"It's weird. Our approval rates seemed to be fine and all of a sudden we've had several patients who weren't approved. What is going on?"
Ever find yourself in this spot? If so, you're not alone. Often, practices will see approval rates drop and make a call to their patient financing provider who will say nothing has changed on their end - underwriting has remained the same. So what's going on?
In our 50+ years of patient financing experience, we've found there are three common explanations when a change in underwriting at the bank is not to blame for a decline in approval rates.
1) Is it just bad luck?
It very well could be. Sometimes it is a fluke and a few patients with less than stellar credit scores applied at the same time. Luckily, this issue will resolve itself on its own and rather quickly. The more patients you apply for, the quicker this run of bad luck dilutes and the faster your numbers return to normal.
You may also find there is some seasonality in your approval rates. For example, consumers tend to overspend every December in preparation for the holidays. This credit card usage frequently leads to a post-holiday hangover, as far as credit scores are concerned. Credit scores may drop slightly due to credit utilization ratios being abnormally high in December. When evaluating your approval rates, looking at year-over-year data is often more helpful than month-to-month.
2) Has something changed with our staff?
If you have a new employee or someone that is new to presenting financing, they may feel uncomfortable with the payment discussion. In these cases, they often won't bring up financing unless the patient asks for it. The problem with this approach is that the patients who have to ask for financing tend to be the ones who need it the most as they have no other way to pay. They are also less likely to be approved as their credit scores often reflect their precarious financial situation. When these patients aren't approved, your staff may be even more reluctant to offer financing as communicating a decline can be awkward.
In an ideal world, staff members would offer patient financing to every patient for a couple of reasons. One, you can't judge a book by its cover and that woman in the fur coat and diamonds may not be able to afford the procedure you're offering unless there is a way to pay over time, but she may hesitate to ask for financing. Two, that patient who may be able to pay in full might prefer to pay over time using no interest plans, as it can be a smart financial move. They can keep their money in savings, earning a small return and pay off the procedure over time. If you hesitate to offer no interest plans due to the additional fees, consider the fact that patients given the opportunity to pay over time at no interest are less likely to ask for discounts and more likely to spend more than those paying in cash.
If there isn't a new employee or someone in a new role, confirm that everyone is leading with your preferred patient financing provider. If everyone isn't on the same page, and someone is offering another patient financing company first, that will automatically cause your overall approval rate to drop with your preferred patient financing provider. This scenario can be especially present in larger practices or practices with multiple locations.
3) Have we changed our marketing?
The slightest shift in marketing, from one radio station to another or from advertising in one new publication, can change the demographics of patients walking in the door. While driving more patients to your door may be a good thing, it won't help your practice if those patients can't afford your services and can't get approved for financing.
The good news is that knowing who gets approved for patient financing and who gets declined can give you additional insight into your marketing efforts and what type of patient you are attracting. If you find you are receiving a lot of declines, take a look at your recent marketing efforts and the source of these declined patients.
In the end, while changes to underwriting might cause a drop in approval rates, often that is not the case as underwriting is complicated. Most banks look beyond the credit score alone and look at hundreds of variables to determine if a patient would be approved or not. As a result, they don't change the process often, maybe once or twice a year.
After checking with your patient financing provider to make sure things haven't changed on their end, often you'll need to look internally to see if an shift is to blame or if it is just a run of bad luck that will reverse itself in due time.