How to Choose a Cosmetic Surgery Financing Plan

As the number of cosmetic surgery procedures grows at a healthy clip of 10 to 15 percent a year, financing plans that enable some patients to pay for them proliferate as well. With about a dozen companies offering plans that can vary widely in their cost and benefits, sorting out the best plan for your center can be tricky. But surgery center administrators say it's worth taking the time to identify a good plan or plans, because they can help to boost your casevolume.

"We feel it's pretty important to offer patient financing. Though few of our patients use it, those who do just wouldn't have the surgery if we didn't offer a financing plan," says Dana Smith, Insurance Coordinator for Southeastern Plastic Surgery Center, Gastonia, NC.

Industry observers estimate that 15 percent of patients or less actually use financing plans, but having the option may be important for attracting those extra procedures.

"Forty percent of cosmetic surgery patients who leave a physician's office without scheduling a procedure do not return-and 85 percent of those patients leave because they are concerned about how they will pay for the procedure," opines Dan Cavallaro, President of Medical Options Finance, Inc., Tampa, Fl

And offering a plan that pleases patients (many plans finance LASIK and other elective procedures besides cosmetic surgery) may give your center a competitive edge with surgeons.

"If you're looking to attract the better surgeons, patient financing is a value-added service. You can give the surgeon another tool to build his practice, and another reason why patients will be satisfied with your center," notes Kathy Frahm, Director of Marketing for Health Ready Patient Financing, Aurora, Col.

These experts and others offer tips on sorting out patient financing options for your center.

Ask around. Check with colleagues to learn their experience with various plans. The reality may differ from the marketing pitch you've heard. "Ask your colleagues how their patients have been treated. Is this plan easy for the office to deal with? Ask the plan representative to refer you to some offices that have used the plan," says John Brown of PFS Patient Financing, South Plainfield, NJ.

No upfront fees. While some plans charge patient application fees (up to $200), others do not. There also should not be an enrollment fee for your center. Look for plans that make it easy for everyone to get involved.

Quick approvals. This may be one of the most important points for patients. They should be able to fill out a financing application at your office, fax it to the finance company, and hear back from the company in less than an hour. Some firms can do it even faster; Mr. Cavallaro says his firm does it in about 60 seconds.

One desirable feature may be patient pre-approvals, either online or by phone. The patient can provide the financial information in the privacy of her home, and then get an answer without having the embarrassment of involving your staff.

"Online applications and phone pre-approvals are very popular. Then the patient knows where she stands before we talk about scheduling the procedure," says Kelly Beaumont, Practice Administrator for Elan Plastic Surgery Center, Kirkland, Wash.

Acceptance rates. Always ask the financing company for its acceptance rates for cosmetic procedures. The national average is relatively low-30 to 40 percent-although it can vary.

"Ask for the plan's approval rate for your region, and then compare it to what other plans tell you," urges Ms. Frahm.

Don't be afraid to probe for more information. Says Mike Gilroy of Cosmetic Fee Plan, Framingham, Mass.: "It's hard to get a straight answer on acceptance rates. If the plan gives a very high figure, ask why it's so much higher than the national average."

Competitive interest rates. Patients will want the lowest possible rate, which is about 12 percent for an unsecured consumer loan. The rates can go much higher if the patient has a poor credit rating.

"We're charging anywhere from 11.99 percent to 16.99 percent, depending on the credit rating. We won't go any higher than that because we would rather just turn down the loan than charge extremely high rates," says Mr. Brown.

Other plans may offer lower interest rates for loans that are paid off more quickly. Cosmetic Fee Plan charges 9.99 percent for an 18-month loan, but 13.99 percent for a 60-month loan.

Favorable terms for the patient. You can get financing plans that are lines of credit, revolving credit, or consumer installment loans. The first two options will allow patients to borrow for additional procedures up to the limit for which they've been approved.

"Something like 25 percent of patients who have an elective procedure will have a total of six elective procedures in their lifetime. With favorable financing, it's very likely the patient will return for another procedure," notes Mr. Cavallaro.

The installment loan works much like an auto loan, with a payment book, set monthly payments, and defined pay-out period. Some patients will be more comfortable with a predictable payment and set loan amount, Mr. Gilroy says: "Our plan is similar to an auto loan; there are no surprises. Patients like that. And there's no penalty for early payment."

