I have received a dozen or so calls or emails in the past two months from clients who have received solicitations in the same format (calls or emails) from other orthodontist friends and acquaintances singing the praises of the newest patient financing scheme to hit the orthodontic marketplace.
I wrote about this type of organization in my October 2013 article, and I urge you to read what I wrote then. One thing I recommended in that email was to beware of signing up for a new product or service, of any kind or type, when it was being promoted by persons, orthodontists or consultants, who were investors in the product! So far it appears that the solicitations currently being received by our clients are almost entirely coming from the 25-30 orthodontists who are investors in this new company. The one and only way for these investor orthodontists to get a return on their investment is to hustle their buddies to sign up!
Why are orthodontists failing to remember the past? Do you remember the orthodontic MSO’s? Their marketing plan, to convince some orthodontists and consultants to invest in the new organization and then count on them to sell the plan to other orthodontists or orthodontic clients, was almost identical to what this new patient financing company is doing today. Those investor orthodontists also pitched you, heavily, that the MSO business model was the future of the orthodontic profession and that you needed to get in on the ground floor before the opportunity was lost. Common sense told me that model could not succeed and I wrote aggressively back then against participation by any of my clients. You should also remember that every one of those MSO’s failed!
To those of you interested in this new version of patient financing, please remember that there have been many “third party” orthodontic financing companies that have entered the orthodontic marketplace, and then have left the orthodontic marketplace, after realizing they could not make a profit, or an adequate profit. Most of you will remember OFP, Capital One, Chase HealthCare Advantage, but those are just the big names. There have been well over a dozen others that have come and gone over the years – and failed to be profitable! The financing companies that have succeeded and that still exist today are profitable because they will not buy “bad paper!” “Bad Paper” is the term used in the financial world for loans made or contracts purchased in the high risk marketplace – the group of persons who routinely fail to keep their financial agreements.
This new company has a couple of new “twists” or approaches to patient financing. One of those twists, one that I will call the lesser of two evils, is the utilization of an iPad app and a duplicate website allowing a prospective patient/parent to, while in the office or while at home, “slide” down payment and monthly payment options. That is simply a new version of an old gimmick that has been tried in different formats many times throughout the years. Unfortunately it is a “gimmick” that is going to damage case acceptance among “A” type quality patients while allowing improved case acceptance from the group of weak “B” and “C” patients! The first time I saw this approach was many years ago when VCR video tape was an entirely new and amazing product. Some entrepreneurial spirit back then was selling custom made VCR recordings to orthodontists. These videos contained a video presentation, customized to each office’s financial policy that was to be shown to every patient, explaining fees, financial policies, payment arrangement options, etc. No longer was a Treatment Coordinator going to be needed to present finances and the modern new technology would make case acceptance increase. The company ceased to exist quite quickly once almost every practice using them suffered a decline in case acceptance.
Doctors, there is simply no “gimmick” that is going to improve case acceptance! Almost every respected management or case acceptance consultant in the country agrees that nothing can replace a committed and skilled Treatment Coordinator who, eyeball to eyeball with patients/responsible parties, negotiates a financial arrangement – without props!
Referring again to OFP, most will remember that they formalized the utilization of a Financial Arrangement “Option Sheet.” The intent was to allow practices with weak or unskilled Treatment Coordinators, those who had poor verbal skills or who were timid about discussing money, to stick a document under the patients’ noses with a list of available financial options. Of course, each of these Option Sheets was designed to push patients into choosing OFP’s financing. The iPad and website “slider” is simply a more modern form of an Option Sheet and will generate an identical result – reduced case acceptance!
The other twist to this new patient financing company, the greater of two evils, is that they seem to be “buying” contracts on all new starts, even contracts for those without any ability or any intention of paying the bill! In my opinion this is going to have no good end for the doctors who are foolish enough to sign up for this program. You see, in almost all of the past patient financing plans, the financing company purchased the entire patient contract, in full, less a discount, and without recourse. If the patient did not pay there was no loss to the orthodontist. Our understanding is that this new company owns and/or controls the contract but only pays the orthodontist as the patient pays the company.
Would you put up with that requirement when you have no control over the delinquency control process? What are you going to do when these high risk patients are two and three months past due? Legal liability of the orthodontist will be massive! Patients do not like financing their treatment through an outside “finance company” instead of paying their doctor directly. That is especially true when there is an onerous interest charge. As evidence, consider the 80%+ of your patients who immediately reject the idea of financing their account with CareCredit or any of the other existing orthodontic financing companies. However, it appears that with this new financing company the patients may be given no choice in the matter unless they want to pay in full. Down payment and contract terms are not nearly as liberal on quality patients yet are extremely liberal for high risk patients. Patients no longer work with an empathetic Financial Coordinator if they have a financial issue and the orthodontist loses a great deal of control.
The winner of course is the financing company that incurs little to no loss when high risk patients fail to pay the bill because the company does not have to pay the doctor!
Overall case acceptance typically will not improve, because good case acceptance depends on much, much more than flexible financial arrangements. Consider your case acceptance rate on new patients referred by other patients. If you are typical, your case acceptance rate on such patients is well above 80%. Lots of study and experience has proven that when patients no longer have a financial relationship directly with the practice, and that financial relationship is with a third party finance company, maintaining the current rate of patient referrals becomes impossible. New patient flow declines and again, the rate of case acceptance declines as well.
Of course, you will have better case acceptance among the high risk “B” and “C” patients who, among our client base, make up about 30% of new exams. Those “B” and “C” patients are those who have a rate of failed/cancelled appointments and a rate of poor clinical cooperation that is double to triple the rate of your other patients. Such patients are also the source of the majority of malpractice suits! Is this really what you want for your practice?
The bottom line is that while third party financing, done right, is beneficial to the profession, nothing I have heard about this new company on the scene is being “done right.” Orthodontic practices with poor financial policies and poor financial controls, and/or that have timid Treatment Coordinators with poor verbal skills and weak follow-up systems will undoubtedly have improvement in their rate of case acceptance and will see growth in their practices. However, that growth will be short lived as these practices become buried in the problems associated with pushing quality patients into offsite financing while simultaneously having large quantities of high risk patients in the practice who are not paying for their treatment. Many years ago, my old boss used to say to me, “Mr. Zuelke, a word to the wise should be sufficient.” Doctors, “a word to the wise should be sufficient!”
