What are Medical Credit Cards?

Medical Credit Cards are broadly available, yet often not well understood. They differ from regular credit cards in that they were designed to be used to pay for specific medical procedures. In those instances where more cost effective choices are not available, medical credit cards represent an option for the patient to pay for health, or pet care, over an extended period of time. Other than when offered to the patient as a time-limited, zero interest promotional offer, medical credit cards are typically the most costly choice for paying for care. There has been well documented confusion in the market about these “free promotional periods” as this type of financing arrangement is called a deferred interest promotion and requires strict adherence to the rules and dates associated with the free-interest period.

Why is there so much confusion? In part it’s that the medical credit card company acts as a finance company. In effect they “purchase” the receivable from the doctor. The doctor is paid a percentage of their fee, discounted for the charge from the credit card company. My understanding from research and from speaking with doctors who accept medical credit cards is that the fee they pay can range from a low of 4% to a high of 9%. So if a procedure, such as a crown costs $2,000.00, the cost to the doctor to accept a medical credit card ranges from $80.00 to $180.00. As you can see, if medical credit cards are accepted by the doctor for just 3 crowns a month, that is between $2,880.00 — $6,460.00 annually, just for the doctor’s cost.

Comparing Costs for Medical Credit Cards and Doctor Provided Financing

Let’s look at the cost to the patient to use a medical credit card. Except in those instances where a zero interest rate promotional offer is made, the interest rate charges for the patient range from what appears to be the lowest interest rate of 14.9% to 26.99% on the upper end.  That means the patient pays an additional $325.08 at the lowest interest rate (over a 24 month repayment time frame) to $610.01 at the higher end.

Now let’s add those two costs together (to accept and use the medical credit card). On a $2,000.00 crown it can be as high as $790.01. And in my opinion, that total speaks to why this is such a poor choice for doctor and patient alike. Why, when the patient needs financial assistance in the first place wouldn’t it be better to choose a payment option that has a lower cost for both parties? What if it were possible for patients to pay for the crown over the same 24-month time frame at a flat service fee of 9% and the doctor was charged nothing? In that instance the total cost is $180.00-period.  Compared to the possible high cost of $790.01 for a medical credit card—a savings of $610.01.

Doctor Provided Financing and CareCap

CareCap was founded on the belief that patients should have access to the care they need and want, and that doctors should be able to provide the highest standard of care, profitably. Beyond that, we understand the powerful trusting relationship that exists between the doctor and patient. When the doctor controls the payment process, that relationship remains between doctor and patient, not between doctor, finance company and patient.

So what exactly is doctor provided financing? It is exactly what it says; the doctor has agreed to allow their patient to pay them, over a period of time. That time frame is determined by the doctor and their patient. The doctor determines an initial payment which is paid on the day service is provided. This is usually equal to the hard cost the doctor has for the procedure. As in the example of the crown we discussed earlier, this might be the cost associated with actually making the crown itself. So, the doctor has no out of pocket expenses and has agreed to be paid for his time, over a period of time.

Interestingly enough, when we speak to doctors about how they are currently being paid, even when the procedure is partially covered by insurance, it is often several months before the insurance company processes the paperwork, sends a check, and the patient pays their portion of the fee. In the example using CareCap, the doctor is actually paid part of their fee, on day one, not 60-90 or even 120 days out.

The Market Needs a Different Answer for Patient Payment Plans

That’s why we think doctor provided financing is such a novel idea. In most instances doctors are already waiting a period of time to be paid. Why should they have to discount their fee, and their patient pay such a high interest rate with a medical credit card? Wouldn’t it be better for the doctor to extend payment terms to patients? Yes, absolutely. So what stands in the way?

Without CareCap’s unique payment management system, or something like it, the administrative and credit risk burdens for the doctor are just too great. Medical offices today have to work hard to be profitable. All costs are rising— rent, equipment costs, staff costs, insurance costs and reimbursement rates are declining, so the delta is growing, making it harder to practice profitably.

It’s Easy to Improve Practice Outcomes

With CareCap’s web based payment management system, there is no software to purchase, nothing to integrate and training can be done in 60 minutes. A patient can be set up on the system in just 5 minutes, and then CareCap handles all the rest— billing, collecting the payments, depositing them directly to the doctor’s account and providing reporting, 24/7 on where everything stands. So far, we’re hearing that using CareCap is saving the front desk staff about 10 hours a week processing accounts receivable. And that’s a terrific benefit for a time strapped office.

And we’re seeing doctors increase their practice revenue by performing procedures that patients would otherwise have declined, due to the inability to pay for the procedure all at once. We even have offices using the system to process aged (past due 90 or more days) receivables.

At a time when medical costs are skyrocketing, CareCap is just the Rx needed to make health and pet care more accessible, affordable and profitable to deliver.