Interest-Free Financing for LASIK

Everyone is aware of how competitive the LASIK marketplace has become over the last few years. Gone are the days when LASIK candidates seemed to appear and multiply on your doorstep, and as the environment becomes more crowded and competitive and price pressure continues downward, today's surgeons and practice administrators must ask themselves what can be done to revive and maintain the market.

During the months of October, November, and December 2001, the auto industry experienced its best 3-month sales period in history. In an effort to jumpstart sales that had been waning due to the onset of a recession and conservative consumer spending in the wake of a national tragedy, most of the large automobile companies began offering limited-time, interest-free financing on all new models. Many economists felt that by enticing customers with this offer, the auto industry was stealing from the market to drive current sales. In the LASIK marketplace, there is no such dilemma—patients will either choose to undergo the procedure, or they will not.

Know Your Competition
Realistically, LASIK surgeons are competing with big-ticket household items such as flat screen television sets and home computer systems for consumers' discretionary incomes. According to Tony Seymour, CareCredit's Director of Vision Care, “LASIK candidates tend to be educated and financially savvy, and they are able to recognize the advantages of ‘floating' their money for a given time without paying interest. Every day, these potential customers are enticed by interest-free or ‘same as cash' payment plans, and incorporating similar sales offers into your practice could be just the motivation candidates need to come knocking on your door.”

Mike Limberg, MD, of Limberg Eye Surgery (San Luis Obispo, CA) says, ?We have found that offering 0% financing has allowed us to maintain our pricing and aggressively grow our market share despite having several discount LASIK surgeons in our area. LASIK candidates love the idea of not paying interest, going to the surgeon of their choice, and feeling like they received a special deal. To me, offering interest-free payment plans has been a no-brainer.?

Bottom Line
So what are the financial ramifications of offering your patients interest-free financing? Jim Denning, CEO of Discover Vision Centers (Independence, MO) points out that the main difference between offering a financing plan that requires monthly payments and one that has no payments and no interest for 12 months comes down to the discount rate, or the cost to the medical practice. For example, Denning explains that a financing option of 48 monthly payments at 12% may cost the practice a 5% discount rate. “On a bilateral purchase of $3,000,” he says, “the practice pays a $150 fee to the finance company to take the risk of collecting the balance, reducing the practice's income to $2,850. The same bilateral purchase of $3,000 with a 0% financing option may have a discount rate of 9.9%, raising the fee the practice pays to the finance company to $297.” Denning added that it might make more sense to look at 0% financing as a marketing expense to drive refractive volume during the slowest months of the year, presenting the option for a limited time during June, July, and August.

CareCredit's Tony Seymour disagrees and states, “By offering interest-free payment plans along with a low interest extended payment plan, regardless of time of year or duration, you empower your LASIK candidates to choose the plan that is right for them.” His point is that patients who need more time to pay will opt for the fixed, extended payment plans, while those who can pay off their loan sooner or who want to ‘float' their money will benefit from the interest-free option. “Practices offering both plans on an equal footing will have the benefit of being attractive to consumers from a variety of economic backgrounds,” Seymour concludes.