Offering A Variety Of Payment Options Can Help Clients Cope

For most veterinarians, health care is a heartfelt calling. But medicine is also a business, and a hospital must make a profit to succeed.

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For most veterinarians, health care is a heartfelt calling. But medicine is also a business, and a hospital must make a profit to succeed.

Vital to that success, financial experts say, is a periodic assessment of available payment options for clients and incorporating that analysis into your practice management.

“Payment is not something that dominates the day-to-day thought processes of many veterinarians because they have so many things going on,” said Howard Rubin, chief executive officer of the National Commission on Veterinary Economic Issues.

“It’s easy for them to just assume that it will take care of itself.

“We have found that veterinarians need to analyze this part of their business just as they analyze other parts of it.”

A common mistake made by practitioners is failing to set payment option standards and policies.

“Many times [veterinarians] just wing it,” Rubin said.

Equally unwise is extending credit without first obtaining a client’s credit history. The result is a possible default that costs your clinic money.

Post-dated checks are another no-no, said Tom A. McFerson, CPA, a partner in the Santa Monica, Calif.-based accounting firm of Gatto McFerson, whose clients include veterinary practices.

“This is the same as taking an accounts receivable,” McFerson said. “It’s usually a mistake because you’re running the risk of getting stiffed. We see that a lot. All of a sudden the onus is on the practitioner to try to collect, which is a position no veterinarian wants to find himself.”

Standard Payment Options

Veterinary practices have a variety of payment options to offer, and Rubin and McFerson suggest you offer as many as possible to meet your clients’ needs.

Cash and checks are preferred payment methods because the practice gets its money up front–but even these forms of payment are not without risk.

“The best payment is always cash, because you know it’s good and there are limited fees involved,” McFerson said.

“But you have employees handling the cash and it remains in the drawer until you can make a bank deposit, so there is a risk that it could be stolen.

“Checks are OK as long as you do your homework and go through steps to verify that the checks are good.”

Bruce Bauersfeld, DVM, owner of the Dover Shores Pet Care Center in Costa Mesa, Calif., uses a check guarantee service to ensure that the checks he receives are good. He also prefers clients to make checks out in his name rather than to his practice.

“It may be a local bank phenomenon, but I’ve found that if a check bounces, it’s easier to collect on if it’s made out to me rather than the clinic,” Dr. Bauersfeld said. 

In our increasingly cashless society, it should come as no surprise that the most common method of payment to veterinary practices is the credit card.

Clients like the ease of use, and practices typically get their money within days. The downside is that merchant fees charged for credit cards are, generally 3 percent or 4 percent of the credited amount.

“There’s a cost involved for that safety,” McFerson said. “But for most practices it’s worth it.”

Most practices happily accept Visa and MasterCard, and an increasing number are also accepting American Express and Discover, both of which charge higher fees. There are some holdouts, however.

Drew Weigner, DVM, Dipl. ABVP (Feline), owns The Cat Doctor in Atlanta. He said he resists accepting American Express because, “They are very expensive, hold the proceeds too long and are very difficult to deal with. It’s too bad, because many of our clients would like to use them.”

New Payment Frontiers

Debit cards are another form of plastic payment that veterinary clinics offer.

“I did a survey at the front counter asking clients if they would be willing to use a debit card in lieu of a credit card,” said Todd Lawmaster, DVM, owner of Parkview Veterinary Hospital in Monterey, Calif. “The answer was an overwhelming yes One of our receptionists came up with the idea because she used to work at a grocery store.

“We’ll have to invest in a new machine to accept the cards, which many practices don’t want to do, but it’ll be a good alternative,” he said.

Bauersfeld offers a debit-payment option in his practice primarily for clients who do not have credit cards or who may be a check risk.

“I can’t say that the debit card has been very popular — it’s still a small percentage,” he said. “But if it helps even one person in a month, it’s worth keeping.”

CareCredit Often Helpful

For clients facing bills too large to pay up front, CareCredit offers a third-party payment service that works like a credit card. CareCredit offers several payment programs, many of which act as interest-free loans, said CareCredit Marketing Manager Judith Gass.

“We have six different payment plans,” Gass said. “Three are no-interest programs and three are low-interest payment plans extending to 24, 36 or 48 months.

“Under the no-interest programs, it’s three, six or 12 months with no interest to the client. We charge a processing fee to the practice just like Visa and MasterCard. However, our rates are higher due to the no-interest benefit to the client.”

One advantage of CareCredit is that clients can be approved over the phone in a matter of minutes.

