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Up Front | Jun 2002

The Buck Stops Here

It's time for a change of attitude toward financing.

Not another discussion about money! Yes, it's time to delve into one of those sore subjects for most refractive surgeons: patient financing. For those having an allergic reaction to the mention of this topic, please overcome your personal discomfort and read on.
I suspect that doctors, just like most people, feel awkward asking for money. That is OK as long as someone besides their patient is paying most or all of the bill. In other words, when insurance, Medicare, or the vision plan pays, the awkwardness is largely avoided.

However, refractive and other elective procedures play by a different set of rules. Ignoring these rules of payment has proven extremely costly to refractive surgeons (many of whom reacted swiftly to the historic ?invasion of the discounters? by lowering or matching prices to ?meet the competition?). Lower prices led to lower—not higher—procedural volumes, as shown by Market Scope data that tracks average LASIK prices and the total number of procedures nationwide. The subsequent meltdown of most discounters has helped stabilize pricing for LASIK in many markets.

The lesson from the low-price invasion is fundamental. Price (ie, “it's too expensive”) was not the problem that needed to be addressed. Fear was, is, and will for many years be the main deterrent to LASIK acceptance. Only when fear is conquered does the subject of price even matter. The emphasis, however, should be affordability, rather than the price of the procedure.

Just look at other consumer purchases. Rarely is a new car promoted by its price or a home bought for cash. Such expensive items are pegged to a monthly payment. Even less costly items, such as consumer electronics and home appliances, are increasingly promoted via ?easy monthly payments as low as?? It seems like every infomercial product is priced at monthly payments of $19.95. What those industry segments recognize is that major consumer purchases are driven by how they fit into a monthly income stream.

National statistics show that only one in every four adult Americans can afford to pay cash for an item costing $500 or more. Long gone are the days when people actually saved money for something they wanted to own. Credit cards provided by banks and department stores have narrowed the gap between ?want it? and ?have it? by allowing consumers to own something now and pay for it later. For better or worse, this is reality for today's mainstream consumer.

Why most providers of elective medical procedures haven't capitalized on this trend is a true mystery. In a private survey conducted in the year 2000, fewer than 10% of over 200 laser centers contacted could give a reasonable-sounding answer to the questions “How much do you charge?” and “Do you offer any type of financing?” This survey included laser owners of all varieties and volume levels. The stumbling and fumbling to answer this question makes it pretty clear that the lack of comfort with price directly affects how centers' staffs discuss price and presents financing with patients. Typically, the whole discussion of price is delayed until the end of the procedure. When the topic emerges, it's presented with a defensive, apologetic tone. Financing, meanwhile, is held ‘til very last and made available only if the patient really needs it.

Although many people (including those whose job it is to promote LASIK) are noticeably uncomfortable with the issue of price, it takes deeper digging to get to the root of the problem with financing. I believe this has much more to do with attitudes and beliefs about those who need financing. The fact is that the majority of refractive surgery candidates can't pay for LASIK out-of-pocket. Providers, however, act as if financing is for the downtrodden, and often promote it as a last resort to help those who are desperate and have ?bad credit.? This thinking is out of touch with reality: the latest monthly survey results by the Cambridge Consumer Credit Index indicate that only one in eight Americans with outstanding credit card balances can afford to pay more than half of that balance.

Part of the value of what you offer, which must exceed the clinical results of the procedure, is making LASIK affordable to your patients. Sorry, but just having the credit application form in your cluttered literature package is not good enough. For those prospects who have overcome the fear of undergoing LASIK, you must make it easy and convenient for them to also sign up for the financial commitment. Here are three common mistakes that keep providers from doing a much better job with patient financing:

If you make patients do all the work to obtain financing (presumably because it's a hassle for your staff), then you've missed a great opportunity to demonstrate the value behind the fees you charge.

“What a Rip-Off!”
If you begrudge the fees charged by banks and financing companies, then you miss the point of why these companies matter. They sell access to money that your patients won't have otherwise. In exchange for taking the risk of not being paid, they get a cut of your fee. Although it ranges from 3 to 10%, this is far less than the 25 to 75% fee cut self-administered by those doctors who lowered their prices to compete during the invasion of the discounters. For most of them, their volumes didn't increase to justify the reduction in profit on a per-case basis. The discount paid to the lender is a far less expensive marketing tactic than playing the low-price game.

Playing Banker
Finally, if you think that operating your own “in-house” financing is a good idea, you've got too much time on your hands. Ask any of your colleagues who have been burned by nonpayment, and you'll quickly realize why this task is better left to professionals who specialize in this area.

Now for a radical idea: Consistently using patient financing actually may allow you to raise your fees for LASIK. The emphasis must be placed on the affordability, not price, of the procedure. Your phone-based staff can't just take the bait when asked, ?How much do you charge?? They need to convey the value of your offering. The price discussion should include an upfront presentation of all options (rather than an assumption about the caller's ability or willingness to pay). Although initial questions about price are usually a smokescreen for fear, the discussion of price should come early, with confidence, and with an understanding that the patient isn't really challenging your price; he or she just doesn't know what else to ask.

With financing, you aren't stuck selling a $4,000 elective procedure. You're selling the ability to improve vision for under $100 a month. Whether patients finance, pay cash, or use a credit card (which charges you 1 to 3% for the privilege), you want to make it as easy as possible. Those early patients with cash in hand are a disappearing breed.

Unfortunately, all the tips and advice on financing are meaningless without the right attitude from the provider. It begins with a basic approach that says, ?We will make financing an integral part of our offering with every patient we see.? The process continues with an audit to see how every interaction with LASIK candidates either conforms to or detracts from living that attitude.

As a starting point, one way to change the attitude would be to invest in significant staff training about your price, developing competence in what you say, and becoming confident in how you answer every question that asks (and often challenges) why you charge the amount you do. It's human nature and instinctive buying behavior to ask this question. Instead of responding defensively, you can learn ways to turn that inquiry into a meaningful dialogue about your offering and the patient's needs.

Data from finance companies indicate that a well-run financing program can boost patient volume by 10 to 20%. I think this is conservative, especially in a practice or center where financing is used as a core tool to increase affordability. New patients will be increasingly attracted to the LASIK providers that finally understand how products and services are purchased: by the month.

The tools can vary, from offers of zero-interest payment schedules to bundled lines of credit that allow for multiple elective procedures to go on the same account. I can promise that, if you take a different look at patient financing programs, your prospective patients will also take a new look at what you have to offer. In today's climate, generating renewed interest is key to growth in procedural volume.

Each month, industry veteran Shareef Mahdavi looks at a different topic relating to the business of refractive surgery, exploring how mistakes from the past can be used by all providers for effective marketing. He was formerly the head of marketing for VISX and is based in Pleasanton, California. Mr. Mahdavi may be reached at (925) 425-9963; shareef@sm2consulting.com
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