How to Avoid a "Surprise" Decline
Usually the person sitting in front of you knows their credit score better than anyone else, and when they are approved or declined for a credit card or loan, they receive the answer they expected. However, every so often, you likely run into a patient who is legitimately “surprised” when declined.
While a low credit score may be to blame, often there is another culprit - their annual income, and underestimating this figure.
Since the CARD Act of 2009, banks are required to evaluate every credit card and loan application based upon the patient’s ability to repay the debt. To do so, they calculate a “debt-to-income” (DTI) ratio for each patient. The bank adds up all debt reported on the patient’s credit report and compares it to the annual income entered by the patient on the application. If the DTI ratio is too high, the bank is required to decline the patient or give them a credit limit that won’t overextend the patient.
The problem with this method is that often patients forget to include income sources resulting in an inaccurate DTI ratio.
To avoid the “surprise” decline due to inaccurate DTI ratios, patients should be reminded to include all sources of income, in order to repay the debt including:
· Full or part-time employment
· Freelance work or small business
· Household income from spouse, partner, adult child, parent, or grandparent
· Government payments such as social security benefits or disability
· Income from investments such as 401Ks, IRAs, and/or pensions
· Alimony, child support, and/or separate maintenance income*
*If they don't wish to have alimony, child support and/or separate maintenance income considered as a basis for repaying the obligation, they should not include it in their annual income amount.
In addition to forgotten income, many patients report their net income (take-home pay) rather than their gross income.
Hopefully with a little guidance at the time of application, your patients will only be surprised with how much they are approved for!
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Three Times, Three Ways
In surveys, patients were asked if they were aware of financing options.
Amazingly, many patients said "no" even when there was irrefutable proof via recorded calls, pre-prepared patient packet inserts, emails, and witnesses to consult conversations.
Why? The answer is simple.
They were distracted. Even though the practices shared information, they didn't absorb it. Often patients have many questions during a call or consult and focus on what they are going to say or ask next, versus the shared details.
That is why we always promote the "Three Times, Three Ways" method. If you want the patient to understand the procedure is affordable, you must present financing options, "Three Times, Three Ways."
The easiest way to accomplish this, is to focus on the senses. Let them hear, see, and feel the options.
Hearing is easy. Repeatedly verbalize your financing options to the patient, especially anytime price is mentioned.
For sight and touch, rely on ALPHAEON marketing materials to do the work for you. Place the brochures and brochure holders throughout the office in your waiting room, checkin/out locations, consult rooms/stations, and exam lanes so patients can touch and feel the brochures. Use the ALPHAEON tabletop signs to visually remind patients of the options as well. These can be placed in areas that are seen by patients, but not necessarily within arms reach like a bookshelf or credenza in a consult room.
As always, all materials are free, so order as many as you'd like and help more patients walk away knowing they have financing options with your practice!
Order My Free Marketing Materials
PS: If you have ever thought, "I wish ALPHAEON had a (insert name of amazing marketing tool)," we want to hear your suggestion and create it! Please email teamcredit@alphaeon.com with any idea no matter how "out-there" you think it is! The more we can promote affordability, the more patients we can help together.
TO REACH A MEMBER OF THE ALPHAEON TEAM - ANYTIME
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When Credit Limits Hurt Patients
When evaluating financing options for patients, most practices look for a company that will approve as many patients as possible, for as much as possible, and at the lowest rate to their practice.
Often if patients receive credit limits high enough to cover the costs of the procedures, the practice and the patient are satisfied. Everyone wins - right? However, did you know that credit limits only covering the procedure costs may be hurting your patients?
A little background...
A patient's credit score is heavily influenced by their utilization ratios. This is calculated by comparing credit card balances to the actual credit limits. While the models vary by each credit reporting agency, most look at both the patient's usage of individual credit cards, as well as overall usage for all credit cards. Having one or multiple card balances close to their limits or worse, maxed out, lowers the patient's credit score. In fact, credit card utilization ratios account for 30% of an individual's credit score. The only factor that is weighed more heavily is payment history.
