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Article | March 8, 2021

The Link Between Zero-Interest Loans, Patient Satisfaction and Provider Return

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The cost of medical care in America is exponentially on the rise, and patients are paying these expenses by any means necessary, including taking on debt. Almost a third of Americans are in medical debt – 28 percent of them owing balances more than $10,000, a recent Salary Finance survey found. Not to mention, about half of them have defaulted on these debts. 

Much of this debt is from either paying with a personal credit card, a medical credit card or using a patient financing company that charges interest. This interest adds up, as consumers will pay an average of $1,155 in interest when paying off their debts this year, according to NerdWallet’s 2020 American Household Credit Card Debt report. 

Clearly, consumers are struggling with the amount of medical debt they have incurred, and often the medical provider becomes the scapegoat for their dissatisfaction. 

However, there is a better financing option that’s a win-win for patients and providers: A truly zero percent patient financing solution, which is proven to increase patient satisfaction and provider revenue.  

To understand how and why this type of financing achieves much more positive results, let’s compare it to the traditional interest-bearing model.

 

The Impact of Deferred Interest on Patient Satisfaction  

Interest-bearing financing, often in the form of deferred interest, is a big factor in overall patient dissatisfaction.  

Almost all healthcare-specific patient financing solutions that are non-recourse use a deferred interest model. With this model, the financer offers a zero percent introductory APR but later adds interest to the original purchase amount if: The patient misses a monthly payment or does not pay the total minimum amount due in any given month, OR does not repay the full balance within the promo period, usually about 6-12 months. These interest rates can be astronomical, generally ranging from 26.99 to 29.99 percent.  

This model banks on the fact that 82 percent of people don’t even know how deferred interest works, according to a recent WalletHub study. Patients with lower credit are the most likely to be subject to deferred interest, thus disproportionately shifting the cost to the most financially vulnerable. 

Consumers don’t like it either. 81 percent think deferred interest is unfair, 54 percent would negatively view an entity that charges deferred interest, and 65 percent of people think deferred interest should be illegal, per WalletHub. These survey results aren’t surprising, considering a patient’s health is at stake if they can’t afford continued care after taking on such debts. 

For these reasons, regulatory bodies are constantly policing these programs for their predatory lending practices. For example, Maryland Senate Bill 776 requires that health care providers and collection agencies allow the provider to oversee practices, and hospitals are prohibited from charging interest on medical bills and debts that are incurred by self-pay patients before a court judgment is obtained. In addition, many states set limits on interest rates, and in some, consumers can even sue a collector or creditor for emotional distress. 

In another instance, the Consumer Federal Protection Bureau (CFPB) required CareCredit to refund up to $34.1MM in deferred interest to more than 1 million consumers, finding that many of its consumers did not know what they were signing up for.  

All of this put together, and it’s not difficult to see why patients tend to be less satisfied with this option and the providers who offer it. 

 

How Zero-Interest Financing Increases Patient Satisfaction 

In contrast, with a financial plan that is 0.00% APR for the entire length of the loan, like CarePayment’s, patients are never subjected to interest on their account – no promo periods, “pay by” dates or hidden fees. 

Additionally, these types of plans are easier for providers to roll out and manage because there are no applications or credit checks, and everyone qualifies.

As a result, interest-free loan programs like CarePayment’s: 

  1. Drive Patient Engagement
    CarePayment engages more patients than any other program with its 0.00% APR solution. For example, when a $300 million health system partnered with CarePayment, they saw a 43 percent increase in engaged accounts, compared to the 7.75 percent interest program they had previously.
     
  2. Increase Provider Yield
    Zero interest programs make paying off balances easier because the patient can do so without fear of recourse or exponentially increasing interest. With some leniency on their payment timelines, regular engagement and ample financial planning resources, CarePayment can guarantee a reduction in payment delinquency. In turn, in the case of NPR Health System, they saw a 67 percent increase in yield.

  3. Boost Patient Satisfaction and Loyalty
    The final piece of the puzzle, patients who successfully pay off their bills without accruing interest and have a positive experience with the payment program tend to view the provider more favorably, and therefore, they’re more likely to return to that provider. This is especially true for patients with lower credit or poorer financial health, now that they know the provider can give them the financial support they need.  In fact, 89 percent of patients surveyed were more satisfied with their provider when they could pay their bills through CarePayment, and 76 percent would choose a provider that offers CarePayment over one that doesn’t. 


Overall, our research has found that the payment options
 a provider offers can directly affect how a patient feels about that provider – level of medical care aside. High interest rates, whether deferred or piled on right away, inevitably puts the average patient in debt, which will not reflect well on the institution that put them in that situation. By offering a truly zero-interest program, CarePayment has helped thousands of patients afford their medical bills and, consequently, hundreds of providers increase patient satisfaction and loyalty as well as financial return.