Blog | July 17, 2023

Stay Ahead of the Curve: Why Zero-Interest Patient Financing is the Safest Choice for Hospitals

provider working with young family after CarePayment and DCS partnership

In today’s healthcare landscape, the cost of receiving treatment continues to rise, placing a significant financial burden on patients. Many individuals find it challenging to afford the care they need, leading to delayed or even neglected medical treatments. In just 2023, healthcare costs have jumped 5.6% to a staggering $31,065 a year for an average family of four. As a result, there is a pressing need for innovative solutions to address these affordability concerns and improve patient access to quality care.

One solution that has gained traction in recent years is zero-interest patient financing. This approach aims to provide patients with a convenient and affordable way to manage their medical expenses. By funding interest-free, healthcare providers can enhance the patient financial engagement experience and ensure that patients receive the care they require without incurring significant financial strain. We will outline the most common questions about the differences between zero-interest patient financing, medical credit card, and deferred interest programs.

What is zero-interest patient financing?

Traditionally, zero-interest patient financing refers to a financing option that allows patients to divide their medical expenses into manageable monthly payments without accruing any interest. Unlike traditional credit-based financing options or medical credit cards, zero-interest patient financing focuses on providing every patient with accessible payment plans.

Zero-interest terms play a crucial role in improving the affordability of care. By eliminating interest charges, patients can better manage their financial obligations and avoid excessive debt accumulation, ensuring they can receive the care they need without sacrificing their health and well-being.

What created the need for zero-interest patient financing?

The rise of patient financing solutions such as zero-interest options can be attributed to the ever-increasing cost of healthcare. As medical expenses continue to rise, patients face significant challenges in affording necessary care, while providers still need to be paid for their work. Additionally, the overall rise in the cost of living has further emphasized the importance of patient financing, ensuring patients can access the care they require without compromising their financial stability. Patient financing serves as a valuable resource, bridging the gap between necessary medical expenses and patients’ financial capabilities.

Additionally, regulatory and compliance measures within the healthcare industry have driven the adoption of patient financing solutions. Legislation like the No Surprises Act and state-specific laws, among others, detailed in this regulatory round-up, have necessitated compassionate, compliant patient financing to assure providers meet the requirements of this new legislation. On top of this, on July 7, 2023, the Consumer Financial Protection Bureau (CFPB), U.S. Department of Health and Human Services (HHS), and U.S. Department of Treasury (Treasury) launched an inquiry into “high-cost specialty financial products, such as medical credit cards and installment loans, that are pushed on patients as a way to pay for routine medical care and which drive up health care costs and medical debt”.

Unlike other options that may charge deferred interest to patients or solutions in which providers lose out on earned revenue, zero-interest patient financing is a mutually beneficial tool. For patients, it ensures improved access to necessary healthcare services by allowing patients to budget their bill payment without collecting interest, instead of having to pay a one-time, large bill. On the other hand, healthcare providers benefit from increased patient loyalty, satisfaction, and improved financial outcomes. By offering financing options, patients are more likely to pay their bills, and providers then enhance their revenue generation and cash flow, leading to more robust financial stability.

How does zero-interest patient financing benefit patients and providers?

Zero-interest patient financing significantly improves patients’ access to necessary healthcare services. Without patient financing options, the CarePayment member survey found that patients were likely to delay their medical care, with 28% saying they would never have been able to pay their medical expenses without CarePayment patient financing. By breaking down the financial barriers, patients no longer have to delay or forgo essential treatments or procedures due to fear of when the bill comes.

This ensures that patients can receive timely care, promoting better health outcomes, and stimulating the healthcare economy. By spreading out their expenses over a manageable period, patients can reduce their out-of-pocket expenses and avoid overwhelming financial strain.

The predictable and manageable repayment terms offered by zero-interest patient financing significantly ease the burden on patients. Instead of worrying about immediate payment of large medical bills, patients can focus on their recovery while comfortably meeting their financial obligations. This peace of mind promotes a positive patient experience and fosters better engagement and loyalty with their healthcare providers.

How does zero-interest patient financing impact the revenue cycle?

Integrating zero-interest patient financing into the revenue cycle of healthcare providers has a profound impact on revenue generation and cash flow. By offering accessible payment options, providers can improve their collection rates and ensure timely payments. In an industry where 48% of revenue cycle teams are experiencing severe labor shortages in their RCM/billing departments, hospitals, and health systems need a partner who can take the burden of revenue cycle management. Taking on a partner strengthens their financial stability and allows for investment in quality care delivery instead of investing in collection efforts. Additionally, no-interest patient financing enhances patient loyalty and satisfaction, as patients feel supported in their healthcare journey and in control of their financial health.

The CarePayment member survey found that ZERO percent of patients prefer a traditional, interest-bearing solution. The ability to provide what patients want and need promotes loyalty and retention, creating improved increased collections of earned revenue, and further reinforcing the financial health of healthcare providers. For example, by offering zero-interest patient financing, CarePayment aided a $1B, 7-hospital health system to reduce self-pay balances by 62%, increased cash on hand to $84M, and collected $33M from accounts over 60 days old.

In conclusion, zero-interest patient financing plays a vital role in the patient financial engagement experience. By addressing affordability concerns, it improves patient access to necessary healthcare services, eliminates financial barriers, and reduces out-of-pocket expenses. Simultaneously, healthcare providers benefit from enhanced revenue generation, increased patient loyalty, and improved financial outcomes. With the rising cost of healthcare and the need for patient-centered financial solutions, zero-interest patient financing has emerged as a valuable tool, ensuring that patients receive the care they need while maintaining their financial well-being.