So, when a patient is only approved for the credit limits needed for a procedure, it may unknowingly, negatively impact one's credit score.
In addition, patients who don't receive the credit limits needed to say "yes" often end up going to another provider who offers procedures for less. Or, they start compromising by selecting another procedure or service that is within their credit limit.
While practices want to help patients with the procedures they desire or need, cost can get in the way. So what can be done?
The best course of action is to evaluate patient financing companies based upon average credit limits provided...most companies will tell you their average credit limit or even the average credit limit for your particular practice. By promoting the companies that provide the highest credit limits to begin with, patients will be in the best possible position from a credit utilization ratio.
Want to learn more?
30% Credit Utilization Rule: Truth or Myth
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Cash Discount Calculator - Now Available!
In June, we discussed how offering a cash discount could actually boost your bottom line. (If you missed that post, you can read all about it here.)
Practices across the country reached out to learn more. Some wanted to offer longer no interest plans without paying more, some wanted to offer fair discounts to all patients, and others wanted to simply cover the cost of their financing fees.
To help these practices, we have created a Cash Discount Calculator. With this new tool, you can enter your procedure price, the plans you currently offer, and the plans you want to offer, in order to determine your needed cost and what type of discount you can afford to provide your patients.
To access the Cash Discount Calculator, select your specialty below:
By offering a cash discount, both you and your patients can save money, making everyone happy.
TO REACH A MEMBER OF THE ALPHAEON TEAM - ANYTIME
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How Offering A Cash Discount Could Actually Boost Your Bottom Line
If you're like most practices, there is a good chance that you have encountered at least one patient who asked for a discount. You also likely have met the patient that wants a longer term no interest plan that you don't offer. What if there was a way to make both of these patients happy and improve conversion ratios overall without costing you a penny more?
If you're like most practices, there is a good chance that you have encountered at least one patient who asked for a discount. You also likely have met the patient who wants a longer term no interest plan that you don't offer. What if could make both of these patients happy and improve conversion ratios overall, without costing you a penny more?
To start, you'll need to transition your practice to a Cash Discount Model. The goal of a Cash Discount Model is to provide an incentive for those who can pay in cash to do so and for those who can't pay in cash to be offered the most attractive patient financing options.
So, how does it work?
STEP 1: CALCULATE YOUR COST
Let's assume you're comfortable paying 3% of the loan cost for one of ALPHAEON CREDIT’S financing plans. After all, that is comparable to what most practices pay when accepting Visa or Mastercard.
But your patient wants to use a long-term no interest if paid in full plan which requires you to pay an 8% rate. If this is a financing option your competitors are offering, it only makes sense to
The cost for the plan is 8% to you, so your additional cost is only 5%.
Please note, at the plan prices used in this article are just examples. To get a copy of ALPHAEON CREDIT’s (excellent) rates, please email enroll@alphaeon.com.
STEP 2: ADJUST PRICING
Once you know how much offering the longer term plan will cost, you will add that cost to your overall prices. Most practices choose to round up to make the next step - offering a cash discount - easier to explain.
So in this scenario, it costs you 5% more to offer the plan, so you raise your prices across the board 5%. This raise will help cover the cost of patients who choose to finance, but should also save you money as you will see in the next step.
STEP 3: OFFER A CASH DISCOUNT
Now comes the best part - not only can you offer 12 month no interest to all patients, but you can also offer all patients who choose to pay cash a 5% discount.
This 5% discount may also save you money by converting those who would have elected to finance, but had the cash, to pay in full. Plus, it standardizes your discount policy and ensures patients who routinely ask for discounts, still feel like they are getting a deal without impacting your bottom line.
The last step is to promote the Cash Discount Model to your patients consistently and incorporate it into your existing financial policy.
To access the Cash Discount Calculator, select your specialty below:
TO REACH A MEMBER OF THE ALPHAEON TEAM - ANYTIME
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