3 Questions to Ask When Approval Rates Fall
"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.
Getting Dialed In
Have you ever launched a pay-per-click campaign and received emails and calls, but for some reason the conversion rate was lower than expected? If you answered yes, then there may be room for improvement in your team’s phone skills. I’ve noticed that even the most skilled front office associate sometimes tends to miss an email or forgets to ask for the patient’s name and phone number on a call. I know these actions seem rather simple, but you’d be surprised at how many times they’re overlooked.
At least quarterly, practices should "mystery shop" their own practice, by calling and pretending to be a patient, to learn first-hand what their patients experience and to identify areas for improvement. You can use the following "Perfect Phone Call" checklist when evaluating your practice.
The Perfect Phone Call
- Superior Communication Skills - Enunciation, tone of voice and demeanor reflects positively on the practice.
- Takes the Lead - Who’s the expert here? The trained office associate, or the patient? Letting the patient lead the conversation may not be the best tactic.
- Key Questions Asked - Asks the right questions: Name, phone number, how they heard about you, main concern, special event coming up, etc.
- Credentialing - Every team member should have each provider’s CV down, backwards and forward. Why would the patient want to choose a certain practice if they don’t understand the value behind it?
- Procedure and Product Knowledge Shared - When a patient is calling in with specific questions, sometimes they can only be answered in a consultation with the provider. However, each team member should have a good amount of knowledge about the products and services sold in the practice and know how to explain them in a way as to not provide medical advice and pricing.
- Books the Appointment - After the above steps are completed, booking the appointment should be a breeze, right? But how do we know they’ll show?
- Completes Follow Up - Personally emailing the patient to confirm before the end of the day is very important, as well as a confirmation phone call the day before the scheduled appointment. I’m sure this is happening most of the time, but what exactly is being emailed to these leads? Text message confirmations and automated emails are super convenient, but then the personalization is left adrift.
The checklist above is definitely something to consider when spending your marketing dollars into paid advertisements. Is your team ready? Do they know what campaign you just launched? How will you keep track of who may need training or a refresher course for phone etiquette?
About the Author: Lacy J. Banks is the owner and CEO of Aesthetic Practice Concepts providing phone and consultation trainings for board-certified plastic surgeons and their staff. If you’d like a complimentary assessment of your team’s phone skills please feel free to contact her at (760) 747-1111 or at lacy@apc.management. She’d love to hear from you.
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The Secret is Out
Hi, I’m Tony Seymour and am the President of ALPHAEON Credit. I’ll be writing short posts periodically for our blog on interesting topics regarding ALPHAEON CREDIT and your practice.
The first thing, I'd like to point out is what makes ALPHAEON CREDIT spectacular. I know you may be thinking it's our "Great approval rates," or our "Generous credit limits,." I agree, we have those, but the true secret is pretty simple. "We answer the phone."
After 15 years at CareCredit, I knew I wanted to be a part of something different for our industry and so did a few other employees. Katy Thomas and Lisa Taylor were my top two managers renowned for their customer service. Together we discussed our likes and dislikes with larger banks, and the first thing we all agreed needed to change was their call centers, including our current bank, Comenity. The routine with all large financial institutions is to push numerous buttons, hope you get to the right place, usually wait, and then depending on the call center representative, you may receive a resolution.
We vowed to be different. Like you, we know navigating phone trees and waiting while a patient is sitting in front of you is frustrating and embarrassing – after all, you recommended patient financing to the patient. To prevent this from happening at ALPHAEON CREDIT, we installed a Hotline that rings directly to all ALPHAEON CREDIT employees’ cell phones, including my own.
At ALPHAEON, "we answer the phone.". Every day of the year, 24 hours a day. Call us anytime at 920-306-1794 to speak to someone immediately with no hoops to jump through.
We will be there for you, so you can get your questions answered and move on with your day.
We look forward to speaking with you.
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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.
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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.
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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:
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