Gass said the company’s acceptance rate is between 50 percent and 80 percent, though interviews with veterinarians who use the service indicate an acceptance rate between 25 percent and 80 percent.

Dr. Lawmaster advocates using CareCredit, noting that he refers clients to the service three to five times a week to pay for charges averaging between $1,500 and $3,000.

“It’s a win-win situation for us,” Lawmaster said. “We get our money and the clients get a payment program [that facilitates optimum care for their pets].”

But not everyone is enamored with CareCredit. Dr. Weigner finds the service too restrictive and no longer offers it to clients. “[CareCredit] hardly approved anyone,” he said.

“We would have to get on the phone and beg them on our clients’ behalf. If that worked, the client was usually approved for only a small amount, not enough to cover a typical medical work-up.”

“CareCredit is in the business of giving credit to clients who want the best treatment for their pets and can afford the care, but just can’t pay a large bill at the time of service,” Gass said.

“Clients without the means to pay at all are typically not good candidates for credit. And therefore, the practice may experience lower approval rates.

“However, it is important to offer CareCredit to all clients, not just the ones who are perceived as unable to pay.”

CareCredit also makes a good supplement to veterinary pet insurance, which an increasing number of practices accept.

“Insurance programs are growing rapidly for the first time,” noted Howard Rubin of the NCVEI.

“One factor is that technology has made it easier to process claims. Veterinarians don’t have to get in the middle of that if they choose not to. They can fill out the paperwork and leave it to the client to file the claim.”

In the Old Days

A payment option that is seen less frequently these days is office credit.

“We do that for clients we know really well and who have always paid their bills on time,” Lawmaster said. “But we don’t like having our accounts receivable go beyond 30 days. We’re not a bank and it’s not a veterinarian’s position to do that.”

Southern Arizona Veterinary Specialists in Tucson used to offer a payment plan that included a 60 percent down payment and a three-month billing period for the balance, said hospital coordinator Dawn Coleman. But, the plan was eliminated because too many clients didn’t make payments as promised.

“Always get the money up front,” McFerson said. “Veterinarians have to pay their bills on time, so if you allow clients to pay 30 or 60 days later, it just costs you money. You can lose control of those receivables very quickly.”

Bartering Discouraged

Equally unwise is bartering for veterinary services, McFerson said.

“We suggest [veterinarians] avoid that,” McFerson said. “We find that bartering usually works to the detriment of the veterinarian because you usually end up trading for goods or services that you don’t need.”

Bauersfeld said he occasionally barters his services, but it’s rare.

“I trade services with a very small, select group of people,” he said. “My accountant, for example, is a client. That’s a win-win situation for both of us.”

Veterinarians exploring payment options for clients are encouraged to consult with those who know the ropes.

“Be as flexible as you can for your clients and meet their needs,” Bauersfeld said. “Also, get good professional advice, such as from a CPA, on what your options are on keeping your bottom line in the black.

“It’s easy to practice excellent medicine when you get out of school, but it’s not necessarily easy to keep it profitable.”

NCVEI Offers Online Help

The National Commission on Veterinary Economic Issues offers some helpful benchmark tools at its Web site, (www.ncvei.org), to assist practitioners in selecting the best payment options for their hospitals, the Commission

“We start by guiding the practitioner through a self-assessment of the accounts receivable process at his or her hospital,” said Howard Rubin chief executive officer of the NCVEI.

“Once we collect core information, we give them feedback on how what they are doing compares to other practices and what options they have [to improve their bottom line].

“We also give them examples of what has worked very well for other practices.”

– D.V.

To Bill or Not to Bill

It seems like only yesterday that veterinary practices routinely billed clients for services rendered. But not any more.

Most practices now require payment at the time of service, and bill only under special circumstances.

“If we have an animal that has to be euthanized, we’ll bill the client because it’s upsetting to them to be asked for payment after they’ve lost a pet,” said Dawn Coleman of Southern Arizona Veterinary Specialists in Tucson.

“Otherwise, we prefer to receive payment when services are rendered.”

That’s a good policy, said Tom A. McFerson, CPA, of Gatto McFerson, an accounting firm in Santa Monica, Calif. “The only time we see our clients [veterinarians bill clients] is when they’re dealing with large organizations such as the local animal shelter or a similar nonprofit group,” he said.

“It’s often easier for practitioners to tally up their services and bill every couple of weeks. They know the organization is reliable, so it’s not as big a risk as billing individuals.”

– D.V.

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