Because plans vary in their terms and acceptance policies, it's often a good idea to have more than one plan to offer patients. The surgery facility managers we spoke to advise having two or three available.

"We really like both plans we offer. One of them has a better interest rate, but it's harder to qualify for that plan. The other plan is better for patients who have less-than-perfect credit. If you have more than one option to offer, there's a higher chance the patient will get the loan, and you can schedule the procedure," explains Ms. Smith.

No risk. If a plan offers an extremely high reimbursement rate (over 90 percent) or an extremely low interest rate, double-check to make sure your practice or surgery center isn't assuming some of the risk. In other words, if the patient defaults on the loan, your center will take some or all of the loss.

"We absolutely only use plans that present no risk to us. If there's a risk, we don't take the plan," says Ms. Beaumont.

High reimbursement. You are, of course, looking for a high reimbursement rate. This is the amount the lender pays to the surgeon for the procedure. It's never 100 percent of the surgeon's usual fee. The discounted amount represents the surgeon or surgery center's cost for having the plan.

The reimbursement may be a flat rate, or it may vary according to the credit risk. For instance, Medical Options pays 95 percent for most cosmetic procedures (92 percent for liposuction and breast enhancement). Health Ready pays 97 percent for patients with the highest credit rating, and as little as 70 percent for patients with the lowest credit rating (this can be improved to 85 percent if the patient makes a cash downpayment).

The pros and cons of these are simply that a flat reimbursement rate often translates into lower patient approval (the finance company just doesn't take the poorer credit risk), while a varied or "tiered" structure allows the finance company to approve more loan applications (you will have more cases).

"Reimbursement is a big factor for our doctors," says Ms. Smith. "They would rather do the surgery for a discount than not do it at all, but they won't go so low that they are losing money on the surgery."

Quick payment. Always find out how and when reimbursement is made by the finance company. Of course, it's best to choose a plan that reimburses the surgery center or surgeon directly, instead of sending the funds to the patient. You also want a plan that reimburses promptly, and preferably electronically.

"The plan we like best reimburses us before the surgery," notes Carol Evangelista, Surgery Coordinator for 1818 Center for Plastic Surgery, Cherry Hill, NJ. "We just make sure the loan paperwork is all filled out at the pre-op visit."

Electronic funds transfer means you don't have to deal with those "the check is in the mail" delays: "There's no reason for the staff people to have to ????-??handle' the check. It should go right in your account," says Ms. Frahm.

Added value. Because there is a good bit of competition out there, financing plans are offering special services that may make a difference to you. Medical Options actually tracks patient activity. If the patient has not had the procedure within seven to 10 days of the loan approval, the firm tries to prompt the patient to schedule it. If the procedure isn't performed in the following week, the company will call again.

"We will politely and professionally ask the patient if there's any problem, or if we can help. The customer care representative will have the doctor's number, and offer it to the patient, in case he or she no longer has it at hand," says Mr. Cavallaro.

PFS Patient Financing offers consumer credit counseling. Many times, patients aren't aware how their credit rating affects the loan approval.

"Most patients don't understand what's on their credit report, and how it will affect the lending process. We try to build good will by explaining this to the patient," says Mr. Brown.

Most companies claim they offer superior customer service, and you should monitor this closely. If a finance company is careless with applications or won't respond promptly to patient calls, it may mean more work for you. Although parting ways with a plan generally does not cost any money, the actions (or inactions) of their employees can create an awkward situation for patients and reflect poorly on your center.

"We work with one plan that we're happy with and have others as back-ups. But we had to drop a plan because it wasn't working well for the patients. The finance company wouldn't call them back, and other ridiculous stuff," notes Sylvia Trujillo, Office Manager for plastic surgeon Dennis Gocken, M.D. of LaJolla, Calif.

A well-run plan, however, may streamline your workload and win you bonus points with patients. "Our favorite plan has great customer service reps who always take care of the customer right away. Their paperwork is always professional, which means less work for us," says Jaclyn Tice, Administrative Assistant for Body Sculpting Center, Scottsdale, Ariz. "They make the patient happy, and that makes us happy."