What Is Non-Recourse Financing in Healthcare?

The ever-evolving healthcare landscape has caused patients to adopt a consumeristic approach in choosing when and where to receive care, leading healthcare providers to find simple yet innovative ways to accommodate patients and secure their bottom line. With 56% of consumers unable to pay a medical bill over $1000, streamlining the patient financial experience is becoming increasingly more important–both for patients and for healthcare organizations.

There is a heightened emphasis on transparency and flexibility regarding patient responsibility; patients are seeking support in managing their out-of-pocket expenses, and providers are in need of better methods to manage patient collections. A common remedy for these pain points is patient financing. However, healthcare organizations must understand how different models work before determining which financing option is best for their practice. 

What is Non-Recourse Financing?

Non-recourse financing, in terms of healthcare, is a payment plan that allows patients to manage their healthcare costs and spread out payments over time. Unlike traditional loans, the non-recourse partner is buying the patient receivable from the healthcare system. The financing partner then pursues collecting payments not covered by insurance from the patient, establishing a payment plan with a set amount to be paid each month over a period of time. In the event that a patient defaults on their plan, the financing partner retains the account and pursues collections on their end.

The primary benefits of non-recourse financing for providers are increased speed to cash and a reduction in bad debt. It costs healthcare organizations four times more to collect from a patient than it does from an insurance company. By implementing a non-recourse financing program, providers avoid the cost and burden of accounts going to bad debt. Furthermore, once the financing partner buys the receivable, it is completely off the provider's books. Unlike recourse models, non-recourse models absorb the full financial risk of default from the provider. 

Recourse vs. Non-Recourse

The main difference between recourse and non-recourse financing programs is what happens to a patient account if it defaults. Recourse lenders return defaulted patient accounts back to the healthcare provider, putting the provider in charge of reconciling the unpaid debt.

Recourse lenders avoid any risk associated with patients that do not pay, putting it all on the healthcare system. Additionally, recourse lenders protect themselves by requiring the provider to maintain a contingent liability amount on their books, i.e. a certain dollar amount in the bank.

Recourse financing programs that operate via a loan, credit card, or line of credit are typically associated with high interest rates, hidden fees, and potential credit score impacts as a way for the lender to protect against financial losses. 

What About In-House Financing Programs?

Healthcare organizations that offer in-house patient financing usually don't succeed in improving collections or the patient experience. The payment plans typically lack flexibility and only extend for a few months post-service, yet 89% of patients reported they need a year or longer to pay off their medical expenses. Because of this, a large majority of patient accounts end up in bad debt collections.

Patient accounts that are enrolled in an in-house financing plan are not resolved after patient discharge, meaning the balance remains on the hospital books until it's settled. This slows cash flow to the provider and leaves the RCM staff to work as collectors. Managing accounts in-house also requires more resources to administer and manage, often more than the average billing department is able to handle. By implementing a third-party financing partner, provider staff can focus on patient care, not patient collections.

Integration & Implementation

The rise in healthcare consumerism combined with the lasting effects of the COVID-19 pandemic has caused patients to become accustomed to, as well as expect, a digitized, contactless healthcare experience. 80% of patients prefer to pay for their care online. The implementation of a third-party patient financing program simplifies the management of patient payments by allowing for seamless integration into the provider system.

Financing partners work within the healthcare system and can be provider-branded and entirely digital. By replacing paper statements and collection calls with an online patient portal, RCM staff can relinquish the day-to-day management of patient accounts, regardless of the lifecycle stage. 

The Patient Experience

The number one goal of healthcare providers is to provide a positive patient experience, from the quality of care to the cost of care. 90% of Americans stated that they are more likely to return to a provider if the organization offers flexible financing, and with 30% of provider revenue dependent on patient responsibility, healthcare systems can't afford not to offer patient financing.

By offering a non-recourse financing program such as BridgeMed, both healthcare providers and patients can enjoy a simplified repayment process and an improved patient financial experience. With absolutely no fees, no, interest, and no prepayment penalty, providers and patients can focus on their health, while BridgeMed absorbs the risk and responsibility. To learn more about BridgeMed, visit www.mybridgemed.com.


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