Removing financial barriers with financing

Dr Phillip Palmer, March 2017 

Looking back at my career in dentistry, from the 1970s to now, there are many ways that being a dentist and business owner has become harder.

Equipment is more expensive, sterilisation standards are stricter, competition is fiercer, there is compulsory continuing education, more marketing is needed, the list goes on… (I recently wrote an article about this, which can be found here)

One of the ways that being a dentist has become easier over time is with patient payment options.

For much of my career as a dentist, patients could pay by one of a few options:

1. Some would pay with cash on the day (very few these days).
2. Some would pay by cheque (that may or may not clear when you took it to the bank).
3. Most practices would send lots of accounts at the end of the month - accounts that regularly had to be chased for payment.
4. Credit cards, by way of a manual, non-electronic machine that would imprint the card onto a form, which you would later take to the bank and hope that the card had money on it.

All insurance claims would be handled separately by the patient, who would have to fill out forms by hand and submit them to their health fund provider, and then wait for the claim to be processed. 

Looking back at it all now, it is hard to imagine operating a business under such economically inefficient and uncertain conditions. A lot of time and effort was wasted by chasing accounts and taking cheques and credit card transactions to the bank to be deposited, and there were always bad debts on the books…but somehow dental practices made it work.

With time, other payment options came about that dental practices are more familiar with now. Electronic merchant facilities and HICAPS machines allowed the dentist to be paid (from the patient, patients bank and health fund) on the day, and with these efficiencies came a profound change in dental practices.

The relationship between ease of access and transfer of money and consumer spending is well-established and obvious. For dental practices, the ease of access to and transfer of money meant that:

• There were increased efficiencies in the business. Modern payment options meant that practices (and all businesses) could stop spending time going to, waiting in line, and making deposits at the bank. They could spend less time chasing accounts by phone and mail.
• There is increased consumer spending. Consumer spending goes up when people have greater access to money (both their own and the bank’s). For patients, increased access to credit and HICAPs machines meant that they aren’t out of pocket from insurance claims that haven’t been processed yet.

Recent years have introduced even more payment options for dental and other consumer products, and with them we have seen (and will continue see) further increases in efficiencies and consumer spending. More recent payment options include…

• Payment by smart watches and phones
• Dental plan memberships
• Coupons
• Government schemes, like CDDS and CBDS

In 2017 there will be several companies hitting the health market with on-the-day, in-house, organised patient financing options, so that patients can get longer payment options, with much lower interest rates than those available with credit cards. Here are three reasons why it is worth looking into:

1. It helps patients overcome a financial barrier to significant treatment.
   If everyone had to pay for cars with money that they had in the bank, there would be a lot fewer cars on the road. No amount of hounding and chasing by car salespeople would make a difference - many people simply don’t have the liquid cash in the bank to pay for them. Cars are expensive and they often need financing to buy.
   Whitegoods stores have offered in-store financing for white goods (fridges, washing machines, etc.) for years for the same reason.
   There is no similar offer for dental treatment yet. It is often an expensive and discretionary decision for patients. Without financing, when a patient is faced with a treatment option that they don’t have money in the bank to pay for, their options become:
   - To save for the treatment
   - To go into credit card debt, or
   - To refuse treatment.
   Dentists are hitting brick walls with patients who simply don’t have the liquidity at the time to afford the treatment.
   When in-house financing (at a reasonable interest rate) is an option, patients are able to spread the payments to reduce the financial pain of saving, or paying it all up front. This in turn should make the financial decision easier, and many will consider accepting treatment at an earlier date than they would otherwise.
    
2. The cost for the practice is much lower than before.
   In the past, any form of 3rd party financing offered in-house was also expensive for the dentist. Although the practice got paid immediately, they often needed to pay the financing company a merchant fee of sometimes up to 15% of the total fee. The fees that the dental practice is charged today are commonly under 5%, and there are no ongoing costs to the practice.
    
3. Speed, ease of application and terms of the loans have improved a lot.
   With new financing options available, this whole process can be handled in the office, within a few minutes. The financing companies hitting the health market in 2017 all have different features, but the best include:
   - There is no requirement for the patient to provide pay slips as proof of income
   - There are no early payment penalties
   - Less than 5% is taken from the dentist by the finance company, in return for upfront payment of the invoice.

There will be those who squirm at the thought of a dental practice offering finance options for treatment. They feel discomfort about a health provider offering a financial product - and how the message is communicated - to the patient.

Why shouldn’t patient financing products be offered to patients?

Why is it that if a patient wants a car or a fridge, they can get finance on the spot in the store?

Why are these places more appropriate for finance than a dental practice?

It simply doesn’t make sense why this should be the case. There is no reason why a patient who wants an oral health and/or oral aesthetic outcome should wait in a suboptimal state until they have the money, or go into credit card debt.

If anything, there is possibly more justification for patients to have access to finance for discretionary health spending, than for discretionary consumer products.

Communication from the practice, regarding the product, needs to be handled appropriately. The team must be made aware of the benefits to the patient and feel confident explaining the process. The patient in turn needs to be informed, but not pressured, to accept the product.  

If a finance product is chosen and presented/communicated correctly, the result should be a win-win for all involved.

More of our patients can receive the quality treatment that they want and need, and the dentist can do the work they think is appropriate for the patient.