Don't leave clients out in the cold-help them find ways to pay

One of the many unhappy lessons veterinarians have had to learn from the recession is that clients don't have bottomless wallets filled with cash to spend on veterinary care. What's more, many pet owners who are already financially challenged because of the economy are facing rising veterinary costs as more sophisticated medical options become available. These options extend the life span of many pets, which results in more routine care spending as well as an increased likelihood of the pet developing a serious or chronic disease.

So how do we as a profession respond? The needs of these clients and patients are real. But it's not reasonable to think we can just give care away. Running a veterinary hospital isn't cheap, and veterinarians and their staff members have the same need to earn a good living as anyone else.

The fact is, clients need options for veterinary service payments. In fact, a poll conducted last year by the National Commission on Veterinary Economic Issues (NCVEI) shows that 74 percent of clients are using payment options they haven't used in the past, including pet insurance, third-party payment plans, and in-clinic billing options. We can help shoulder some of the burden by learning about these payment options and heartily recommending our favorites to clients.

FIRST STEPS

The first thing you need to do, if you haven't already, is to create a written financial policy. Once you determine the forms of payment you'll accept, make sure everyone in the practice clearly understands the policy before talking to clients. If clients know what to expect, they're more likely to accept treatment because you've eliminated their fear of cost.

Next, while no one in practice wants to function as an insurance salesperson or credit card vendor, it's important to be well-versed in the options and recommend the ones your practice believes in. You already suggest obedience trainers, pet daycare centers, groomers, pet sitters, and a wide variety of dietary and other products to clients. Financial options are just as important. When clients are equipped with the ability to pay, pets receive improved care, veterinary teams can practice high-quality medicine, and business profitability improves.

Not convinced? A 2006 study conducted by VPI showed that the company's policyholders on average had 41 percent higher stop-treatment levels than uninsured pet owners, scheduled 40 percent more veterinary visits, and spent twice as much on veterinary care over the life of their pets. And in a 2010 CareCredit survey, 71 percent of the firm's cardholders said having a financing option affected their decisions regarding the level of treatment they provided their pets.

In order to effectively recommend payment options, veterinarians and staff members must first understand the products themselves. Clients want a recommendation for a specific brand along with the reasons why your practice thinks this product is the best. This is no different from medical products; clients don't just want to know that their pets should be on heartworm preventive; they want to know which brand your practice recommends and why.

THE OPTIONS

Client payment options generally fall into three categories: in-house delayed-billing, third-party payment plans, and pet insurance. Here's a rundown.

In-house delayed billing plans. Practices have used in-house delayed billing for years to help clients who couldn't pay at the time of service. Have you ever held a check for a certain amount of time or sent a statement post-treatment with the understanding that the client would pay upon receiving the statement, either in full or in installments? This is delayed billing. Practices have experienced varying degrees of success with this method, and the trend has been away from in-house options and toward third-party payment plans and pet insurance. (Visit dvm360.com/receivablespolicy to download an internal handout that summarizes an ideal payment policy.)

Third-party payment plans. Third-party medical payment plans aren't all the same. But in general, these financing arrangements function like a credit card that can be used for various types of medical services, such as veterinary care, dentistry, and optometry. Veterinary clients can apply for the cards while at the practice and receive immediate approval. The practice receives payment soon after it provides the care and is not responsible for collecting from the client.

As with regular credit cards, the practice pays the financing company a fee. Sometimes the fee is higher than a regular credit card company would charge, but these programs carry some advantages that counterbalance the fee. First, instant approval at the practice means pet owners can make an immediate decision to accept the practice's recommendations for their pets. Also, the higher fee allows the financing company to offer their plans interest-free, which makes them more attractive to clients. As with regular credit cards, not all clients will be approved, which will let you know that in-house credit is a risky alternative.

In order to be comfortable recommending third-party payment plans in general and a specific company in particular, compare plans and check out the companies. Are representatives helpful? Is it easy to get your questions answered? Is information about their plans readily available and easy to understand?

Pet insurance. Another option to consider is pet health insurance. Pet insurance is classified as indemnity insurance and is similar to other forms of indemnity insurance, such as automobile insurance. (For a detailed explanation of how pet insurance functions, see "A Veterinarian's Guide to Pet Health Insurance" at www.ncvei.org/articlelinks/VetInsBroJan9.pdf.)

As with third-party payment plans, you need to understand the insurance plans available and the companies providing them in order to make intelligent and useful recommendations. In the past, when veterinarians or clients have become unhappy or frustrated with pet insurance, it's usually been because they've had unreasonable expectations of pet insurance in general or incomplete understanding of specific policy terms. Here are a couple of pointers that will help both you and clients understand their options better:

> Pet insurance isn't right for all pet owners. Several factors for clients to consider when deciding whether to insure a pet include their bond with the pet, how much they're willing to pay for its care (both over its lifetime and at any given point in time), their level of risk tolerance, and the nature of their financial situation. Pet owners need to think about their ability to cover not only basic wellness care but also nonroutine and catastrophic accidents and illnesses.

> All companies limit coverage in some way. If they didn't, they'd pay out more in claims than they received in premiums and be bankrupt in months. Limitations include deductibles, co-pays, annual or lifetime limits, the use of benefit schedules, and coverage exclusions. When recommending plans, practice teams need to understand the coverage of the policy as a whole. You can't just say, "Well, this policy has a 20 percent co-pay so it's not as good" or "This policy uses a benefit schedule instead of a percentage pay so it's not as good." Look at the coverage as a whole (claim payment amounts, deductibles, co-pays, limits, and exclusions) compared to the premium. Pet owners also need to consider any breed-specific conditions that apply to their pets or any particular types of procedures they might want covered (for example, dentistry or acupuncture) and see whether their pet insurance policy includes those items.

> Some pet owners will pay more in premiums than they receive back in benefits. For pet owners or veterinarians to expect that all policyholders will receive claims payments equal to or exceeding what they pay in premiums is unrealistic. How many people have been reimbursed for homeowner insurance claims that exceeded the cost of the premium? The nature of the insurance industry is such that some policyholders will pay more in premiums than they receive back in benefits. For pet owners, you could say these folks were unlucky with their pet insurance—but you could also make the case that they were lucky with their pet's health. Other policyholders will pay much less in premiums than they receive in benefits—these individuals were unlucky healthwise but fortunate enough to have insured their pets. And most pet owners (as with customers of any type of insurance company) will be somewhere in the middle.

Once a client has decided to purchase pet insurance, the next step is picking a company and a plan. There are many options out there. You can help your clients by studying the policies and recommending a couple of companies you're comfortable with. For a list of questions to ask, see "Choosing the right insurance plan" at left.

Researching client payment options isn't easy. But the time you spend studying the options will pay off if it leads to clear recommendations from you and better acceptance by your clients. Why? Because all of this means your practice team can help pet owners take better care of their pets.

Dr. Karen Felsted, CPA, MS, CVPM, is CEO of the National Commission on Veterinary Economic Issues. Send questions and comments to ve@advanstar.com