, you can process applications and you can accept transactions, all remotely. But it’s all tied to your practice.”
To help patients sign on, CareCredit provides various tools. This includes content for providers can put on their web sites, QR codes, or even the ability to text to apply. Or, patients might drive the process by visiting the CareCredit site. However, educating the patients is crucial, Baldwin says.
“There are many ways in which a consumer can apply for CareCredit, but one of the ideal things is to have a provider extend the information about CareCredit to the patient,” he explains. is what CareCredit is,” he explains. “Then let the consumer either use their smartphone or tablet, and apply using a QR code, text messaging or help from the provider to apply.”
So, the key is for providers considering adding the healthcare credit 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.
POINTS TO REMEMBER
- Consumer credit is finally catching on in the retail market for HME products and services, which is critical because it increases potential revenue per patient.
- Credit lets consumers finance more expensive purchases, such as mobility devices to home access upgrades.
- It also helps them more easily pay for smaller items such as co-pays or small items.
- When it comes to major home access upgrades, providers need to understand lending options, such as 203(k) loans. It’s a good idea to partner up with a lending professional. They should also understand state programs, VA options, etc.
- Supporting a healthcare credit card is also a smart move. A good example of a healthcare credit program that has gained considerable popularity in the HME industry is CareCredit.
More information about CareCredit is available at www.carecredit.com.
This article originally appeared in the May/June 2020 issue of HME Business.